Lack of Role Clarity: The Silent Profit Killer

Think the CEO and COO/Second-in-Command don’t need clearly defined roles?

Think again!

Lack of clarity at the top contributes to:

• Misunderstandings that confuse your employees and result in project delays.
• Tripping over each other because you are both doing the same task (a massive waste of time and resources).
• Missed deadlines due to dropped balls (you each think the other person has it covered).
• Miscommunications that lead to thinking the other person isn’t competent (even though they are fully qualified and committed to you and the company).

Let’s dig into each of these points and see how hard they hit your bottom line.

Misunderstandings that confuse your employees and result in project delays.

When you and your Second-in-Command/COO aren’t clear on who’s leading what (projects, departments, initiatives, teams), neither are your employees. Which leads to inconsistent instructions, performance, and deliverables. It also hampers your ability to develop standard processes and procedures that improve productivity and quality.

As a result, profitability takes a hit.

If we estimate two extra hours per employee (5) and manager (1) on a project due to lack of standard processes and misunderstandings. That’s easily $500 per project, which could add up to $5,000 per year (or much more) depending on team size, number of projects, and complexity.

Tripping over each other because you are both doing the same task. 

If you’re like most business owners, there are tasks that you sometimes hand off to your Second-in-Command/COO and other times do yourself. Since the person ultimately responsible for different tasks is unclear, you can both wind up working on the same thing.

Both doing the same task is particularly detrimental because it hits your bottom line twice – missed opportunity costs (something else isn’t getting done because you’re both working on the same thing) and duplication of effort costs.

Let’s say the missed opportunities over the course of a year are worth $30,000 and your combined annual cost for duplicated work is $5,000. That’s $35,000 per year.

Missed deadlines due to dropped balls. 

As the saying goes, when two people are accountable, nobody is.

Due to the nature of your roles, you are both dealing with lots of moving parts, interruptions, and comments made in passing. It’s easy to think the other person has something covered, but they don’t.

Results include damage to your reputation (with clients, stakeholders and/or staff), deterioration of the company culture (loss in trust, finger pointing), loss in revenue (if you lose the job or client because of it), and possibly compliance issues (which could result in fines and legal fees).

A decline in productivity due to a deteriorating company culture could easily cost $25,000 annually (6 employees, 2 hours per week). In a worst-case scenario with lost revenue, fines and legal fees it could be $50,000 or more.

Miscommunications that lead you to think the other person isn’t competent. 

Have you ever been frustrated because your Second-in-Command/COO just doesn’t seem to get it? Sometimes, it’s so annoying that you even begin to question their competence (despite their qualifications, skills, and dedication to the company).

It’s not just you. It actually happens a lot (and your Second-in-Command/COO probably feels the same way about you at times).

You two are often polar opposites who see the world differently, process information differently, and essentially speak different languages.

When you don’t play into this as a strength and define your roles accordingly, the stage is set the stage for repeated miscommunications that can ultimately erode your confidence in them and lead you to question their competence (which they may be doing as well).

No longer respecting and trusting each other is, by far, the most damaging to your bottom line and overall company health.

When people feel frustrated, challenged, disrespected, or written off, it shows. They get defensive and aren’t at their best.

In fact, the ability to communicate rationally shuts down completely as their subconscious goes into fight or flight mode.

That’s why arguments in meetings, snide remarks, and gossip become more common. Of course, this makes everyone uncomfortable, negatively impacts the culture, and employees often wind up feeling the need to choose sides. Which extends the tension all the way to the front lines.

If this tension causes just one mid-level employee to leave, you are looking at $75,000 to $100,000, because it costs 1.5x to 2x a person’s salary to replace them (and it’s exponentially higher if your second-in-command leaves because of severance).

Even using these conservative estimates, misunderstandings, duplication of effort, dropped balls, and miscommunications add up to $140,000 to $190,000 per year.

All because the CEO/Founder and Second-in-Command/COO don’t have clearly defined roles.

Would adding $140,000 (or even more) back into your bottom be worth the time and effort it takes to define your roles and live them?

Probably.

The sooner you accept the fact that your relationship (how you treat each other, how you work together, how you lead the company) impacts everything, including your bottom line, the faster you win.

Written by Diane E. Mentzer.
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