Leadership failures are routinely in the headlines. A recent example includes management’s admission of the rigged emissions tests at Volkswagen. Locally, a former publicly-held, global executive search firm that was started in Cleveland, CTPartners, unwound and disappeared after a variety of allegations were raised against its CEO. Another local headline grabber involved Pilot Flying J, the Knoxville-based (and run by the Cleveland Browns owner) truck-stop company accused of a scheme to defraud commercial customers of rebates.
These leadership failures cost owners, shareholders and other stakeholders dearly. The Volkswagen scandal is expected to cost the company $87 billion. Other historic failures and their price tag include WorldCom at $107 billion, Enron at $74 billion and Bernie Madoff’s Ponzi scheme at $20 billion. Of course many leaders of those companies lost jobs and/or served jail time, and the companies went bankrupt or went away.
Most leadership failures never make the headlines, and are much more insidious. In addition, most are not caused by fraud but by poor leadership skills and practices. In a recent interview with Dr. James de Gaspe Bonar of the Bonar Institute for Purposeful Leadership, and based on surveys by The Economist and others, nearly half of corporate leaders are incompetent or untrained for their roles.
- Leadership is disappointing – 75% of employees report that their boss is the worst part of their job.
- Leadership is disconnected – half of surveyed CEO’s feel isolated in their roles, and thus less effective.
- Leadership is disgraceful – the most pessimistic of surveys show that only 7% of employees have confidence their leaders are looking out for their best interests.
Fortunately, most organizations are not in a situation of leadership failure or crisis. However, even these organizations may benefit by improving leadership training and accountability.
Molinaro suggests having leaders sign a leadership contract at each new level of leadership, and as part of four steps to driving leadership accountability. Here are the four steps:
- Make leadership accountability a business priority.
- Enumerate the obligations of leadership with a written contract.
- Train and coach leaders on dealing with tough decisions.
- Create a leadership community by connecting leaders.
Molinaro provides a tremendous amount of supporting detail and substantive suggestions on implementation of the contract in his book.
For shareholders, boards of directors, CEO’s and others who are responsible for overseeing organizational leaders, the idea of a leadership accountability contract may be appealing. Not all organizations would choose to use a formal contract, but the level of commitment and communication involved in doing so would certainly provide a structured approach to addressing leadership performance and accountability.
The impact of leadership failure can be devastating. A clear communication and review of leadership responsibilities can certainly help avoid leadership failure, and a leadership contract is a great start.
For help in designing and implementing leadership accountability programs in your organization, please contact us.