Financial indicators and market statistics represent an economy moving from strength to strength. The twin specters of inflation and unemployment are at the Fed’s target rate and at a historic low, respectively. Stock market indices hit an all-time high in September as prices continue to move steadily upwards post the 2016 election. Headline GDP growth for Q2 is at 4%, its highest result in 4 years. And consumer confidence remains high.
With all these favorable results, why are the pundits talking about uncertainty in the marketplace? Deutser Clarity Institute’s Fourth Quarter Clarity Report uncovers 5 key business trends that are impacting the immediate and long-term viability of organizations, their leaders, their workforce, and their returns.
TREND 1: SHORT-TERM RETURNS WINNING OUT OVER LONG-TERM SUSTAINABILITY
The short-term focus has become the new currency of business success, but often at the expense of long-term viability and sustainability. Start-ups often are so focused on and energized by the startup phase that they neglect to build the proper foundational framework to protect their original intent and spirit. Legacy companies with reliable, strong performance numbers are being faced with extreme consequences when any dip in performance occurs. An overemphasis on quarter-to-quarter results is compromising overall performance, safety, and employee satisfaction. Cultural equity is a common casualty of a short-term approach breaking the social contract with long-standing employees. Organizations are forgoing the emphasis on value and behavioral alignment, sustained employee engagement, and professional development in exchange for shorter-term corporate wins. This focus has created an unnecessary and unhealthy competition between the organization and its people. More and more, the leader is being put in a compromising position of doing what is right for the short term to satisfy shareholders while sacrificing culture and the people drivers that determine the sustainability and durability of the company’s performance and returns.
TREND 2: THE MIDDLE MANAGEMENT GAP
There is a concerning dearth of mid-level management talent in companies and it is creating bottlenecks and redirecting the companies in accidental and unintentional ways. We continue to see a growing trend where individual workers are promoted for prior work successes without any purposeful assessment of their skills as matched to the higher level
at which they will need to be competent, leaving leadership gaps, technological gaps, and cultural gaps. This has quickly become the Achilles heel of many organizations, where there is more sophistication at the top and more specialization at the bottom and a more obvious hole in the middle. Companies’ decade-long efforts to reward and acknowledge employees by promoting them in order to retain them, has left many short on the core competencies necessary for true, reliable leadership. This leadership competency gap results in a lack of connectivity between the workforce and management. In addition to promotions born out of reward for outstanding performance, customer demand or growth imperatives can also cause lesser trained employees to assume mid-management positions, resulting in cultural degradation and a decrease in overall performance. It is also creating friction and a lack of connectivity across the workplace between the highest and lowest levels of the organization.
TREND 3: THE SHIFTING POWER DYNAMIC: MISALIGNED BOARDS AND OVERREACHING LEADERS
Misaligned boards are making their impact felt by inserting themselves in ways previously left to management, creating chaos and causing distractions inside organizations. This functional change is true in both profit and nonprofit organizations and indicates an expansion of the reach of boards with board leaders often attempting to dictate or “gently encourage” performance by influencing personnel decisions, demanding efficiency plays and cost reductions, implementing outdated thinking and mandates, and working to appease a faction rather than do what is right for the whole of the organization. Boards serve a very specific function in organizations and that is to provide the highest level leadership oversight, set the highest-level strategic direction and ensure fiscal control. But today we are seeing an increasing blurring of the lines between strategy and operations. We are finding increased misalignments between boards and leaders as well as conflicting priorities and values. The real conundrum here is while the board member overextends his or her influence, the organization’s executive is still left 100 percent accountable. Conflict erupts when the leader pushes back on courses of action that have been dictated or demanded by the board, yet if leaders do not push back, the chances of that leader having long-term viability diminish.
TREND 4: THE FOUR-LETTER F-WORD UNDERMINING BUSINESS
There is an unprecedented conflict between trust and the four-letter F-word – FEAR – in organizations; caused by management, politics, expectations, pressures in and out of work. The current way capital is often being deployed incentivizes short-term decision making and creates an undercurrent of fear by leading in “survival mode,” a great enemy of clarity and endurance. This lack of psychological safety is impacting employees who have to have to strike the right balance in their decision-making while navigating fear of retribution, loss of position or status, and all while doubting their trust of leadership and co-workers to do what is right. Further, employees are increasingly becoming more concerned that they will be ostracized by their supervisor or co-worker. This is causing a string of poorly constructed or non-decisions by the front-line workers or a level of paralysis in the organization, whereby policies, performance, and safety situations are brushed aside – thus further cultivating a compliant organization where the minimum amount expected is favored over the commitments necessary for innovation, appropriate risk-taking, purposeful growth and increased safety performance.
TREND 5: THE DEMOCRATIZATION OF OPINION AND THE WILD SWINGS OF SOCIETAL NORMS
The political environment is in perpetual chaos and employees are feeling more and more emboldened to anonymously attack company mandates and culture using social and traditional media as well as direct communications. The wild shifts of popular opinion that is now a part of every hour of every day is directly impacting the workforce as employees and leaders at different levels are lashing out at management and each other while customers are equally empowered to say whatever they want, impacting not only customer service but shaking the foundation of the employee on the receiving end. There is a rush to judgment and a boldness that is undercutting organizational identity. For many organizations, they haven’t quite caught up with the changing norms of society, passionate and unforgiving opinions, and the need to define or redefine what it is they stand for along with what is true and acceptable in the discourse of their doing business. The lines have blurred between what is personal and what is business, so much so that false information and incorrect conclusions can quickly harm or destroy careers, products or companies.
Author Bio: Brad Deutser