The Hidden Cost of Leadership Waste

By Janeen Gelbart

What leadership activity is causing corporate America to waste over $322 billion a year?

Let’s begin by taking a few, obviously bad things off the table: Mistakes, miscalculations, lack of foresight and other known causes of waste. Instead, let’s talk about the things we hope are good.

Consider the kinds of choices that managers and leaders make every day when they’re working hard and ostensibly doing their jobs. There, hiding in plain sight, is a leadership activity that is draining organizations of major resources and causing massive and pervasive losses every day, at every level of your organization.

It’s hard to imagine that our leaders and managers could unknowingly be responsible for such waste. We are, after all, talking about our most expensive and influential people. These people would immediately take action to change things if they became aware of any investment that was generating significant waste.

They want to do the right thing and they care about successful outcomes. The problem is, they’re trying to do too much. Their lives have been invaded by more information, more connectivity, more demands and more complexity than ever before. They believe that coping with all that is coming at them at once is the way it is and must be.

This hero mentality creates a pervasive lack of effective focus, causing a significant gap between strategy (what an organization says it wants to do) and execution (what it actually does).

This gap is very expensive. A Harvard Business Review-published study[1] shows that leaders and managers waste an average of 41% of their time on low-value activities. By extrapolating that level of waste across the leaders and managers at Fortune 1000 companies, we estimated that America’s biggest companies are wasting at least $322 billion every year because managers and leaders are not focused enough on critical priorities. This is equal to the GDP of Hong Kong! The rate of loss is breath-taking and this calculation does not consider hiring, training, or the opportunity cost of doing the wrong things.

Astonished by these figures, we set out to validate them. We collected data from dozens of executives that employ over 156,000 of their own leaders and managers. The results validated the HBR research: they estimated that their managers and leaders consistently waste an average of 40% of their time on non-priority related activities.

No wonder 60% of key initiatives fail[2] and 75% of large organizations struggle to implement their strategy[3].

Imagine if you ran a business unit, product line or asset that consistently, year after year, lost 40% of every dollar invested. Your job security and future career would be compromised immediately. As leaders we are taught from day one to monitor and measure return on investment; we must begin to give the same level of attention to something we call Return On Leadership.

This loss is avoidable and represents an opportunity that most businesses can seize today. Research by Bain & Co. supports our view that a significant share of this waste can be recovered. A minimum of 25% of a typical managers total time, representing over $200 billion can be reclaimed every year in the US alone[4].

We have seen organizations successfully turn this around. At BDO USA, one of the largest professional service firms in North America, Matt Becker, a member of the executive team, faced a challenging turnaround situation for one of their divisions. Following a series of M&A transactions, he needed to realign, refocus and turbocharge this division to execute on a select number of critical areas. Matt kicked off this effort with the senior-most 100 leaders in the division. Aligning and maintaining focused execution of a small team is challenging enough, so to scale and sustain the broad effort, he rolled out this approach together with a technology platform that we have developed. Throughout the process, he ensured that tough tradeoffs were being made and that organizational and individual priorities were clear and aligned.

Only 10 months after adopting this integrated solution Matt and his team have already seen significant positive results, including a 51% increase in profitability for the division over the same period a year earlier. Let’s remember that this success was achieved with just the senior-most 100 leaders; we would expect even greater results as the approach is adopted by successive levels of management.

So how can we harness the same power and achieve a greater Return On Leadership?

How can we operate with ongoing clarity and focus on the right things? The answer to this complex problem is relatively simple, but not one that is easy to put into practice. And it’s even harder to do in a widespread, sustainable, scalable and measurable manner.

Begin by focusing your organizational strategy and identifying the key areas that require the most attention in order to secure success over the next 6–12 months. Even though you should have a three- year plan, todays’ environment calls for a dynamic execution approach. The executive team and department heads must readjust and highlight key areas of focus clearly and regularly for the organization.

With alignment on current organizational focus, every leader and manager at every level should systematically identify their top few individual priorities for the upcoming month. They should then operate by making clear priority-driven choices on where to focus their energy, what to work on, what meetings to join or not join, and where to pay more attention. These individual monthly priorities should be clearly connected to the identified organizational priorities. The key to turning the tide in your favor is to activate every individual manager and the collective management population simultaneously.

To succeed in this disciplined mode of execution, every leader must:

· Proactively distinguish what is crucially important from what is merely important

· Make tough trade-offs through dynamic ongoing strategic choices

· Help others to do the same

· Operate with transparency and awareness

· Build a culture that gives the freedom to say no or at least” not now” so people can focus on the highest value areas

To implement and scale, we must also leverage technology to give managers and leaders a platform for successful action together. This approach requires discipline at every level of leadership. Without this discipline, it’s easy to disguise leadership waste because it often presents itself as nonstop activity.

This wasted work is draining America’s leading businesses. Something is wrong, and we must have the courage to question the status quo of how we have always operated. Instead of working endlessly without seeing strategy succeed, you will create endless opportunities to achieve your vision through strategic execution. Not only will we generate much greater return on our investment in our leaders and managers, but we will make today’s leaders and managers the most successful in history.

[1] HBR Study “Make Time for Work That Matters” Sept 2013 — https://hbr.org/2013/09/make-time-for-the-work-that-matters

[2] IBM Report “Making Change Work” October 2008 — https://drive.google.com/file/d/1Y3K-A9NY_9YY8L-AqgjZ8zGQRzGlg1y9/view?usp=sharing

[3] HBR “Why Strategy Execution Unravels — and What to Do about it” Marc 2015 issue by Donald Sull, Rebecca Homkes, and Charles Sull.

[4]Time, Talent, Energy” by Michael C. Mankins & Eric Garton, Harvard Business Review Press, 2017.