In the business press, it has become fashionable to argue that the productivity gains enjoyed by companies during the past few years have reached their natural limit, and that you’re now in for a period of steady or rising costs.
That’s patently wrong, or rather as right or wrong as you choose it to be as leader of your company. I’m inside a wide variety of companies large and small every year, and I’ve yet to encounter one that has come close to reaching its productivity or profitability limit. Of the many opportunities to improve profitability that you’re not yet fully exploiting, here’s one: Upgrade the quality of your team, by being a stronger leader.
You can hire more carefully and intelligently, digging deep to research and qualify new hires and holding out for only the very best candidates. You can manage and motivate a lot better, instructing your people explicitly and inspiringly how they can raise their game, and then holding them to that standard through regular coaching and feedback. You can pay your people more differentially, creating large variance in compensation tied directly to the results achieved by each employee, which will create stronger incentives for the desired behaviors and keep your best performers within the company for longer. And you can weed out underperformers more quickly (after appropriate feedback and opportunity to improve), rather than expensively forestalling the inevitable because firing people is one of your least favorite things to do.
I’ve yet to walk the halls of a company that can’t raise the quality of its average employee by 20% through this type of leadership. That’s a 20% increase in productivity – and this greater output can take the form of higher revenue, lower costs, higher profit, or all of the above.
Every leader I know is capable of leading this way. The limiting factor is not your ability, but rather your drive and your willingness to self-improve. Are you already as strong a leader as you’ll ever be? Or are you ready to take yourself and your company to the next level?
