The Distant Early Warning Line, also known as the DEW Line or Early Warning Line, was a system of radar stations established by the US and Canadian governments across the Canadian Arctic region in 1957 to detect incoming Soviet bombers during the Cold War, and provide early warning of any air, sea or land invasion.
It proved to be not only an effective warning system, but also a psychological deterrent to any such attacks. Plus it helped stimulate the Canadian economy and link remote villages together. All in all a fairly effective system against potential external threats.
Is there an equivalent early warning system for businesses that can forewarn of a potential downturn in sales or profitability? While no one has a crystal ball that can tell the future or a time machine to look ahead and see looming business problems, there is a business Early Warning System that over the years has proven highly effective in signalling upcoming problems.
With an understanding of the principles of corporate culture (seeLEVERAGE: The CEO’s Guide to Corporate Culture), it becomes straightforward to see a series of relationships that nearly always foreshadow a decline in business effectiveness.
The graph below shows the relationship between senior team alignment, employee trust in leadership, overall productivity and results.
It’s commonly understood that when overall productivity falls inside an organisation, greater effort, time and money must be spent to keep output at required levels, thus negatively impacting profitability and overall business results. In fact, productivity measures are commonly used by firms to establish valuations on potential acquisitions.
What is not so well understood is the relationship between “trust in leadership” and “overall productivity”, although there is a growing body of work being done by business academics and others on this connection. Management guru Stephen Covey makes a strong case that lack of trust in leadership imposes a “hidden tax” on the organisation in terms of greater controls and a larger number of processes to ensure the work is being done in a timely and compliant manner. The Edelman Trust Barometer annually polls the public on whom they tend to trust most. Routinely CEOs and business leaders rank close to the bottom, barely above government officials. As trust in leadership falls inside a company, so do behaviours such as creativity, innovation, going-the-extra-mile, customer service and many other drivers of productivity and performance.
What’s nearly invisible, at least to senior executives, is the impact their individual and collective behaviour has on the overall company performance. One of the insights we have gained over the years through our work with leadership teams, corporate culture and strategy execution is the almost direct relationship between senior team alignment and employee trust in leadership. Look at it this way.
Organisations are shadows of their leaders; that’s the good news and the bad news!
Whether consciously or subconsciously, employees watch the behaviour of the leadership team. Leadership behaviour provides employees with clues on what is important and what behaviours are acceptable. Employees also observe the interactions between members of the senior team as a clue to the level of cohesion and teamwork at the top. When employees see VPs fighting each other over budgets and resources, over time it undermines their confidence in leadership. Leadership is not about winning against the other VP, it’s about the entire company winning. When employees see a lack of leadership alignment at the top, motivation and pride in the company suffers, which as we has a direct impact on productivity and overall business results.
The Good News
The good news is that by paying attention to the level of leadership team alignment and the behaviours displayed by the senior team gives the CEO a “time opportunity” to improve alignment and team behaviours before the other elements in the chain of events (trust in leadership, overall productivity, business results) begin to decline. We call the “opportunity for recovery”!
In many organisations, however, leadership is minutely focused on important issues such as cost control, schedule adherence and quality and tend to miss the equally important element of senior team alignment. As a result they only begin to react when business results tend to fall off and miss a significant opportunity to change the negative chain of events that began with the deterioration of leadership alignment and behaviour.
One solution is for the CEO to routinely make “senior team alignment and behaviour” an agenda item at all senior meetings. Put it on the agenda, talk about it, educate the team on the “shadow of the leader” process, identify those on the team who don’t get along and provide coaching and feedback.
Imagine the positive impact if businesses managed their “leadership culture” as finely as they manage costs!
Thanks for joining the dialogue.
John R Childress
Senior Advisor on Corporate Culture, Leadership and Strategy Execution
Author of LEVERAGE: The CEO’s Guide to Corporate Culture
Visiting Professor, IE Business School, Madrid
PS: John also writes thriller novels