Destructive Leadership and the Impact on the Business

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Destructive Leadership and the Impact on the BusinessBusinessman making poor decisions in business

The effectiveness of an organization’s leaders will decide its fate; the organization will either thrive or fail. Yet, despite the importance placed on leadership, research indicates two-thirds of the managers in corporate America are ineffective or incompetent; and ultimately will fail. In an economy where salaries have been stagnated (year-over-year growth between 2-3% since 2013; Bureau of Labor Statistics), 65% of the workforce would take a pay cut if someone fired their boss.

Destructive Leadership

Why Employees Leave

We have all heard the adage:  people don’t leave their jobs, they leave their manger. The organizational cost of employee turnover is staggering and depends largely on their level; entry-level employees are between 30-50% of their salary, mid-level employees are roughly 150% of their salary, and a senior-level employee will cost 400% of their salary. Additionally, it can take a replacement hire up to two years to reach the same level of productivity as an existing employee highlighting the cost isn’t only short-term challenge. But it doesn’t stop there.

Bad managers damage the reputation of the organization. Thanks to websites like Glassdoor, your company’s reputation, good or bad, is readily available to your prospective candidates. Candidates are going to these sites before applying to any job and reviewing how likely current employees would recommend their company to a prospective candidate and how much they support the current CEO. Bad managers are a risk to your organization’s ability to recruit quality candidates and grow your organization with the level of talent needed to beat your competition.

Bad managers destroy staff engagement and low levels of engagement produces negative business results. Companies with engaged employees average 147% higher earnings per share, but unfortunately, research shows only 30% of U.S. employees are engaged.

“When employees are engaged, they like their jobs, they work hard at their jobs, they take initiative, and they show loyalty,” Dr. Robert Hogan

Finally, a study by Everest College showed 75% of people say the most stressful aspect of their job is their immediate boss. According to a NIOSH study, 40% of all workers see their jobs as very or extremely stressful and problems at work were identified as a more important life stressor than money or health.

Job Stress

Job stress for American adults has continued to increase over the past few decades and has been associated with increased rates of psychological and physical diagnoses. The increase in job stress comes from the perception of having little control but lots of demands, which is exacerbated by  bad leaders. This increase in stress is associated with increased rates of hypertension, fatal and non-fatal heart attacks, depression, substance abuse, and other disorders.

In fact, in Los Angeles, New York, and other cities, police officers who suffer a heart attack (on or off the job), are assumed to have a work-related injury and are compensated as such. Bad leaders are creating enormous health costs for their subordinates, their organizations, and the US economy. According to The World Health Organization, stress has been called the health epidemic of the 21st Century and is estimated to cost American businesses up to $300 billion a year.

State of HR Report

The State of HR is in transition. The days of being merely transactional are extinct and the evolution of the strategic HR department is underway. So, what shape will the future take? Where will the focus lie in order to achieve success? Find out in our latest report: The State of HR.

Wrongly Defining Leadership

If we know bad leaders are costing our organizations considerably, why do we continue to promote them? The quick answer – organizations often look for employees who “look like a leader”, or more accurately, employees who are charismatic and use their political savvy to advance their careers.

How did we get here? At Hogan we believe the research in leadership has failed for three reasons:

  1. Wrong definition. Leadership has typically been defined in terms of an individual’s status in the organization – if they have the title, they must be a leader.
  2. No attention to actual results.
  3. No attention to followers. A leader’s subordinates are the consumers of their leadership and are directly affected by the quality or lack thereof. Leveraging engagement data can provide critical insights into a leader’s performance.

Successful Leaders

The success of any collective depends on the quality of its leadership. From an evolutionary perspective, people have evolved as group living animals. And, there has always been a status hierarchy and people are trying to improve their positioning in the hierarchy. However, cohesion is vital for the group to work collectively, and enhance their success. Effective leaders balance the group’s need for getting ahead and getting along, while providing meaning. Leadership should be viewed as a resource for the group and not a privilege for the individual. 

Hogan defines leadership as one’s ability to build and maintain a high-performing team that can compete successfully, and predicting who can lead successfully as possible. In this column, we will review the six scientifically supported competencies of effective leaders; Integrity, Competence, Judgment, Vision, Humility, and Ambition.

Future entries will be published in the following order

  • Column 2: Integrity, Competence, and Judgment
  • Column 3: Vision, Humility, and Ambition
  • Column 4: Brining it all together with science and data


Photo courtesy:  StockPhotoSecrets