There has been the occasional business leader whose reign has been magical (Welch and Jobs come to mind).  Yet their business often fall to sustaining enterprise value after they leave. GE’s revenue and stock appreciation has been stuck in neutral since Welch’s departure, as the 20^th century’s most profitable company tries to find its way.  Apple has been trading all over the map in the last few weeks as the market tries to reconcile a world without the imagination of Jobs and his fancy gadgets.

A systemic problem for private companies is that a lack of management and bench strength.  This dearth of talent goes deeper then inhibiting productivity in the short term; it is a significant barrier to value creation for the entrepreneur.  If an exit is an objective (as is often the case), buyers generally want to see a strong management team and bench that can support future growth. If it is the business owner and his brother-in-law that possess all of the tribal knowledge (intellectual capital) about how a business operates successfully, the enterprise can lose luster with investors.

There are similar problems when one or two employees within a company are technically superior to those around them. Often, feeling their power and value, they are unwilling to teach, document, and delegate. When management and boards allow such conditions to persist, they are doing a disservice to the shareholders and are putting the company at risk.

Organizations should:

1. Require that every manager have a delegate – Identify and develop strong number twos that can eventually step in and take on the job duties of every manager. If people can’t attend conferences or go on vacation, because no one else can cover their desk, it is a sign that they have not developed the talent around them. To develop others takes time and investment including focus on performance reviews, career pathing and training.
2. Institutionalize activities, duties and best practices – Develop thorough documentation. Companies must maintain policies and procedures if they are going to be operationally excellent. When a supplier errs, it is usually because an inexperienced junior staffer doesn’t do something the way his senior counter-part would have. Often the junior staffer is criticized, even though it is their management who put them in position to fail.
3. Teach - Great leaders are usually great teachers; they aspire to develop others through daily interaction, and the sharing of information. The inability to teach is often a sign that a manager views themselves as the only person competent enough to complete certain tasks, and makes excuses as to why they can’t find other people to step up.  Great companies have development plans for every key employee, and make resources available for their continuous improvement.

Organizations that formalize these practices in their companies will maintain a long term strategic advantage over those who do. The talent war has only just begun.

At the current rate of job growth, it would take 20 years to return to the level of employment before the downturn[i].  Over 2% of Americans have been out of work for a year or more, and with the gradual elimination of their unemployment benefits, their future looks bleak. It is believed that another 10% of the U.S. workforce is “underemployed”, surviving on part time work, and under the table side jobs. Unlike past recessions, it is not only the factory workers and retail employees who have been cut back, vast numbers of white collar (skilled) people, find themselves seemingly unvalued. What a tragedy.

Things are not much easier for the fully employed. They have been bludgeoned over the last two years, as their salaries, overtime, and pensions have been cut. A recent study revealed that amongst employers, “work life balance” slid from 4^th to 16^th in a ranking of employer workforce priorities. Measuring workforce performance rose from 9^th to 4^th (don’t ask me how it was ever 9^th) reflected the move to more bottom line business results. American employers have a bit of a hangover, as 28% predict further salary reductions and 52% expect lower retirement plan contributions to continue. [ii]

As the promise of lower costs is now flowing through to the bottom line, many business owners are returning to prosperity.  We all need to be mindful of the sacrifices made by our employees. Lost in the health care debate is the fact that health care inflation is rising twice as fast as wages. It has been a two year grind, and people who have not taken vacations and are fighting pay check to pay check are becoming physically and emotionally exhausted.

At the very least, employers should consider reinstating lost benefits and being more proactive in completing performance reviews and the like. Just because business is sluggish is not a good reason to stop giving feedback and honoring the work of people who have given themselves to their employers.

In fact, if your business has only posted modest results, the very best thing you can do is to communicate with employees. They know business is bad, and their fear is often worse than the reality.  Exuding confidence is extremely important, and asking for employees to participate in the success of a company creates unity and teamwork. As business improves, sharing the fruits of your labor with the people who got you there is just good business.

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[i] The Kiplinger Letter November 5^th, 2010

[ii] New Priorities for Employers-Bloomberg Business week September 13^th, 2010