Three Sins That Will Sink an Organization

You can find multiple books and articles on how to become a better leader and build the ideal company. But what about areas that can slow and ultimately destroy the growth of people and organizations?  What are the three areas we need to be conscious of never entering; three threats that will ultimately lead to failure?

Centralization of Power.   Making all decisions from the top down and having a few ‘elite’ people in leadership positions offer very little or no opposition to suggestions from the President/CEO.  This type of leadership is what communist organizations used known as ‘Command and Control’.  We can often find it in organizations where the President or CEO has created a circle of advisors from friends who offer no resistance to ideas brought to the table by the president.  This position of leadership is extremely dangerous because all decisions are made without the knowledge or vital input from the people the decision will affect.  It is especially critical when decisions are made that will impact the ‘producers’ within the organization.  Quite often, you will find the majority of organizations owe their continued growth due to a few key leaders who have proven their success by contributing ideas, suggestions, and improvements while actually performing in the day-to-day activity, yet their personal observation and experience are overlooked and overpowered behind closed doors.   Centralization of power without considering the people who create the majority of the production for the organization will, in a short time, take the heart and drive of that producer and they will seek an organization that values them more.

Redistribution of Income.  More than once, I have viewed or even been a part of the negative impact received when people in power redistribute the wealth of a corporation. Often the head of the organization comes to the determination that those in the organization who are making the most money based upon their personal production need to have their income decreased and reworked in order to spread the wealth to others, very often to those who have yet to prove their value.  This type of action is driven by those at the top having the mindset of believing by spreading more money to the masses that more people will benefit. Oftentimes, those in leadership feel those who are making money are making entirely too much. Those in leadership will retire to their boardroom often surrounded by non-producers, and as a group they will begin to methodically restructure and redistribute the income by ‘taking away’ existing payouts from the proven producers. It can be done in a variety of ways, increasing a person’s territory while reducing their commissions, by eliminating financial incentives that have been guaranteed annually for years such as reducing profit sharing or restructuring stock incentives…all being done from the belief that by redistribution there will be more money for those who have yet proven their ability to produce. 

The impact of these decisions is disastrous. First, those who have created this new structure are sending a signal to the producers of ‘no value’ both as a leader and economic producer.  Second, they punish the people who produce profits and intellectual equity.   Most importantly, they ‘violate trust’; the change sends the signal to those who have been loyal and who have proven their ability to succeed they can no longer trust those in control.  Once this trust is violated, it is virtually impossible to re-establish.  When you take the fire from your producers, you begin the slippery slope of negative growth.

Having people who have never proven themselves successful placed in positions of leadership over those who are proven.  The number one complaint I hear when presenting my leadership seminar is this: “How do I overcome someone in leadership who is my superior that has not a clue about what they are doing”?  An action often taken by many organizations and corporations is moving people into positions of power based on ‘relationships rather than resume’.  Often a family member or friend is placed in a key position of responsibility which erodes trust as well. The key element in leadership is the ability to create respect, and the best way to create respect is by doing what you are asking those who follow to do.  People today are not impressed with ‘textbook experience’, especially if you have been placed to lead a ‘veteran leadership team’.  Favoritism should never be the rule for placing people in leadership positions; how you ‘feel’ about someone’s potential performance should yield to what you ‘know’ about the person and what they have already proven. When making appointments always ask, “how will this affect my existing team”?

Organizations will restructure utilizing the above elements without understanding, or attempting to understand, how it will negatively impact their organization’s performance.  Often it is done out of ignorance but at times you will find those in leadership have risen to a degree of arrogance that unfortunately overrules their intelligence.  They will never accept the fact that by implementing the above ideas, they have destroyed the growth and expansion of their enterprise.  Instead of seeing how their actions have created negative reactions, they begin the process of ‘finger pointing’, believing those who once were key producers have just become ‘lazy’.  They begin building their organization’s future based on the competition rather than their competence.  Not realizing what they have done or not admitting what they have created, they spend hours looking at ‘numbers’ on spreadsheets instead of those who create the numbers and their needs…and production screeches to a stop.

Examine the negative impact when corporations, organizations, and even governments operate from these three positions, and give me a call if you need the tools to turn these decisions around for the better.

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