4 Ways Management is a Drag on Your Bottom Line

Leadership

In January 1988, author and management guru Peter Drucker made a bold prophecy. Writing for the Harvard Business Review, Drucker predicted that in 20 years organizations would cut layers of management in half and shrink their management staff by two-thirds.

Such has not been the case. In spite of the growth of alternative organizational systems like holacracy and the gig economy, management has, in fact, ballooned.

From 1983 to 2004, the number of managers, supervisors and support staff in the U.S. workforce grew by 90%, while employment in other occupations grew by less than 40%.

Some might argue that in an increasingly complex business environment, the growth of bureaucracy is inevitable. Yet, author and management expert Gary Hamel finds that excess management is costing U.S. companies $3 trillion per year. Hamel argues that bureaucracy imposes a heavy tax on today’s organizations in four considerable ways:

1. Managers add overhead. The average manager-to-employee ratio is 1:10. A small organization may have one manager and 10 employees. A company with 100,000 employees and the same 1:10 ratio will have 11,111 managers. That’s because they’ll add 1,111 managers to oversee the managers.  Layers breed layers.

2. Bureaucracy distorts reality. The bigger the decision, those with authority to decide are at a greater distance from frontline realities. “Give someone monarch-like authority, and sooner or later there will be a royal screw up,” writes Hamel. All too often, decisions made on the top floor are unworkable on the ground.

3. Layers choke information. In a multi-layered management structure, communication gets bottlenecked, innovation stagnates, and silos grow. In their effort to prove their value, managers often impede, rather than expedite, decision making.

4. Hierarchy disenfranchises. Hamel argues, “As a consumer you have the freedom to spend $20,000 or more on a new car, but as an employee you probably don’t have the authority to requisition an office chair.” Treat an employee with distrust, and you shrink the incentive to dream, innovate and contribute.

Most managers are hardworking employees. But, research by Deloitte Economics finds that half of their time is spent on low-value, internal compliance processes.

The goal, of course, is not to fire all of the managers. Instead, redeploy their time from mind-numbing, non-value add work and into value-creating work. Sound impossible? It’s not. Just 25 people work at Berkshire Hathaway’s corporate headquarters. Morning Star, the world’s largest tomato processor, practices a management-less model in which employees are “self-managing professionals.”

Companies like these understand that bureaucracy is a drag — on creativity, on productivity, and on culture. What is the cost of bureaucracy at your organization?

Question: Is your hierarchy choking your productivity?

Interested in getting more content like this? Subscribe to CEE News!

CEE News is designed to help you with the challenges you face every day by sharing infographics, white papers, best practices, and spotlighting businesses that are getting it right. I hope you’ll subscribe to CEE News and it becomes a resource that continually adds value to your walk as a leader. If I can be of assistance in any way, please don’t hesitate to reach out!

The Price We Pay to Be Leaders of Integrity, By Dr. Tony Baron

Leadership

Over the past 10 years, I have been honored to explore and debate the essence of power with Dr. Tony Baron. Specifically, how power impacts leadership, how leadership impacts culture, and, ultimately, how culture impacts performance. 

With a double doctorate in psychology and theology and decades of executive coaching experience with Fortune 100 companies, you can imagine the depth and breadth that Tony adds to the subject. We are currently co-authoring a book that combines Tony’s scholarship and my straight talk about the challenges faced by today’s leaders. Meanwhile, I will be sharing guest posts by Tony over the next several months to give you a taste of what it’s like to have an amazing colleague and friend like Tony Baron. – Sheri Nasim

I have been fortunate to know many C-level leaders who have refused to trick, con, swindle, defraud, bamboozle, or dupe their employees and their customers. To them, a handshake meant something and their word was their bond. Aware that they have a responsibility to be a conscientious and competent steward within the company, they acknowledge their commitment to the public trust. Most of these leaders have never made the cover of Harvard Business Review, Time, or Newsweek but they have received the highest level of respect by their colleagues.

Yet, for many, their integrity came with a price. Some of these character-first leaders were fired, didn’t get promoted, harassed, smeared, or moved to another company prematurely because of their integrity.

I have also known a few executives who have cheated on their spouses, intimidated their employees, and intentionally deceived their customers for corporate profit and personal gain. Skilled in the art of positive public displays, those within the corporate inner circle knew the reality but feared for their jobs or bought into the illusion for their own gain. Some of these leaders were so good at covering their deceit that I too was fooled, sadly to say, for a while.

Yes, these leaders reach astounding heights and public admiration. But over time, their lack of integrity catches up with them. When it does, the costs are even higher. Ask Volkswagen. Last summer, Volkswagen made front page news by surpassing Toyota as the world’s largest auto maker. This June, Volkswagen agreed to pay up to $14.7 billion to settle a case of defrauding the public and the U.S. government for diesel emission tests. An additional $10 billion will be spent by the automaker to buy back or modify VW and Audi vehicles. The largest automaker settlement in United States history also added another $2.7 billion into a trust fund to assist with environmental and emission programs.

According to James Robert Liang, Volkwagen’s former Leader of Diesel Competence (yes, that was his title), they knew about the deception from the very beginning and their efforts were focused on improving the devices so the deception could continue. The lack of integrity has cost Liang his career as he pled guilty to wire fraud, violating the Clean Air Act, and defrauding the government.  He will soon be sentenced for up to five years plus pay a potential fine of $250,000. In addition, Liang’s testimony could lead to indictments of a much broader swath of VW engineers and management.

The hard fact is that, if you want to be a leader with integrity, there is always a cost. Most of the corporate world is busy acquiring and protecting power and using people as instruments. When you choose not to sacrifice your integrity within that system, there will be a price to pay. But, it will never cost you guilt, shame, or remorse.

Transformative leaders know that building a high-trust organization starts by looking in the mirror. Organizations in which leaders have personal integrity are those that build trusted interpersonal relationships. Rather than personal profit and public adoration, they focus on making a sustainable and significant impact on the lives and livelihood of others.

Dr. Tony Baron is Distinguished Scholar-In-Residence at Center for Executive Excellence and an internationally recognized speaker, writer, corporate consultant, professor and the San Diego Director of Azusa Pacific University Graduate School of Theology.

Dr. Baron is the author of six books, including The Art of Servant Leadership and a workbook manual co-written with noted author and business leader Ken Blanchard.  Throughout his career, he has worked with hundreds of companies including Ford Motor Company, Coca Cola Company, Warner Brothers Studios, and Boeing, among many others.

Driven by the premise that excellence is the result of aligning people, purpose and performance, Center for Executive Excellence facilitates training in leading self, leading teams and leading organizations. To learn more, visit us today at www.executiveexcellence.com or subscribe to receive CEE News!

Join us April 27, 2017 for our Annual Re:Imagine Leadership Summit! Learn how your organization can meet the demands of rapid change by creating a culture that can respond swiftly, communicate freely, encourage experimentation, and organize as a network of people motivated by a shared purpose! To be added to our registration list, please email info@executiveexcellence.com

3 Steps to Rebound from a Setback

Leadership

The CEO’s eyes were filled with tears. I was sitting across from him in his office, bracing myself for the news he was struggling to share. “I just made a deal to sell the company, and most of my team will be replaced” he said. “They’re going to take this very hard. I feel like I’ve let everyone down.”

After a brief pause, I said, “The decision you made will certainly have an impact on your team. You’ve set a big wave into motion. But how each person responds to that wave is up to them. Some will let it wash over them and they will spin out of control for a while. But others will catch the wave and ride it to new heights. How each person reacts to that wave is ultimately up to them.”

In our years of research and consulting work, we’ve met executives who have been fired, laid off, or passed over for promotion. We’ve ridden with them through mergers, restructurings, and competition for top jobs. Regardless of how the wave was put into motion, we’ve found that one lesson is pretty universal:  Even a dramatic career setback can become a springboard to success if you respond in the right way.

Here are three steps to help you rebound from a setback:

Step 1: Move from denial to acceptance

No matter how resilient they are, most executives process news like this by working through the five stages of grief. They start with denial that turns into anger. Next, they bargain over their fate, then fall into a period of depression. For many, it can take years to make it to the acceptance stage.

That’s partly because high achievers tend to have attribution bias. That is, they take too much credit for their successes and assign too much external blame for their failures. It’s a survival mechanism that helps to protect their self-esteem. Unfortunately, it also prevents learning and growth.  The next time you suffer a setback, don’t get stuck in the grief cycle.  Take action to explore how you contributed to what went wrong. Gather honest feedback from others and critically evaluate if you were culpable in the derailment.

Step 2: Look for meaning in your setback

When you’ve accepted reality, you’ll be ready to turn your loss into a win. Take advantage of the opportunity to do some deep thinking about who you are and what you want. Chances are, you’ve been climbing the career ladder for so long that you’ve gotten really good at doing something you don’t even like.

Many people fall into careers because of parental pressure or because they needed a job to pay off student debts. The Bureau of Labor Statistics finds that Americans spend over 37% of our lives at work. Over a working lifetime, that adds up to 99,117 hours. Use the power of the pause to allow yourself to look for work that has meaning beyond a paycheck.

Step 3: Move forward with confidence

After you identify possible next steps, it’s time to pick one. Admittedly, this can be a little frightening, especially if you’re venturing into unknown career territory. Reimagining your professional identity is one thing; bringing it to life is another. Remember, though, that you haven’t left your skills and experience behind with your last job, and you’ll also bring with you the lessons learned from the setback. You may also have revised your definition of success.

Use a setback as an opportunity to do some serious discovery work, then act with renewed conviction. Move out of the grief cycle and onto a path that will allow you to thrive.

Question: How have you taken advantage of a setback as a setup for a comeback?

Do you need guidance formulating a strategy for how you can rebound from a setback? Check out our Executive Coaching services or email me at snasim@executiveexcellence.com directly to set-up a free 30 minute consultation.