I was approached just recently by a company to run a 3-day leadership training program for senior leaders, and they asked me to send them the course outline, objective, and price, etc.
I sent them the proposal, and the following day they wrote back and asked me if I could reduce my fee by 50 percent because they feel that the cost was much more than they were willing to pay.
Now while I understand that everyone is looking for a great deal, wants to negotiate and needs to feel that they are getting a bargain, it did.
But as I thought about how I would respond it occurred to me that they didn't really understand the full price that they were already paying for poor leadership.
So I decided to reply highlighting three areas where poor leadership is possibly costing the company a fortune.
Staff turnover costs.
There is a lot of research into what the true costs of staff turnover are, and these range from 16% of salary for hourly employees, up 213% for executive leaders. These costs widely vary, and this is because they can include many different components such as recruiting a replacement, disruption, lost productivity, etc., etc.
But even if we go with the lowest figure, 16% of salary is still a significant figure, especially in a tight and competitive market.
Given that the number one reason that people leave companies is that of their direct manager, then that costs is directly attributed to poor leadership. People leave bad bosses not companies.
Studies have repeatedly shown that the majority of staff are disengaged, and in the US that figure is regularly around 30% with associated costs of around $450-550billon per year.
Employee engagement should be management's number one job, and we constantly here that our people are our most important assets, and yet these figures show that while it might be believed that idea is not fully implemented or optimized.
Better leadership leads to better engagement, happier and more productive staff, and more satisfied customers.
The cost of failure.
When you look at the statistics for failure the numbers are staggering, IBM Research shows that 60% of IT Projects fail, according to Bloomberg's 80% of first-time business go bust in the first 18 months, and Forbes will tell you that 95% of product launches fail.
It's the costs here which are the most significant and impactful, and while there can be many reasons as to why things fail, good leadership can prevent or avoid many of them, and actually deliver the desired results and associated benefits.
Needless to say, I didn't offer them the 50% discount, and as I looked at the cost of poor leadership, it occurred to me that I might not be charging enough!