Traps Every Entrepreneur Must Avoid
While there is
no shortage of books and articles on how to become a better leader
and build the ideal organization, there are few that address the
management approaches that can slow and ultimately destroy the
growth of people and organizations. There are three traps that must
be identified and avoided, three threats that will ultimately lead
Centralization of Power: When power is centralized, all
decisions are made from the top down; a few “elite” people in
leadership positions offer very little or no opposition to
suggestions from the president/CEO. This type of leadership has been
used by communist organizations and is known as “Command and
Control.” It is often found in organizations where the president or
CEO has created an advisory circle of friends who offer no
resistance to the ideas and suggestions he or she brings to the
model is extremely dangerous because all decisions are made without
the knowledge or vital input of the people the decision will affect.
This is especially critical because those people are generally the
producers within the organization. The majority of organizations owe
their continued growth to a few key leaders who have proven their
success by contributing ideas, suggestions, and improvements while
actually performing in the day to day activity; but when power is
centralized, the personal observations and experience of those key
contributors are overlooked and overpowered behind closed doors.
of power without considering the people who create the majority of
production and success will in a short time take the heart out of
those producers, and they will seek an organization that values
their ability to produce.
Redistribution of Income: Income redistribution arises out of
the desire to spread more money to the masses so that more people
will benefit. The idea evolves as the leader observes there are
those in the organization who are making a lot of money, too much
money in his or her estimation. The head of the organization will
determine that those who are making the most money (based upon their
personal production) should have their income decreased and reworked
in order to spread the wealth to others, very often to others who
have yet to prove their value as producers.
leadership retire to the boardroom, often surrounded by
non-producers, and as a group they will begin to methodically
restructure and redistribute the income by taking away the existing
payouts of proven producers. This can be done in a variety of ways:
increasing a territory while reducing commissions, eliminating
financial incentives such as profit sharing, or by restructuring
The impact of
these decisions is disastrous as it actually punishes the people who
produce profits and intellectual equity. Most importantly, it
violates trust; the change sends a message to those who have been
loyal and who have proven their ability to succeed that they can no
longer trust those in control. Once this trust is violated, it is
virtually impossible to reestablish. Remove the “fire” from the
producers, and the organization begins a descent down the slippery
slope of negative growth.
Authority: The number one complaint voiced in leadership
seminars is “How do I relate to a superior who doesn’t have a clue
about what he/she is doing?” Many organizations and corporations
move people into positions of power based on “‘relationships rather
than résumé.” A family member or an old college friend is placed
into a key position of responsibility.
The leaders who
fall into this trap fail to recognize the key ability they must
cultivate, the ability to create respect. They fail to understand
that the best way to create respect is by doing what they ask their
followers to do. People are not impressed with “text book
experience,” especially in those who have been chosen to lead a
veteran leadership team.
should never be the rule for placing people in leadership positions;
how one feels about a person’s potential performance should yield to
what one knows about people and what they have already proven. When
making appointments, the president or CEO should always ask, “How
will this affect my existing team?”
will restructure unwittingly utilizing these three tactics without
understanding how they negatively impact performance. Often this is
done out of ignorance, but at times there are leaders who have risen
to a degree of arrogance that overrules their intelligence. They
will never accept the fact that by implementing these ideas they
have destroyed the growth and expansion of their enterprise. Instead
of seeing how their actions have created negative reactions, they
begin the process of “finger pointing,” believing those who once
were key producers have just become “lazy.” They begin building
their organization’s future based upon the competition rather than
upon competence. Not realizing what they have done or not admitting
what they have created, they spend hours looking at “numbers” on
spreadsheets instead of observing those who create the numbers.
Sometimes, rare as it may be, they wake up to the realization that
when producers are punished, production stops.
negative impact when corporations, organizations, and even
governments operate from these three positions.
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