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Three Tests of Leadership in the New Disengagement Economy

04/21/2015 05:50 pm ET | Updated Jun 21, 2015

"This year, employee engagement and culture issues exploded onto the scene, rising to become the No. 1 challenge around the world." -- Global Human Capital Trends, Deloitte, February, 2015

The growing concern regarding disengaged employees reflects a simple truth: leadership requirements have changed, most leaders have not. Disengaged employees are part of a broader mega-trend: steep relationship decline across home, work, politics and faith. In business, this so-called Disengagement Economy reflects organizations burdened with the heavy cost of uncommitted workers, stunted innovation, weak customer relationships, low-performing teams, and productivity loss. Many leaders are operating in an outdated leadership model where compliance substitutes for commitment. As millennials, the group least engaged with today's leaders and most engaged with social media, become our largest workforce demographic in 2015 -- the leadership challenge will only grow. Leadership, the primary product offered by formal and informal leaders to constituents everywhere, is increasingly being rejected. Bluntly stated, the dogs are not eating the leadership dog food.

Deloitte's 2015 Human Capital Trends report puts Leadership as the number two business challenge right behind its woeful result, deteriorating Engagement and Culture. Nine out of ten respondents cited building leadership as Important or Very Important, yet, the leadership capability gap widened in every region of the world last year. The facts are damning: Gallup first reported in 2013 that 70 percent of our employees are disengaged - very troubling since engaged employees give 57 percent more effort and are 87 percent less likely to resign. One in five trust business leaders to tell the truth on difficult issues. Half of workers would not recommend their employer to peers. And, among Millennials, 50 percent would rather be unemployed than stay in a job they hate. Either our leaders have become collectively inept, or the game has changed.

It's not just business. Forty-eight percent of U.S. soldiers lack commitment to their job and nearly 40 percent do not trust their supervisor. Prior to my recent speech to 500 military officers, a top general lamented: "We used to issue orders and subordinates obeyed. Now they ask 'why'."

Relational Leadership: The New Test for Leadership

This new marketplace of unraveling relationships represents disruptive change that tests leaders much as transformative technology or recession. It calls for a specific brand of leading - Relational Leadership - that infuses a heavy dose of relational intention into three leadership keys: Priority, Purpose and Power.

Relationship Priority: Make productive relationships the organization's highest priority because ultimately they are our most valuable, value-creating and value-sustaining asset. Gallup finds organizations with above-average levels of employee engagement reap 147 percent higher earnings per share. When both customer and employee engagement are above average, they experience a 240 percent jump in performance-related business outcomes. Leader respect is the most powerful predictor of employee engagement. Employees who feel respected are 55% more engaged yet 54 percent claim they don't regularly receive their leaders' respect.

Today's leaders must affect a shift: the manic focus on shareholder value must mature into greater attention and accountability to shareholder value's primary source - productive employee and customer relationships. Words must become action: re-investing in employee learning, mentoring, team-building, involvement and yes, compensation - areas that express value and build relational capacity. Between depleted older workers and millennials carrying unrealistic expectations of a "dream" job and self-management - leaders face the perfect leadership storm. It tests their patience and their competence. Navigating this "relationship storm" starts with putting others first. Lt. General George Flynn nets out the sacrifice, "the cost of leadership is self-interest."

"Commitment-worthy" Purpose: Build committed relationships - central to great organizations - through purpose-filled people. Gallup finds that organizations emphasizing mission/purpose and employees doing what they do best every day are the two strongest factors for retaining Millennials, Gen Xers and Baby Boomers. When short-term financial goals are substituted for purpose, commitment suffers. The Aspen Institute reports a majority of surveyed business executives and academics agree the primary purpose of the corporation is not shareholder value but rather "to serve customer" interests, which is also the best way to serve shareholder interests. A recent survey of professional women places "meaning and purpose" as their highest job priority and 79 percent of millennials seek to work at socially responsible companies. Shareholders are also seeking purpose. Investments in socially responsible assets grew from $3.74 trillion in 2012 to more than $6.57 trillion in 2014, up 76 percent. Purpose follows the law of supply and demand: as perceived supply shrinks - value rises.

The test of leadership is fostering purpose that builds productive, relational commitment among diverse individuals and groups. Purpose is not just curing cancer or solving world hunger. "Commitment-worthy" purpose simply means touching those we serve in a meaningful way which in-turn captures our spirit, redirects our selfishness and delivers a unifying magnetic pull. Intuit co-founder Scott Cook recommends a highly purposeful question at the center of business success: "Where can we change lives most profoundly?"

Relationship Power: Relational Leaders multiply their power by giving it away. They counter organization's depleting energy supplies by intentionally inviting, involving, and empowering others which stimulates and distributes energy throughout the organization. Relational leaders are more transparent, less excluding, less controlling. Frederick Laloux, the self-management guru, says: "The right question is not: how can everyone have equal power? It is rather: how can everyone be powerful?" More powerful people make more powerful organizations. Yet, new research confirms that power often has just the opposite effect on leaders: evidence suggests power has similar effects on the frontal lobes as brain trauma...Through brain trauma you become a sociopath. When you feel powerful, you kind of lose touch with other people. You stop attending carefully to what other people think (and feel).

Today's employees are looking for a different relationship from their leaders. Four of their top five priorities: leading by example, communicating in an open/transparent way, admitting mistakes, and bringing out the best in others. Notice how relational the traits are - valuing empowered followers over "powerful" leaders. Relational leaders treat business as a team sport shifting focus from individual performance to high-performing teams. This helps explain why a survey of tomorrow's talent management specialists put collaborative leadership, building strong teams, and change leadership among those topping the list. Increased power-sharing is key to scaling the human-energy demands for innovating new products, building strong customer relationships, and growing markets.

In summary, to quote Ted Rubin, "indifference is expensive, hostility is unaffordable and trust is priceless." Relational Leadership is the test for leaders confronting a disengaged world. It requires making productive relationships the priority, fostering "commitment-worthy" purpose, and multiplying power by giving it away.