Founder and CEO of ERG Enterprises. Nationally recognized opinion leader in entrepreneurship, investment and leadership.
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Making a leadership mistake can be costly – very costly.
Consider employee turnover, a measure that is highly correlated with leadership effectiveness. For every employee who leaves, it can cost half to twice their annual salary to replace them, according to Gallup. Multiply this over an organization of 200 people and you’re looking at potentially millions of dollars.
And that’s just the cost of revenue, not overall performance, sales, marketing, or customer service — not the myriad areas that positively or negatively influence leaders.
If you run an organization, this article may be worth your time. It examines four mistakes that I have often seen leaders make in my twenty years of experience as a commercial investor and serial entrepreneur. Here’s what they are and how to avoid them.
1. Focusing on Self-Performance
While introspection and self-assessment are the responsibilities of any effective leader, your primary concern should not be self-improvement; you should focus on helping the people around you to improve. That means you need to recalibrate your focus from individual to team performance.
This challenge often affects individuals stepping into new leadership roles. When I began my entrepreneurial career, I made the transition from running a solo hand surgery practice to running a hospital with dozens of doctors, nurses, and staff. Success no longer meant just delivering excellent care to my patients. It meant creating an institution that systematically and sustainably provided good care while making money at the same time.
To focus on the performance of the collective:
1. Redefine your success metrics. Leadership success must be linked to organizational performance. Think of profit and loss statements and the balance sheet as your scorecard.
2. Recognize the importance of the team. No founder or entrepreneur has built a successful business on his own. Yet I meet many young or new founders who challenge themselves to do so. They don’t realize that they will only go as far as the talent they acquire and the team they build and retain.
2. Acting on impulse
When you act impulsively, you create far-reaching and long-lasting consequences. That is why it is important to act with patience, calculation and intention. Rarely are leaders faced with a decision that needs to be made in the moment; you can take the time to assess the implications of your trading or inaction.
This is the thesis of Charles Fred’s book, The 24-hour rule: leading in a hectic world. Fred explores the tendency of leaders to act impetuously, driven by 24/7 communication and cultural influences that admire unsustainable work habits. The book argues that leaders should adopt the discipline of pausing: taking conscious and deliberate time to avoid impulsive decisions.
To avert your impulses, I recommend:
1. Understand the realistic timeline. Assess the actual deadline for your decision.
2. Realize your impulse triggers. Take stock of when you are most prone to acting impulsively and avoid making decisions during this time.
3. Assess the implications of your decision. Acting impulsively isn’t always bad. When the situation is routine and the stakes are low, taking immediate action can create value.
4. Find the balance. Balance numbers 1 and 3 to make your decision timeline and stick to it.
3. Never discover your “reset” point
Leadership is analogous to running a long, grueling marathon. Sometimes it can feel wonderful; in others it can seem daunting and exhausting. A reset point allows you to find internal balance, recalibrate and refresh your mind and continue charging.
You need to find a reset point for both the short term and the long term. Short-term examples might include exercise before work, morning meditation, family time, reading, or reflection. Long-term opportunities can be vacations, new hobbies, or new interests. For me, I never miss a family vacation. I also reserve early mornings for meditation, an exercise that has served me well in the boardroom and operating room.
To create your reset point:
1. Focus on your energy. Choose the activities that replenish your mental and physical energy.
2. Focus on your motivation. Your reset point should keep you motivated to perform at the highest level.
3. Focus on your discipline. Your day can quickly unravel if you miss the routines that hold it all together. Identify one or more of those activities as they represent your reset point (or points).
4. Over- or under-rewarding employee contributions
Positive reinforcement is needed to improve employee performance. Your people need to know that you value their contributions more than compensation.
However, positive feedback has its time and place. By using it intentionally and intentionally, you can maximize the productivity of your team. But using it too often can create a sense of complacency, create unhealthy expectations, and reduce performance.
Recognition is an influence tool that you should use wisely. But doing so is not as complicated as it seems. For example, in my company, I recognize employees when they follow best practices and exceed expectations in their performance. In other words, I value process and achievement, regardless of the end result. That’s because employees can control the first two factors, but not always the third.
Consider rewarding appropriately:
1. Process: What process did your employee follow to arrive at the result? Was it identified and recommended, or was it spontaneous and not reproducible?
2. Performance: Does their performance exceed what is expected and considered the baseline? How common is it at this level?
3. Value: If replicated, would this performance event create significant value for your organization?
If the process is good, the performance is superior and the value is high, give credit to your employee or team.
Maximizing Your Leadership ROI
By avoiding these four mistakes, you create the conditions for your team and organization to thrive. You also avoid the costly mistakes that make many organizations stagnate, shrink or sink.
These are by no means all the mistakes we can make as leaders. But they’re some of the most important I’ve seen in my career, especially among new leaders and entrepreneurs.
Acknowledge these missteps, remember them and use them to get the most out of your team and especially yourself.
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