How Leadership Can Boost Profits for Your Business

11/21/2017 05:06 pm ET
Talega Transportation

It is often said that leadership is the lifeline of any business. In fact, the growth of a business is strongly influenced by the quality of its leadership. For decades, experts have marvelled at leadership as a key enabler, associating the success of a business, irrespective of its size, to its leadership. And there are numerous examples that showcase this. Take the case of Sir Richard Branson (Virgin) or James Sinegal (Costco) who are known as exemplary leaders. It’s safe to say that effective leadership in an organisation makes a significant difference.

Someone asked me the other day, “What are the tangible benefits of leadership?” Given that we attribute growth of a business to its leadership, understanding how much growth, and in what areas becomes essential. Very often, businesses show resistance to investing in leadership development, as they aren’t convinced of the value it would add, the magic word being ROI- Return on Investment.

So what are the benefits that leadership has to offer? In this article, we look at 3 key areas, called 3 P’s where effective leadership can boost profits for any business. For any business that is keen to understand how leadership can contribute to its profits and growth, they could find these insights quite valuable.

1. Productivity- Businesses that are highly productive have one thing in common- strong leadership. Through strong leadership, leaders inspire their teams to be more, do more and encourage them to push the boundaries and innovate. All this creates a culture of high performance and collaboration, which improves productivity by close to 50%. Given lack of productivity hurts 7 out of every 10 businesses in Australia, this becomes an opportunity for your business to surge ahead of your peers and create a genuine competitive advantage. With productivity going up, it means the employee morale remains high, and your customers get more bang for their buck. Which makes them happy, and they come back for more. That creates repeat sales for your business. And as your customers experience this consistently, they start becoming advocates for your product/service to people who aren’t your customers, yet. So, it’s not just repeat sales, but also sales from new customers that start coming in.

An organisation that executes this strategy really well is McDonalds. They pride themselves on having excellent customer service, which distinguishes them from other fast food chains globally. Staff at McDonalds aren’t taught sales, they are taught to serve their customers well, and that generates sales for them.

2. People- One of the significant impacts of effective leadership is a higher level of staff engagement. Staff who are more engaged tend to be highly loyal and committed towards the business’ initiatives. They effectively become key ambassadors of the business, and they inspire others to be the same. Businesses that receive strong support and loyalty from its employees have a higher brand appeal. The result?

A. More interest from prospective clients- This brings in increased leads to the business, to the tune of 20-30% more than its peers. The greater the brand appeal, the number of leads increase accordingly, going upto 50% and more. Consider this, as a business, if your competitor receives 10 enquiries daily from prospective clients, you receive between 12-15 enquiries. Talk about gaining an edge, right? With businesses operating on a larger scale, that edge becomes even more prominent.

B. Lower Staff turnover- When your staff are loyal, they wouldn’t want to leave. This means you retain more talent in your business. Which also means that subsequent costs related to staff turnover, such as recruiting new staff, as well as training them, tend to be optimised. The costs of staff turnover for any position can be between 33 to 50% of the annual salary cost of that person. So by retaining an employee with an annual salary of $60,000 per annum, you effectively save between $20,000 to $30,000.

C. Reduced absenteeism- Staff that are highly loyal and engaged tend to be rarely absent at work, through sick or unplanned leaves (Leaves that tend to go up when absenteeism is on the rise). According to a survey conducted across 108 organisations employing about 450,000 employees, costs related to absenteeism came to be about $3,000 per employee per annum, through sick leave costs and lost productivity. Think of what are the potential savings if staff are more engaged in your business through effective and stronger leadership.

3. Processes- Lastly, businesses with highly engaged and productive teams tend to innovate and create processes and systems, which others can follow and execute easily. They also ensure that any inefficiencies are removed when they setup such processes. This lowers their operating costs, while they remain highly productive. As a result of this structure, highly engaged employees produce about 30% higher revenue per employee. That’s potentially 30% more revenue than other businesses similarly sized and structured as yours. As you scale up higher, the revenue benefits can be realised even further.

To summarise, with the 3 P’s explained, businesses, regardless of their size or scale of operations can appreciate the impact that strong and effective leadership can have on their profits. It is not surprising that the high performers in any industry look at leadership development as an investment that is ongoing and non-negotiable.

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