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Lack of or Poor Leadership is the New Global Pandemic

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Gallup recently released its annual State of the Global Workplace 2023 Report, and McKinsey released its State of Organizations 2023 report. These reports, along with other research, reveal growing dissatisfaction among workers and major transformations happening in the workplace. But an organization’s greatest asset to turn the tide is being ignored.

  • The state of workers is at DEFCON 3
  • Poor leadership is the new global (work) pandemic
  • The executive leadership knows it’s bad
  • Bad leadership is expensive
  • Middle managers are stressed, stretched, and sinking
  • Investing in people generates growth

The state of workers is at DEFCON 3 — an increase in force readiness above the normal is required.

65% of employees said they would forgo a 10% raise if it meant their boss would be fired

Though this statistic is from a 2012 Forbes survey, not much has changed in a decade. According to the Gallup report, only 31% of U.S. workers are actively engaged, down 2% from 2022. While those who are disengaged (quiet quitting) and actively disengaged (loudly quitting) were up to 52% and 17%, respectively. Those who experience daily negative emotions of stress are up to 52%, and anger is holding at 18%. The U.S. results are slightly better than the global averages.

Regarding engagement and stress, women are more engaged and more stressed. Engagement for women and men is 33% and 23%, respectively. As for daily stress, women are at 57% versus 48% for men. All that said, there is good news. The percentage of employees thriving at work globally peaked at 23%.

low engagement costs the global economy $8.8$ the equivalent of 9% of the global bdp.

Poor leadership is the new global (work) pandemic.

The Gallup report points to multiple factors contributing to employee disengagement. Poor or lack of leadership is the top reason. Globally, 41% said they would change engagement and culture to improve it, 28% said pay and benefits, and 16% said well-being. The engagement and culture category focused on leadership, clear goals, development, respect, and autonomy.

50% have left a job or company because of a bad boss

Seventy percent of engagement relies on the manager. The challenge is many managers are also disengaged or craving the proper tools to develop their teams. Quiet quitters are low-hanging fruit when it comes to turning the tide. They haven’t quit yet because they still have hope.

The executive leadership team knows it’s bad, but their hands are tied to fix a system they enabled.

The radical and inconvenient truth is that companies know their leaders aren’t effectively leading. But getting rid of them exposes the company to litigation risks or the departure of key employees.

71% of organizations reported that they believe their leadership teams aren't effective

Labeled high potential, bad leaders were promoted with the understanding that their lack of leadership abilities would be addressed later. But when later never comes and they realize an entire organization dislikes the leader or they’re ineffective, little can be done. This leaves the people under their command feeling miserable, toxicity levels rise, and people leave. The best people are typically the first to go.

If your strategy is to wait out bad leaders, don’t. They pull a great paycheck and aren’t held accountable for their bad behavior. Likely, they believe they’re doing a great job and won’t quit. At best, if they aren’t meeting revenue or operational expectations, they may be relieved of their duties and moved to corporate Syberia until they leave or retire.

Bad leadership is expensive.

A company loses 7% of its revenue annually when it delays investing in leadership development. The cost to replace a leadership position ranges from 50 to 60% of the annual salary. Not to mention the time cost to source candidates, interview, onboard, and come up the learning curve. Replacing a non-leadership position is about 30-50% of the annual salary with the same dwell time.

That’s one person. Imagine having to backfill 50% of a team due to constant turnover. I’ve heard of an entire function quitting at once. That’s not hyperbole. The team turned over 90% within three months. A team turned over 100% at a different company in six months.

The future of work is changing rapidly, with most of the focus on people.

Because of budget constraints, companies will cut professional development and leadership training. But these short-term fixes have long-term consequences.

We have a saying in Spanish, ‘Lo barato sale caro’. The cheap comes out expensive.

Judge Marilyn Milian, The People’s Court

The McKinsey report details 10 shifts that are transforming organizations.

  1. Increasing speed, strengthening resilience
  2. True hybrid: the new balance of in-person and remote work
  3. Making way for applied AI
  4. New rules of attraction, retention, and attrition
  5. Closing the capability chasm
  6. Walking the talent tightrope
  7. Leadership that is self-aware and inspiring
  8. Making meaningful progress on diversity, equity, and inclusion
  9. Mental Health: Investing in a portfolio of interventions
  10. Efficiency reloaded

It shouldn’t be surprising that eight of the ten deal with people. Leadership and talent acquisition are called out specifically.

Since the pandemic, new rules about attracting and retaining talent have emerged. Forty percent of U.S. employees reported they were planning to leave their jobs. This is partly driven by employees redrawing work and personal life boundaries. What used to attract employees – compensation and benefits – is no longer enough. The work-from-home debate is fracturing companies and cultures as many companies fight to maintain in-office work policies. I have lost great candidates because of this.

4. New rules of attraction, retention, and attrition

We have found that what employees want from work—for instance, flexible hours, remote work, opportunities to advance, tasks that have purpose and meaning, and adequate compensation—can vary significantly, depending on age group, life stage, work experience, and other factors.

The command and control structure or leading through fear and intimidation is quickly fading. Employees are quitting in the face of disrespectful and uninspiring leadership, lack of development, and a dearth of growth opportunities. Leaders who don’t adapt will be retired or relegated to the menial over the next decade as organizations refuse to continue paying the cost of poor leadership.

7. Leadership that is self-aware and inspiring

For today’s leaders, the essential task comes in three layers: they need to be able to lead themselves, they need to be able to lead a team of peers in the C-suite, and they need to be able to exhibit the leadership skills and mindset required to lead at scale, coordinating and inspiring networks of teams and ensuring that their organization functions as a cohesive whole.

The middle layer is stressed, stretched, and sinking but is the most underutilized asset.

As a Director, I can attest to the opposing forces of will that meet right at the middle layer. Directors and middle managers must navigate diametrically opposed views on culture, working from home, and increasing workloads while not receiving development funding for themselves or their teams. And the generational divide lands squarely on their desks.

Because my team and customers are my priority, I stop what I’m doing if they need to chat. This leads to working late or catching up on the weekends to address administrative tasks, let alone the time to produce in my role. I created a tech stack and system to automate my inbox and tasks.

Emerging leaders may see this and opt out of people leadership or seek opportunities elsewhere. The challenge this presents is that people who would make phenomenal leaders are saying “no thanks.”

Investing in people generates 2x revenue growth.

Focusing on the middle layer is the best tactic for re-engaging quiet quitters. According to additional McKinsey research, companies with a middle layer of high performers experience better financial outcomes. Organizations can catalyze middle managers by:

  1. Optimizing the right span of control
  2. Resetting manager roles to take action
  3. Pivoting to capability building
  4. Fostering inclusion, increasing purpose, and offering development opportunities
  5. Building accountability mechanisms

In the long run, companies that optimize people and processes see better financial returns and attract top talent. People and performance focused companies grow their revenue twice as fast as performance-focused companies.

TL;DR – Leadership is at DEFCON 3

The US workforce is more disengaged than ever, and poor or lack of leadership is the #1 reason. Middle managers are uniquely positioned to turn the tide if they had the proper development tools for themselves and their teams. Organizations that invest in the development of their people grow their revenue twice as fast as those that focus on performance only.

  • Given the state of workers, it’s time to invest in developing leaders or risk further organizational fracture.
  • The leadership crisis is a global epidemic, with 41% stating they would focus on improving engagement and culture, which included leadership. Compensation and well-being were lower on the list.
  • Though 71% of executive teams know the leadership is ineffective, their hands are tied to fix a culture they enabled.
  • Bad leadership is expensive. Replacing one leader is 50-60% of the role’s annual salary. Multiply that by your rate of turnover.
  • The future of work is changing, and the biggest transformations are focused on leadership and people.
  • Companies focused on people + performance grow revenue two times faster than those that don’t.

References

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