Cost of Leadership in Small Business

Leadership coaching can be viewed as a frivolous expense. Especially, for small businesses that have many things pulling for their attention and trying to make ends meet. Plus, the comfort zone for many founders is working in the business because it allows them to focus on their craft. As a result, working on the business and leadership development are put on the back burner.

My first employee, who was usually the support system for new people, [had stepped away and after she left], the rest of the team kind of fell apart…… [My family and I] went on a trip that we had planned for a long time, and then I spent the whole time fixing [problems by] email. I literally called the office and said, “Do not respond to any more emails,” and ended up letting everybody go when I came back.

Business of Home

Leadership coaching unfortunately falls to the wayside similar to health and finances. You operate on cruise control until you hit a bump and almost lose control. Some founders face reality and seek guidance. Others revert to cruise control until the next bump comes along. Change often doesn’t occur until the pain becomes unbearable. It doesn’t have to be that way for you!

Cost of Weak Leadership

Weak leadership includes a lack of personal development and team coaching + development. It has a negative impact on team performance, productivity, and company culture. The ripple effect impacts clients and the industry. “Moving away from a bad manager or leader” is one of the top reasons for US employees when considering whether or not to take a job with a new company, per Gallup.

If I were to assess the annual cost of weak leadership, I’d start by putting my costs into the Leadership Cost Analysis. Numbers are calculated using 50 weeks allowing for 2 weeks of vacation. Items listed under the toggle are hidden costs that occur as a result of the performance or behavior.

• Management tasks are an investment in employee development; hours are positive.
  • You host a 60-min weekly team meeting.
  • You don’t facilitate structured monthly performance coaching.
  • You have a 15-min check-in every other week with the team member.
• Hiring/Turnover tasks are a cost; hours are negative. The hours and tasks are conservative to account for delegating some of the work to a recruiter or assistant. However, as hiring manager there’s still a time investment by you.
  • Allowing 40 hours for onboarding + training even if onboarding is automated.
• Behavior tasks are a cost; hours are negative. These are situations that have escalated quickly or slowly built over time due to lack of early intervention (aka coaching).
  • What’s the cost of a disgruntled client with mismanaged expectations?
  • What’s the cost of a team member(s) who’s fed up with management’s inconsistent practices, arbitrary decisions, and lack of accountability?
  • What’s the cost of your industry reputation? Awards, brand refreshes, and personal branding won’t save a tarnished reputation.
• Performance tasks are a cost; hours are negative.
  • You spend an hour a week correcting work. This could more or less some weeks.
  • Lack of monthly coaching and check-ins result in employee performance at less than their potential. (40 hrs/wk * 50 wks = 2000 hrs). 75% of capacity means a loss of 25% of productivity (-500 hours). The side effects and hidden costs include: low job satisfaction, behavior spreading to peers. Loss of initiative and innovation.
  • If you do decide to put them on a performance improvement plan, it costs time to prepare, facilitate, and follow up.

Cost of Strong Leadership

Strong leadership understands their impact on their team’s success today and in the future. They actively pursue personal development and have a desire to see their team reach their potential. This mindset and behavior support team performance, productivity, and company culture. The ripple effect impacts clients and the industry. “Allows me to do what I do best” is one of the top reasons attracting US employees to new opportunities, per Gallup.

If I were to assess the annual cost of strong leadership, I’d start by putting my numbers into the Leadership Cost Analysis. Numbers are calculated using 50 weeks allowing for 2 weeks of vacation. Items listed under the toggle are hidden costs that occur as a result of the performance or behavior.

• Management tasks are an investment in employee development; hours are positive.
  • You host a 60-min weekly team meeting.
  • You facilitate structured monthly performance coaching.
  • You have a 30-min check-in every other week with the team member.
• Hiring/Turnover tasks are reduced due to retention of team.
• Behavior tasks are eliminated due to frequent coaching, proper oversight + accountability.
  • What’s the return on high team morale? How does this impact how they show up daily and in meetings?
  • What’s the return on increased collaboration? How does this impact innovation + creativity?
  • What’s the return on positive client experiences? How does this impact referrals and returning clients?
  • What’s the return on your industry reputation? How does this impact vendor collaborations, referrals, and increased responsiveness/flexibility?
• Performance tasks are a cost; hours are negative.
  • You spend less time correcting work because you invested in time upfront with 1:1 coaching. This could more or less some weeks.
  • Consistent monthly coaching and check-ins result in employee performance achieving greater potential. (40 hrs/wk * 50 wks = 2000 hrs). 90% of capacity means a loss of 10% of productivity (-200 hours). The side effects and hidden costs include: improved job satisfaction, confidence and capability to mentor.
  • No performance improvement plan.

What’s next?

The recurring argument against structured performance coaching is the time it will take away from working in the business. However, when you break it down and assess the estimated cost and hidden costs between strong (-$300.00) and weak (-$25,750) leadership the argument doesn’t stand over time.

I encourage you to recreate with your own numbers for a personalized cost analysis. Then create a plan for personal and team development. Your commitment to development is a long-term investment in you, the team, and your business. Behavior won’t miraculously change overnight, but each step forward is progress. 💪🏻

If this is an area you would like support with, let’s chat. If you’re adamant that leadership isn’t for you, have you considered bringing on an operations partner who can lead your team? Your team deserves your best and to be challenged to reach their potential.

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View the Leadership Cost Analysis