The $227,000 leadership problem

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Here’s a typical example of how an organization may be losing $227,000 per year due to ineffective leadership that often goes unnoticed or is overlooked.

By examining the various ways poor leadership leads to wasted time and resources, we can better understand the true cost of inefficiency and highlight the value of effective leadership development, including coaching.

I want to look at 4 key areas where we often see the impact of wasted resources due to ineffective leadership: (1) ineffective communication, (2) low engagement, (3) stalled change initiatives, (4) additional burden on other leaders and/or HR

(1) The cost of ineffective communication

Miscommunication and unclear instructions lead to confusion and errors, causing employees to waste valuable time correcting mistakes. This hinders productivity and leads to significant delays and rework. Additionally, poor communication can result in client-facing errors, damaging customer relationships and the company’s reputation; this may require additional resources to make up for lost revenue.

Example calculation:

Hours wasted: 3 hours per week per employee

Number of employees: 10

Hourly rate: $30 per hour

Annual cost of ineffective communication: $43,000

(2) The cost of low engagement

There is a direct correlation between employee engagement and the effectiveness of leaders. Low engagement results in decreased productivity and higher turnover rates, leading to time spent on recruiting and training employees. Disengaged employees are less motivated and less productive, which means more time is wasted and fewer goals are achieved.

Example calculation:

Hours wasted: 2 hours per week per employee

Number of employees: 30

Hourly rate: $30 per hour

Annual cost of low engagement: $86,000

(3) The cost of stalled change initiatives

Ineffective leaders struggle to implement changes, leading to significant wasted time on stalled initiatives. When leaders lack the ability to drive change, projects languish and deadlines are missed, causing a ripple effect throughout the organization. This wastes resources and demoralizes employees who may feel their efforts are useless. The opportunity cost of delayed innovation and missed opportunities further compounds these losses.

Example calculation:

Hours wasted: 4 hours per week per employee

Number of employees: 5

Hourly rate: $40 per hour

Annual cost of stalled change initiatives: $38,000

(4) The additional burden on other leaders and/or HR

Ineffective leaders create numerous issues that other leaders and HR professionals must address. This includes resolving conflicts, managing employee issues, dealing with low performance, and handling turnover. When leaders fail to effectively manage their teams, the burden falls on others to pick up the slack. The diversion of time and resources from strategic initiatives to firefighting hampers productivity and growth. The cumulative cost of this additional burden is significant.

Example calculation:

Hours wasted: 5 hours per week

Number of leaders/HR professionals: 5

Hourly rate: $50 per hour

Annual cost of additional burden: $60,000

Total annual cost of ineffective leaders

$43,000 – ineffective communication

$86,000 – low engagement

$38,000 – stalled change initiatives

$60,000 – burden on other leaders & HR

= $227,000 year after year

Cost of one-on-one leadership coaching

Assume an executive coaching engagement costs on average $5,000 per leader and the company invests in coaching for 10 leaders per year:

Annual cost of coaching: 10 leaders x $5,000/leader = $50,000

This is simply an example to help illustrate how much ineffective leaders impact the bottom line. Feel free to run your own numbers with your own assumptions. By addressing the root causes of ineffective leadership and committing to ongoing development, organizations can significantly enhance their overall performance and financial outcomes.

Research shows that Executive Coaching consistently yields a return on investment (ROI) exceeding 500%, showcasing its substantial impact on personal and organizational growth. Read the ROI case study here: https://awcoach.co/roi-value/

Read this to learn more about who should receive leadership coaching: https://awcoach.co/who-should-receive-leadership-coaching

A powerful thing happens when your leaders excel: it creates a domino effect, laying the groundwork for individual and organizational success. This doesn’t happen by chance.

In today’s fast-paced, rapidly evolving business landscape, effective leadership development is non-negotiable. Clients consistently report that their work with Amber results in elevated leadership skills, increased productivity, reduced turnover, and enhanced interpersonal effectiveness. Clients have built and led high-performing teams, fostered self-accountability, and seen less resistance to change initiatives. Many have attained promotions, boosted their confidence, and taken control of their time and energy.

The $227,000 leadership problem

(1) The cost of ineffective communication

(2) The cost of low engagement

(3) The cost of stalled change initiatives

(4) The additional burden on other leaders and/or HR

Total annual cost of ineffective leaders

Cost of one-on-one leadership coaching

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