How being a better leader increases your profitability

A business owner has many priorities and of course the profitability of their business is high, if not the highest, on the list.

Having worked with hundreds of business owners across the UK, we know developing strong leadership skills often comes second place to other business pressures, including profitability. It’s not necessarily because owners don’t want to become better leaders, but that they are spinning too many plates trying to keep the business going.

However, it has been shown, such as in a 2015 study by Forbes that ‘good leaders create more economic value than poor leaders and extraordinary leaders create far more value than good ones.’ Despite all the ways the world has changed since then, the need for fantastic leadership has not changed. In fact, arguably, it’s even more crucial towards the profitability and success of a business in a time of rising costs and wellbeing pressures of your staff.

As a result, we felt it wise to lay out how developing good leadership leads to improved profitability, and that business owner should not let it be second on the list to anything else.

What is a good business leader?

Before we dive in, what is a good business leader? ‘Good’ is clearly a subjective term, but good business leaders listen to and inspire their staff, allowing them to be part of key business decisions to grow both professionally and personally. A strong leader is also empathetic with staff as well as delegating effectively to ensure they are working more on the business, rather than in it.

5 reasons why stronger leadership improves profitability 

#1 A strong leader creates a 'caring' culture

A key part of improving your company culture, is that change comes from the top. That’s you. Through improving your leadership skills and changing your culture to align with your values, you can create a ‘caring’ culture. Not only in the sense of your staff caring for one another, but they will begin to care about your business as much as you do. This will lead to improved productivity, motivation, and hence a nice boost to the bottom line.

#2 Looking after your people improves performance

By caring for the health and wellbeing of your people, there’s no doubt you’ll see an improvement in their performance. Accenture found that when employees have championed workforce wellbeing and equality, 94% put significantly more effort into their work. In contrast to that, the phenomenon of quiet quitting (where staff do the bare minimum for their job), has largely come from a lack of support from management. Therefore, by putting your people’s welfare first as a leader, you’ll see better performance, improved work, and increased sales as a result.

#3 Sharing your vision helps staff know their 'impact'

In a similar way, staff are likely to put more effort into their work when they understand their value to the business. By sharing your vision of where the business is going, why you do what you do, and the values you all hold, staff can see more of their impact through their work.

#4 Good leadership means good retention

It goes without saying, but if you’re a good leader and create a working environment where people want to work, you’ll no doubt see less retention. This has a big impact on your profitability because you will have less outgoings for recruitment costs. According to the Society for Human Resource Management (SHRM), it’s estimated that it cost businesses between 6-9 months’ worth of an employee’s salary to replace them. Your leadership can be the difference between keeping your best talent and losing them.

#5 Improving your leadership enhances your employer brand

Your business’ employer brand is effectively what you build to create a strong reputation in the job market. With a stronger employer brand, you become a magnet for the best talent who will booster your performance and profitability. When you have the right people in the right roles, it can absolutely transform your business’ output and success. Your leadership can underpin the strength of your employer brand!

Five ways to become a better leader today

There are several qualities that make a good leader and now we’ve shown how good leadership improves profitability, here are five practical ways to improve your leadership today.

#1 Schedule one-to-ones with your management team

Start with sitting down with each of your managers and listen. Start communicating better and find out what your staff want, rather than assuming you already know. The best leaders listen and avoid emotional decision-making, or snap judgements, and this will allow them to make better decisions for their customers and the growth of their business.

#2 Plan a team day and share your vision

When was the last time you got your team together? Effective team days can be the difference between staff feeling inspired and excited and feeling overlooked and demotivated. Giving space for inspiring people maximises employee engagement and enhances your company culture.

#3 Create a new 'task-force' for making decisions

Stop making decisions alone. Accept that you don’t have all the answer and you, as the leader, need support too. This humility will not only earn you respect from your staff, but also involving others in your problem solving and decision-making aids their own personal development and sense of empowerment.

#4 Write a list of delegation tasks

Start delegating better! Without doing so, you as the leader become a bottleneck and employees get frustrated. Once leaders learn how to delegate more effectively, they find they have more time to focus on the strategic direction of the business and staff are much happier.

So, start by writing a list of all the tasks you do and highlight any that can be delegated, even if some staff training is needed. Then, delegate them today.

#5 Be more empathetic

When leaders show empathy, it leads to compassion and understanding on the most human level. Make it clear to your staff what you expect from them but emphasise there is always support available. This stops them from worrying or even misunderstanding the task at hand. Regularly challenge yourself to see things from other people’s point of view and what you would need to be at your best and give that to your staff.

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Conclusion

A poll in May 2022 found than two in five employees have left a job because of bad management. Don’t lose your staff or let your profitability suffer because you aren’t focusing on your own development as a leader.

We hope you have found this article helpful, but for either further support to become a better leader, look no further than joining a peer advisory board.

A member from one of our boards, Dr Stewart Desson said that since joining a TAB board, he has “built a global team that is empowered, passionate, and growing.”

Could you make a change today and see the value an advisory board could add to your business? Don’t hesitate to find your local board facilitator and get in touch.