Leadership Mistakes

The Ultimate Leadership Strategy

Steven Sonsino asked:

Put people first. It’s the great cliche, isn’t it? When a business school professor like me asks you ‘what’s the most productive leadership style?’, you know the answer don’t you? Put people first.

But if everyone knows the answer, why aren’t more people doing it? Why aren’t executives focused on motivating and inspiring their people?

The reality is that people put profits first. They focus on the short-term financial gain without realizing that there is a direct link between putting people first and building outrageous profits.

In one of the very few great books on this topic, ‘The Human Equation’, Jeffrey Pfeffer from Stanford Business School paints a simple and striking picture of how to build profits by putting people first. I don’t have a lot of time here to recap the whole book, but if you want some bald statistics, if you need numbers to justify putting people first, then get this book.

Pfeffer tackles head-on some of the sacred cows of many CEOs today – he particularly challenges the view that downsizing, competing on price, and operating globally are really necessary. It’s very thought provoking.

One of the most striking pieces of evidence Pfeffer cites is a study of one thousand large US companies. Pfeffer found that investors place a much higher value on companies that improved their bottom line through revenue growth, rather than cost cutting.

Why? Well, investors want growing companies not shrinking ones. You can only cut cost once, says Pfeffer, or only a limited number of times, before you bite into the muscle of the business. Cut too much and you lose the competitive edge that makes the company great.

You might be wondering at this point, though, isn’t downsizing something that the US does a great deal? And isn’t the US one of the most competitive and innovative countries in the world? You’d be right. So there’s an apparent paradox here.

Not so, says Pfeffer. He reminds us not to confuse success that occurs IN SPITE OF what leaders do, with success that comes BECAUSE OF what leaders do.

I love this idea. That not everything you do leads to financial success. If you are successful enough – and profitable enough – that success will mask some of the mistakes you make.

Probably the most significant practical key of this story is for me captured by a quote from Sir Richard Branson, founder of the UK’s Virgin Group. At Virgin, says Branson, the people come first, the customers second and the shareholders third.

In a speech to the London Institute of Directors, Branson said: ‘In the end, the long-term interests of shareholders are actually damaged by giving them superficial short-term priority.’

And this is the key point, isn’t it? Customer satisfaction generates recommendations and gets our clients back for more. That’s what it’s about, after all.

But to get great customer satisfaction you need great customer service. And to have excellent standards in customer service means having staff who are proud of the company they work for and who respect the managers of the business.

Pfeffer closes the book with a key quote from Sam Walton, who built the Wal-Mart empire. ‘The more you share profits with your people, the more profit will accrue to the company. Why? Because the way management treats its people is exactly how its people will treat the customers.’

If you want some bald statistics, or if you need numbers to justify putting people first, you must get this book. Then convince everyone around you, who isn’t already doing it, to read it too. Let’s really try to put people first. It will be profitable.

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