Business Cancer: The Hidden Threat That Kills Corporate Profits
Business leaders are always looking for ways to give their companies a competitive edge by increasing productivity and profitability. They want to increase market share and beat out the competition wherever possible. To accomplish this they look for ways to improve their technology, work processes, business systems, and teamwork.
So why do most businesses fail to improve performance?
The reason businesses fail to improve is that they mistake the symptoms for the root cause. This keeps them busy doing the wrong stuff; giving them the illusion things are changing.
The Root Cause
The difference between good and great results is the people in a company. Or put more bluntly, people make the difference between mediocrity and excellence. How well employees work together (The Human Factor) has a large impact on the performance of the organization. The level of engagement employees' exhibit is a great barometer of how well the employees work together.
"We have met the enemy and he is us", Walt Kelly
In a Gallup survey employees were asked to categorize themselves into one of four groups; highly engaged, somewhat engaged, somewhat disengaged, and highly disengaged. The survey of 42,000 workers and managers revealed that disengaged employees cost American business $350 billion each year in lost productivity. That is a really big number. On average it works out to be $1350 per employee per year. When a member of the management team is not highly engaged the impact is far greater.
Weak Teams and Bad Behaviors
In many organizations phrases like "we value or people" or "employees are our real assets" or "we work hard to foster a spirit of teamwork" is nothing like what's really going on within the company. Unfortunately, silos, politics, complacency, and finger pointing are way more common than commitment, trust, and a go-getter attitude. Leaders know that corporate cultures where bad behaviors abound cost the organization dearly. Bad behaviors kill morale, destroy teamwork, and increase staff turnover.
Bad behaviors result in poor decision making, which produce big problems for the organization. A big problem looks like a root causes but it's just a symptom. The management team busies itself on fixing the big problem, totally missing the root cause which manifests itself as another problem. It's like an unseen cancer that starts shutting down a vital organ. The medical staff focuses on the organ to save the patient and totally misses the cancer only to have the cancer create problems elsewhere in the body. Bad behavior is like a cancer in an organization which must be healed before any meaningful and lasting change can occur.
Strong Teams and Market Dominance
We read about stellar organizations that have a "culture of excellence" in books and articles because they are a rarity. These organizations have employees that work hard because they feel a commitment to one another. There is a high degree of trust so people feel comfortable pitching new ideas and knowing they can shoot ideas down without others getting defensive.
"The team with the best players wins.", Jack Welch
In these organizations the better idea wins because it's not about one's ego; it's about ensuring the organization wins. Cultures like these ensure everyone is on the same page and is going in the same direction. This gives the organization speed because employees make better decisions and they do it faster than the competition.
Improving the organization
When the results are falling short, organizations embark on change programs. They implement change initiatives, develop new strategies, have "come to Jesus meetings" and even try the flavor of the month new business consulting fad. In fact, the need for businesses to change has created a $100B/yr consulting industry. The only problem is that change programs have a high failure rate. According to the Harvard Business Review the failure rate for change programs is 70%1. When a change program fails, companies jump to another idea in hopes that "This one will definitely work". After a few go -rounds employees start to suffer from what researches call Change Fatigue. In a meeting they might say, "Great idea!" but after the meeting they tell their coworkers, "Don't worry about it, and just do what we've always done because this too shall pass."
Why Change Often Fails
Way too often organizations embark on change programs without considering the Human Factor. If there is a culture of politics, blaming, and distrust no meaningful change can occur. If a culture like this exists people will say what they think the boss wants to hear but won't really believe in it so their behaviors will not change. For a true change to occur people have to have a different mindset.
"Failure is not fatal, but failure to change might be.", John Wooden
The culture of politics, finger pointing, and distrust has to be vanquished before employees will wholeheartedly embrace new ideas and initiatives. When there is a culture of trust, commitment, and cooperation employees can speak the truth and get to the root causes and fully implement the needed change. Where Are WeDo you know what they call it when you don't know where you are? It's called being lost. Most leaders have a sense of what is going on in their organization. When bad behavior like politics, silos, finger pointing, and distrust is going on leaders know there is a financial impact. But it's a hard to calculate the financial impact of something so intangible. If this type of bad behavior is going on while the organization is profitable it makes it much harder to see the financial impact.
If You Can't Measure Is It Real?
A CEO may recognize bad behavior and have a sense of its impact but without hard numbers it's hard to rally the management team to fix it. In the real world there is limited time and resources available so the Human Factor often gets put on the back-burner. What's needed is a way to measure the financial impact of bad behavior so CEOs and management teams have something to sink their teeth into.Imagine if a CEO knew bad behavior was costing his or her company $2.4M/yr in wasted resources and lost opportunities. They would hand out a report to each management team member and say, "This B.S. is costing us $2.4M/yr, and it's got to stop now!" If organizations knew the real financial impact of bad behavior they would take immediate steps to change it.
Calculating The Financial Impact Of Bad Behavior
We have developed an application called the Corporate Waste Index that calculates the financial impact of bad behavior in an organization. It takes a leader under three minutes to run through this application and a PDF report is generated detailing the financial impact. Armed with this data the CEO can task his management team to fix the problem. As the corporate culture changes the CEO can use the Corporate Waste Index to measure the progress.
It's Free To Use
I have been thinking about the true cost of bad behavior for some time now. Politics, Silos, Blaming really are like a cancer within an organization that kills morale, slows down the organization, and eats profits. I created the Corporate Waste Index as a way of giving back to the business community. The accuracy of the application is always improving because each time a company uses it the data collected (always kept confidential) is used to improve the accuracy of the underlying algorithm that is at the heart of the application. You can find the Corporate Waste Index at Productivity Cubed.
1 http://blogs.hbr.org/cs/2010/06/four_ways_to_know_whether_you.html Harvard Business Review
Questions and Answers
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