How do employees feel when their leaders let them down?

Organizations are blessed by having hard-working employees who take pride in their work. I recognize not everyone fits this bill, but hopefully an organization has more of those that do than not. Yet, what becomes problematic for these earnest employees is when their leaders let them down.

I am thinking of the hard-working Wells Fargo employees who day in, day out help their customers, who saw leadership create a culture of cross-selling that led to some illegal behaviors. And, when honest employees shared their concern, they were admonished or let go.

i am thinking of the hard-working employees of energy company Enron whose leaders pursued aggressive and fraudulent accounting approaches with various code names to hide profits and dress up earnings. They also told their employees not to sell Enron stock when they knew the price was artificially propped up.

I am thinking of the hard-working folks of Arthur Andersen, who watched client leaders for their Enron accounting team help Enron’s leaders mask inappropriate activities and not catch others. These leaders brought down an accounting firm with an excellent reputation.

I am thinking of the hard-working employees of Duke Energy whose leaders have been less than forthcoming about a significant breach in a retired plant coal ash site knowing for years a problem existed and not moving quickly enough on some current ash sites where seepage into neighborhood water systems were a concern. Duke’s employees were incredulous by these actions.

I am thinking of the hard-working employees of Marsh and McClennan Companies whose leaders set-up and turned a blind eye to a small part of the company that was steering business and not operating in the best interests of the clients. They paid a huge fine and leaders were asked to leave.

These hard-working employees deserve good, honest leadership. The loss in stock price and jobs wear on them, but also the deflated pride in their companies. I worked for a subsidiary of Marsh and McClennan and it embarrassed and upset me that our leadership would do what they did and not address the problem when it was raised. Plus, being a stock holder through a 401(k) plan, stock purchase plan and some options, I was hurt financially as were folks who also lost their jobs due to the resulting downturn. I knew innocent folks who were asked to leave because of downsizing due to the impact of the malfeasance of this small group.

We need our leaders to be strategic and cognizant of issues, but we also need them to be honest and supportive of their employees. When problems arise, they need to be swift and contrite in addressing the issues.  Johnson and Johnson quickly addressed a Tylenol tampering incident many years ago when a nefarious person was removing lids and poisoning the pills. They did what they had to do to weather the storm.

From reading and watching news, apparently more than a few hard-working federal employees are not taking much pride in their new boss. That is unfortunate as they deserve more. So do we, with all of our leaders.

The $65,000 Question

Let’s start with a question. As a seller of contractual services, do you make more money if you charge a new client $65,000 or $70,000? The answer is not obvious, but it may be the smaller amount. Why?

What if you told the client you would do the work for $65,000? But, your company had some cost overruns that may or may not have been the client’s fault taking the cost to $70,000. If you told the client, we had some overruns, but told you it would be $65,000, so that is what we will invoice, you will create goodwill and trust. Your firm may get hired for future work as a result. If you billed the $70,000, you may not get hired again.

But, what if you told the client it would be $70,000 and you were more efficient. By invoicing the lesser amount, you will have done something unusual and it will be noticed. This may also lead you to being hired for future work.

The key that gets lost on managers who push for billing every cent in the system is most services are relationship based. If trust is established, the opportunity to have a mutually beneficial relationship exists. You make more money serving the client long term. When trust is broken, all bets are off.

This is a hard lesson organizations like Wells Fargo are learning today. And, if you doubt the veracity of this observation, the most acclaimed accounting firm used to be Arthur Andersen. They no longer exist as they breached the trust of a significant client and they could never recover.