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POINT TO THE BENEFITS

“Don’t worry when you are not recognized, but strive to be worthy of recognition.”

—ABRAHAM LINCOLN

The world spun into a palpable state of shock. While there was deep opposition to his greatest achievements, this was not the way the president was supposed to die. When John Wilkes Booth entered Ford’s Theatre on April 14, 1865, the implications of his actions were the last thing on his mind. Stirring up more emotion than patrons had anticipated, Booth approached President Abraham Lincoln from behind, firing his Philadelphia Deringer. The following morning on April 15, Lincoln was pronounced dead, the first US president to be assassinated.

In the weeks that followed, a series of events were held, mourning the president’s untimely passing and memorializing his valiant life. More than 7 million citizens paid their respects as Lincoln’s body was transported from Washington, DC, to Springfield, Illinois. The political turmoil dissipated as individuals from all walks of life rallied in droves to pay their respects. A good friend and confidant of Lincoln, Ulysses S. Grant, famously wept at one of his memorial services as he said, “Lincoln was the greatest man I had ever known.” The heart of the United States was wholly broken.

While the size of one’s funeral does not by any means make one a great leader, there is much to be said about the sheer number of people who go out of their way to pay their respects. The impact that a great leader has on the world is powerful enough to set aside the most irreconcilable differences. Like all things, there are two sides to every coin. If great leadership can be powerful enough to set aside irreconcilable differences, what is the impact of being a bad leader?

There are two main costs of being a bad leader: financial and health. The financial cost of being a bad leader varies, but in our research at LearnLoft, we estimate one bad leader costs a company between $100,000 and $115,000 over the course of a year due to higher than average turnover, low employee engagement, and an overall lack of productivity.

The health costs are even more interesting. In 2011, the American Institute of Stress conducted a study on managers and executives, finding that they are 52 percent more likely to die earlier than their counterparts due to stress-related issues. It makes a convincing case that the worse a leader is, the higher the leader’s stress is going to be, increasing the likelihood of early death.

If there is such a huge cost to bad leadership, both monetarily and as it pertains to physical health, the natural question becomes: Why do people choose to be bad leaders?

The answer is complicated but stems from the fact that bad leadership is not an isolated issue. Like a plague, it is passed along to everyone it comes in contact with. As up-and-coming leaders look for someone to emulate, they will naturally draw from their personal experiences of being led. If the only example these new leaders have is a negative one, the probability that they will make the same mistakes while leading are high.

Being the victim of an incompetent, unjust, or bad boss causes many organizations to crumble, as bad habits are transmitted and spread throughout the body of an operation.

Look no further than Enron: once a Wall Street darling, the company and its executive leaders were universally applauded for their work. Through a strange series of events, it was revealed that part of the company was a pipe dream built on bad accounting practices and blatant lies. Overnight, the company evaporated as a result of the sixth largest bankruptcy in US history; Enron investors and employees lost everything.

Although it didn’t bring back their money or jobs, justice was eventually served to the executives who had masterminded the operation. Founder Ken Lay was found guilty of 10 counts of securities fraud and died shortly after. Allen Fastow, Enron’s former CFO, spent six years in prison, and Jeff Skilling, the former CEO, was sentenced to pay $45 million and spend 24 years (later reduced to 14 years) in prison.

While bad leadership is fairly evident in the situation at Enron, Skilling is where the lessons of bad leadership are most prevalent.

Skilling, a Harvard MBA, rose through the ranks at McKinsey & Co. and was noticed by Ken Lay in 1987 during a consulting stint with Enron. He was hired in 1990 as the chief executive officer of Enron Financial Corp. It didn’t take long for Skilling’s visionary ways and confident style to stand out, eventually he took over as CEO of Enron Corporation when Lay stepped down in 2001.

Skilling’s story and management style are well documented in Bethany McLean and Peter Elkind’s bestselling book The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. Skilling was influenced heavily by his experience at Harvard, where professors were required to grade 15 percent of students with a “fail” or “low pass,” the two lowest grades possible. He created similar practices within Enron for performance reviews that eventually became known as “rank and yank.” This method required every employee to be graded on a 1-to-5 scale with 5 being the lowest. Skilling took a page directly from the administration at Harvard and required that 15 percent of Enron’s employees must receive a 5, regardless of their actual performance. Those employees were then given two weeks to find another job within Enron or be terminated.

Skilling believed this unorthodox process was one of the most important in the company because he believed people were only motivated by two things: money and fear. He carried this belief into his personal life, creating the same kind of disastrous effect that imploded his company. He had a nasty divorce in 1997 that caused great strife for his three children and ex-wife. His youngest son, John Taylor, died from a drug overdose in 2011 after Skilling had been in prison for five years. Skilling was a leader who brought the ineffective, extremist style he was accustomed to into his company and his home life, and both failed. What Skilling didn’t realize was that replicating the only leadership style he knew was causing his demise.

A recent Gallup study showed that 75 percent of employees leave their jobs because of their bosses and not the position itself. The majority of top performers gladly exit a toxic environment instead of tolerating lousy leadership. This often leaves average or below-average employees reporting to bad leaders. For fear of losing their job, these employees are forced to deal as best they can. A real cyclical effect emerges, and it takes a major shake-up in an organization to change the negative agents at work. Beginning as a small seed that can be easily plucked from the ground, negligent leadership if not addressed it will quickly take hold as a forest.

Your responsibility as a leader is bigger and broader than you think. It reaches far beyond your limited thoughts of the immediate present. Think about the impact Abraham Lincoln, Ulysses S. Grant, and John F. Kennedy had and still have on the world. Conversely, think about the impact Jeff Skilling had on all those who came into contact with him. It’s a humbling thought that as a leader, good or bad, you will impact the world for decades after you are gone. Regardless of the leadership you’ve experienced, the leader that you are and the impact that you will have is a choice that lies within you.