Nov 02 2021| Leadership

The Seven Symptoms of a Sick Company

And how effective leaders restore good health

by Phil Eyre Leaders' Founder

Fostering excellent leadership that in turn creates sustainable, healthy workplaces is at the heart of our mission. We explored this with our Leadership Development cohort, a group of leaders drawn from very different organisations ranging from professional services to architectural practices. The group identified these symptoms of a sick company, how many of these do you recognise?

 

1. Attrition

Excessive employee turnover is often associated with corporate sickness. What constitutes ‘excess’ is situational and will depend on the nature of the company, the time of life of the company (e.g. start up or mature) and the particular challenges faced. Some employee attrition is healthy: people retire, some need to move on, growth requires change. 

We usually view much over 20% per annum as ‘excessive’; 35% and over can be fatal, especially if undesired and uncontrolled by management. At these levels, the costs are disruptive, let alone the damage to reputation which in turn makes rebuilding the team difficult - sometimes impossible - to achieve. High attrition can become self-fulfilling as team members become unsettled and competitors sense opportunity.

There is a further factor that our cohort identified. It’s not simply the rate of attribution; it’s the quality of the people leaving that is a stronger signal of sickness. Good people tend to leave first. They are unwilling to tolerate an unhealthy environment and are more able to move because they’re ‘good’!  Relatively low attrition rates can therefore be a signal of distress if the people leaving are talented and pivotal to the company.

Excellent leaders attend quickly to employee attrition. They take careful note of the reasons why people are leaving and the impact on the team, as well as considering ways to build back strongly. They don’t dismiss the problem, denying that there is an issue, and they don’t take initial reasons for employee departure at face value. They look more deeply and seek to understand the root cause. This takes time and a sophisticated approach in order to get to the truth.

 

2. Physical illness

 A sick company literally makes people sick.

Various studies demonstrate a connection between extended workplace stress and heart disease.    And stress is not always caused by an excessive volume of work. It can arise from poor behaviour, whether directly (e.g. aggression, passive aggression) or indirectly, via unhealthy company norms. 

For example, we have observed these warning signs:

  • excessive working hours considered as a badge of honour;
  • cancelling time off consistently (and being expected to do so);
  • people being expected to be at work even when unwell; ‘at work’ includes working from home when unwell, a new and growing trend now that many people are able to work remotely; and
  • high absence rates.

Many of our clients monitor sick days in their organisations. They reflect inwardly and take responsibility when sickness rates begin to rise, rather than seeking external reasons for escalating illness. As with any measure, the quality of leadership is determined by what you do with the data.

 

3. Presenteeism

Our cohort defined presenteeism as a lack of creativity, buy-in, discretionary effort and care. People are doing the bare minimum and often to a below-acceptable standard. Yet we find that, generally, people don’t want to get up in the morning and do a bad job during the day. Most of us prefer to enjoy our work, give our best and make a positive impact in our workplaces. What, therefore, causes an unhealthy presenteeism? We believe that this is substantially poor leadership, observed in these ways:

  • new ideas are shot down or dismissed by senior management. The reasons for this tend to be an arrogance that the manager is the sole source of good ideas or a lack of courage to try new things. Either way, the net effect is that people in the company stop bringing new ideas and energy to the table.
  • there is a loss of vision or belief in the importance of the company’s products and services. Tasks have become disconnected from anything purposeful and therefore day-to-day activity is bound to be mundane. It is the leaders’ responsibility to consistently convey vision, purpose and meaning in the workplace.
  • leaders are role modelling being self-centred rather than serving their people and customers. In the worst cases, the c-suite impose procedures and expectations on their people that they excuse themselves from. For example, we are aware of some companies that are requiring their people return to the office five days per week, apart from senior managers who are ‘trusted to work from home flexibly when they need to’. This kind of inconsistency is devastating to morale.

 

4. Productivity Problems

Productivity often suffers in unhealthy companies. Deadlines are missed as standard. Financial results and other measures undershoot expectations. People - and the company as a whole - fail to achieve their full potential.

There are some exceptions, but these tend to be short lived. We have encountered one very unhealthy environment where the monthly financial results were strong. However, it didn’t take long for the aggressive focus on short-term targets to impact on stability; staff turnover hit 40% over three months, with the result that profitability and service levels cratered.

Healthy companies have a more organic approach to growth. They are growing, certainly, but at a pace and in a way that is sustainable, consistent and with a keen eye on the long term. Leaders of such companies will often give up short-term rewards, recycling resources into the company for future resilience and future returns - even when they might not benefit personally from those returns. The very best manage to achieve some short-term wins at the same time as working towards long-term wins, an approach brilliantly articulated by David Cote, former CEO of global industrial conglomerate Honeywell, in his book Winning Now, Winning Later.

Failing to meet deadlines can also be a symptom of:

  • silo mentality, a failure of the leaders of key business units to work together, support each other and pull together towards shared priorities. This is typically associated with excess ego.
  • unreasonable deadlines, usually set by a highly energetic chief who’s too dismissive of the realities and risks to listen to others.

Healthy leaders, people and companies are productive in a way that’s sustainable, repeatable and consistent.

 

5. Loss of *good* clients

When a company is sick, good customers leave. They will sense and sometimes experience the symptoms of the company’s ills and go elsewhere. Perhaps they’ll leave because of an admin error, or failure to deliver on time, or for receiving less attention, or being overcharged - but leave they will.

In our work, we challenge our clients to think of the conditions that determine whether their relationships with customers, or a segment of customers, are enjoyable or not. We then ask them to assess the quality and stability of those relationships. If good customers are leaving, whilst less-enjoyable customers are growing, that’s a sign to us of an unhealthy company, if not now, then in the future. If ‘bad’ customers are leaving, that’s a signal of health (perhaps future health). 

We often find that leaders need to take the initiative with ‘not good’ customers to either change or leave; they rarely leave willingly. Good customers, however, are typically more mobile and will leave. Likewise, they are a fabulous source of great new work *if* they trust and enjoy your company.

 

6. Facilities deteriorate

Sick companies pay little regard to their facilities, the physical buildings and environment in which people work. The look and feel of the place convey the ailing state of the company. We have experienced:

  • heating turned off in winter (I sat through two days of meetings in my coat);
  • broken windows and flaking walls;
  • blood on the floor (yikes! Only a few drops, but worrying nevertheless);
  • desks from the 1970s (it was 2021);
  • out of date calendars and notices stuck to walls; and
  • a dead rat in the office (it had been there quite a few days).

According to research by BersinTM, a ‘safe and humane working environment’ is one of a number of critical factors for employee engagement. When the physical environment becomes unhealthy, that’s a potential signal to unhealthy culture (‘we don’t really care’) and/or a sick balance sheet (‘we have no money but expect you to work as if we do’).

Healthy companies invest in their physical environments. They clear up after themselves properly. They provide healthy working conditions for their people. Whilst I’m sure working from home will come with a number of technical issues - for example are employers now responsible for people’s health and safety at home? - the better leaders have recognised the need to help foster healthy remote-working conditions, providing furniture and equipment.

 

7. Scandal

Scandal is an obvious sign of sickness in a company. It is perhaps an exaggerated or ultimate form of the other signs of illness. Often, the point at which an individual or company is discovered to have been breaking the rules follows an extended period of rule-bending, perhaps minor infractions that have escalated. The problem is that they have been unchallenged or removed sources of challenge. Margaret Heffernan describes this dysfunction wonderfully in her book Wilful Blindness.  Leaders who are unwilling to address the signs of failure will themselves fail. 

I’ve yet to encounter a board pack that has the agenda item ‘avoid scandal’. Yet much good governance is designed to achieve precisely that. The leadership problem is that the seeds of scandal sit in human behaviours and attitudes. For example, regular feedback is good governance; meetings can be measured. Being willing to be wrong, listening and acting on criticism is a choice and takes practice. 

Effective leaders create the conditions where good governance becomes a value-add to the company. Rather than treating codes of practice as an inconvenience, they embrace process, guidance and law as tools towards health and sustainability.

Good leadership is significantly about creating healthy companies, identifying and tackling signs of sickness before they become serious or fatal. Healthy leaders = healthy companies.

About The Author | Phil Eyre

Phil is Leaders’ founder. He has an enthusiastic and inspiring style, drawing on his experience in business, academia and social sectors to help any leadership team to achieve phenomenal performance. Phil has significant expertise in sophisticated psychometrics and in the application of human data for individual, team and organisational success. He has trained with and been mentored by, global leaders in this field, notably Dr Chuck Coker in the US. Phil began his career in the UK offshore finance industry in 1994, working for a wealth management company, Canaccord Genuity Wealth International. Phil was head of the company's Guernsey division, with a staff of 120 and assets under management of £4.5billion before resigning from executive responsibilities in 2008. Since launching Leaders in 2017, Phil has worked with many senior executives and boards primarily in the Channel Islands and City of London. He regularly writes for a variety of business publications and is often invited to speak at events for institutions such as the IoD and the British Army. Phil works closely with clients on focussed projects and long-term retainers to raise leadership standards. He is a popular and inspiring educator and coach who, with the insights gained from psychometrics, is able to accurately detect the strengths and weaknesses in leadership teams and boards. Phil has served on the boards of various charities, ran the Guernsey hub of a national theology college, received accreditation as a pastor in the Baptist Union of Great Britain and is accredited in various motivation and behavioural techniques.

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