Don't Blame the Economy for Your Company's Problems

Leaders today get cotton-mouthed and sweaty palmed about industry downturns that sink their revenues 10% or 20%. Meanwhile, they neglect an even bigger drag on their performance, one that they can control. It's a failure to deal with incompetence. This negligence is the root cause of an enduring recession in our organizations that has not only affected productivity but also humanity. Over the past 25 years, I've worked intimately with more than a thousand CEOs and senior executives. During this time, I've encountered this black hole of both performance and civility with alarming frequency. Terry, a CEO I worked with, had a direct report I'll call Pam whose incompetence put a substantial strain on the company. A Case Study in IncompetencePam was well-liked in her business unit, but not particularly respected. She had an idealistic view of leadership, believing everyone had the potential to excel. So she left everyone in their positions hoping that someday they would. Performance in her organization suffered. Costs were out of control. Revenues were irregular. And she had the attention span of a hummingbird. Pam generated new "visions" for her organization with the phases of the moon. Her direct reports groaned every time she'd call a special meeting because they knew she was about to demand a massive pivot and they hadn't even had time to absorb her previous grand plan. You'd think that given the evidence of Pam's incompetence, Terry would have leapt into action and made a change. Instead he did what most leaders do—he accommodated. He offset her weaknesses without directly addressing them. He revoked her decisions. He made line-item adjustments to her budget. He swooped in and gave orders to her underlings. Once, as Terry complained about Pam's weaknesses, I asked him to 'fess up to the real problem. "You just revised every year-end performance bonus Pam awarded. Why?" "Because Pam is giving away the farm—again." "I don't think that's why. I think you've concluded Pam is incompetent." There was a long, long pause. "I think that's a bit of an overstatement," he answered "Then why are you doing one-third of her job?" Unfortunately, cases like Pam's are far too common. And shockingly, Terry's lack of response (it would be another year before he finally let Pam go) is just how many leaders deal with competence problems that undermine organizational performance. Why Leaders Can't Address the IssueMy experience has confirmed that at any one time, the average executive has one or two direct reports he or she knows aren't cutting it. And yet, the average time lag between knowing it and saying it ranges from one year to never. While these CEOs squander a significant percentage of their team's potential by neglecting incompetent employees, the deeper cost to the company is the permission their tolerance gives to every other leader up and down the chain of command. Our research in business suggests the cost of unaddressed incompetence adds a drag of 30% to 50% to the performance of most companies regardless of industry. Think of it. Leaders today are petrified when the ailing economy threatens to shave 10% to 20% off their revenues. But every day, leaders who neglect to influence chronic incompetence surrender far more than that in lost opportunity. This issue is often chalked up to a lack of courage, with the suggested solution being for managers to "grow a spine." I think otherwise. I think the most vexing problem is a lack of compassion. When Terry finally 'fessed up about the full measure of his concern with Pam, I asked him why he hadn't dealt with it sooner. He said he was trying to protect Pam's dignity. He didn't want to hurt someone who had been so loyal to the company for so long. In my view, his lack of action had the opposite effect. By not dealing with Pam's performance issues, Terry ended up micromanaging her, showing her team how little faith he really had in her and her decisions, and that was profoundly disrespectful of Pam. How to Have the "Crucial Conversation"Over the years, I've had the privilege to work with a handful of leaders who see employees not as objects that either produce good or bad results, but as people who deserve his or her affection, attention, and loyalty. These leaders see competence gaps as a call to duty, not as a terrifying burden. They are impelled toward these conversations, not simply to protect others who are affected by incompetence, but also as an expression of their commitment to the troubled colleague. And the quality of the conversations bears no resemblance to the nightmare we often fear. I've written for years about the skills required to influence people during "crucial conversations" like these. But none of those skills is relevant unless practiced by a committed friend. Widespread and long-standing competence problems are not a reflection of gutless leaders, but of a poverty of social capital. Strong organizations are run by leaders who understand that the most concrete expression of loyalty is in their willingness to enter the profound uncertainty of a crucial conversation. If leaders frame these moments unapologetically and as a moral responsibility, these crucial conversations are far more likely to be experienced by the other individual as evidence of the leader's commitment rather than as signs of the leader's enmity. They build rather than destroy a relationship. This is not only true when a boss addresses the inability of a direct report, but I've also seen remarkable effects when a direct report resolves concerns she has with her boss. A Case Study in CompassionFor example, I once worked with an anesthesiologist I'll call Katrina who had concluded that her boss, Suresh, was dangerously incompetent. To make matters worse, Suresh—the medical director of anesthesiology—was a legend in his field. He had been widely published and had mentored dozens of doctors. Due to some personal problems, he had grown neglectful of new advances in the field and inattentive in his surgical role. Unfortunately, none of the senior leaders in this hospital addressed the problem. And none of Katrina's colleagues addressed it either. So Katrina did. She adored Suresh. She knew of him before she ever met him. But after six months in the anesthesiology practice, she grew intolerant of the games people played to protect patients from him. They manipulated the schedule to put risky patients under other doctor's care. They'd excluded him from consultations on more complex cases. And so on. One afternoon Katrina asked Suresh to lunch. After a few pleasantries she began with, "Suresh, I have noticed your frustration at some things we're doing in our team." Suresh's eyes opened wider. Katrina continued, "I've noticed, for example, that you're being left out of the most interesting consults." Suresh nodded tensely. "I've also noticed that people manipulate the schedule in ways you don't like. I think I know why it's happening, and I'd like to talk openly with you about it. I'd like to be part of the solution and I think you deserve my honesty and loyalty. Can I discuss this with you?" Suresh was nervous but he sensed Katrina's genuine concern and pleaded for openness. Katrina complied. The conversation ran two hours. It was complex. It was painful. But at the conclusion, Suresh acknowledged he had lost a lot of ground and while he resented his colleagues' disloyalty and interference, he recognized that he was part of the problem. In the end, he stepped down as medical director but also began taking measures to regain his edge. In the end, patients received better care. The team's performance improved markedly. Interestingly, Katrina's relationship with Suresh was not only intact after this exchange, it was stronger. And this is not a unique experience. When leaders choose not to talk out their competence concerns with their employees, they unwittingly opt for the less effective strategy of acting them out. You don't get to vote on whether the conclusions you draw about others affect your behavior. They always do. And when your concern is that someone lacks competence, your behavior changes markedly in ways that reinforce the incompetence and undermine your relationship. In the end, what's best for the company is often best for humanity as well. So let's bring one recession to an end while we wait for the eventual end of another. Let's stop receding from the conversations we need to have that hamper our organizations' performance as much—if not more—than what the economy is doing to us. In the end humanity and honesty are not at odds, they are part and parcel of mature leadership.

Before it's here, it's on the Bloomberg Terminal.