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  • Writer's picturejoel

The 4 Stages of Leverage When Building a Team: Stage #1 - The Backwards Leverage Stage:

Updated: Nov 29, 2023

Organizations can experience different stages of growth, each with its own challenges and opportunities. The most challenging and often the starting point is the Backwards Leverage Stage. This stage, is characterized by when the balance of power between the leadership and staff becomes unbalanced and the leadership loses its grip on having meaningful influence on the culture and direction of the organization. This is a difficult position for any organization to be in. Leverage can erode quickly if not taken seriously and assertively. Many leaders in this stage are not aware of any other stage. They assume this is just how it is.



While each stage comes with its own set of challenges, with a clear focus on personal and organizational growth, organizations can transition through each stage and achieve success.

The Leverage Formula:

The quality of your team will always be determined by the following formula.


Quality Team = Quality In – Quality Out



Stage #1 - The Backwards Leverage Stage:

The Backwards Leverage Stage is a phenomenon that organizations can experience when they become trapped in a negative pattern of behavior and struggle to achieve positive change. The primary cause of the Backwards Leverage Stage is a lack of leadership within the organization. When leaders fail to address the underlying issues and take action to uphold standards and fail to address compromise, the organization can begin to deteriorate into a negative cycle losing influence little by little.

As Brian Ahearn notes, this can manifest in the organization always "chasing its tail, putting out fires, and seeming to fall short over and over again."


The Backwards Workplace:


A workplace with backwards leverage can be characterized by a multitude of negative traits, including chaos, uncertainty, and entitlement. Backwards leverage refers to a situation where an employee has the leverage to exert influence over their manager or the company.


Years ago, my company purchased four restaurants in the Des Moines, Iowa area. The previous owner was excellent at marketing but lacked operations and leadership skills. The average hourly wage was over $2 higher in these locations than our current restaurants at the time. This isn’t necessarily an issue providing the talent matches the wages, however I found out quickly that was not the case.


Upon taking over the restaurants, it was apparent that it was in the backwards leverage stage. Back then I didn’t even know such a stage existed. Operational standards were poor, procedures were not adhered to, and the culture was very entitled. The inmates were running the asylum. There was one guy that basically ran all four stores and bounced around putting out fires and desperately working to keep people from quitting. It was a mess, but the staff of each store seemed acclimated to this style of operation. It was a little strange. It’s like they just accepted that this is how the hospitality business is, always.

After the first week or so of spending time with many of my new team members, I began being approached one by one about a raise. A few had mentioned that the previous owner had promised them a raise a while ago and had never received it. They would be looking elsewhere if they did not get their raise. One gal told me she started a few months ago and found out that she is not being paid what they agreed upon. A few others simply put in their 2-week notice. I later found out that they had done this several times prior only to be given a raise to stay. The ironic factor was that none of these people displayed dependable, productive, and trustworthy characteristics that I was accustomed to gladly giving a pay raise.


Most of the employees of these stores were overpaid and underperforming according to the market standards. They knew that the leadership didn’t have control over the company and was in no place to replace them. The truth was that they didn’t have to produce to keep their job. Many had been around a while and called their own shots, comfortably showing up when they wanted and taking the liberty of deciding how each product should be made. I had my work cut out for me.


Chaos & Uncertainty:


Chaos is a state of disorder, uncertainty, and not being able to plan. It is marked by a lack of planning, structure, or control, which leads to chaos and disorder. In a chaotic scenario, things may happen at random, which makes it hard to predict or understand their patterns or results. It's the opposite of order and security, showing a state of chaos and uncertainty.


Backwards leverage creates a climate of uncertainty in the workplace. In such workplaces, workers use their power for personal gain rather than the common benefit. They do this because there have not been boundaries and processes established to direct expected behavior. Employees experience anxiety because of this lack of clarity, which in turn erodes their trust in management and each other. One of the top reasons people leave their job is that they do not know what is expected of them.


This unpredictability is a result of the backwards leverage's effect on the decision-making process. When workers put their own needs before those of the company, decision outcomes become haphazard at best. Everyone does their own thing independently and product consistency dissipates. The workplace culture becomes fractured, drama creeps in and order turns to chaos. The customers lose, the company loses, the leaders and employees all lose. No one gains from backwards leverage in the long run.


To deal with uncertainty in a workplace with backwards leverage, leaders must put openness and communication at the top of their list of priorities. A new, better vision needs to be cast to the team. Clear explanations of the decision-making process and criteria, as well as involving workers as much as possible in the decision-making process, can help reduce anxiety and build trust. Setting up a culture of shared goals and putting an emphasis on the importance of group success can also shift the focus from individuals' needs back to the mutual needs of the team and organization. Leaders can reduce uncertainty and rebuild trust among workers by making the workplace more open and collaborative.


Entitlement:

Entitlement is also a common feature of a workplace with backwards leverage. When employees can get what they want by using their leverage, they may begin to feel entitled to special treatment or privileges. This can lead to resentment among other employees, who may feel that the entitled individual is not pulling their weight or contributing to the team in a meaningful way.


While it may be difficult to eliminate backwards leverage entirely, it is important for companies to be aware of its negative effects and work to minimize its impact on their operations.


Back to my story about my four stores in Des Moines. I did not respond to any of these employees by granting them a pay increase. They weren’t producing at the rate they were already being paid. Over the next couple of weeks, each of them began coming back to me rescinding their 2-week notice, deciding they would probably keep working with us. I am sure they were likely looking for a job elsewhere, realizing that they were making far more than they could make starting a new job. I took this opportunity to grant them their original wish to leave the company. I recall only one leaving on their own. One employee that had been with them for 4 years or so looked at me with eyes wide open saying “Are you kidding me? You can’t let me go! Who is going to run this place?”. “I am not letting you go; I have your written 2-week notice.” I replied… “But I do appreciate your long service to the business”.

As it turns out people prefer making a fair rate of pay that is earned while working in a culture with clear expectations and boundaries that values them, while working toward something significant is better than being over-paid, being bribed to stay in an environment of chaos, drama, and disunity.

A backwards leverage culture is difficult to turn around. I wish I could say I was able to turn it around quickly, but it took a few years. If I knew then what I know now, it would have been much quicker.


Tug of War:


A culture with backwards leverage resembles a game of tug of war with three outcomes, a win-lose relationship, a lose-win relationship or a lose-lose relationship. Either the employee (or team) wins at the employer’s expense and is allowed to rule the roost, the employer wins at the employee’s expense, or they both allow their interests to escalate to a boiling point and they both lose. It takes a leader to resurrect the culture back to a win-win environment. In any scenario, if leadership doesn’t prevail soon, like a bubble hitting its maximum capacity it will burst and turn into a lose-lose proposition for all.

A lack of leadership can contribute to the organization being stuck in a cycle of repeating the same actions and getting the same results. This can lead to a sense of hopelessness and a lack of control, as noted by Ahearn, leaders may tend to blame others for their problems rather than taking responsibility for their actions.

The Hope:


The Backwards Leverage Stage can plague organizations and lead to a lack of progress, demotivated employees, and high turnover rates. But it doesn’t have to be this way. There is hope. You can break free from this negative cycle through developing effective leadership, a growth mindset, open communication, and a commitment to change. By taking these steps, leaders and organizations can overcome the symptoms of the backwards leverage stage and move closer to achieving long-term success.

Now whenever one of our stores falls into the backward leverage stage one of my senior leaders can go in and get it turned around usually within a month. This is only because we understand the process well and have a proper perspective of the importance of leadership.

In a nutshell, Stage #1 - The Backwards Leverage Stage is a big problem in organizations when leaders are not prepared or skilled to do their job well. It's like a repeating cycle of issues that make things go wrong. In a place with "backwards leverage," it feels chaotic and uncertain. Employees might act entitled, thinking they can get special treatment. This mess can be turned around with good leadership, clear communication, and a commitment to change. Even though it can be tough, the right leadership and mindset, organizations can break free from the cycle and find success.


Joel Smith

Business Coach, Author and Entrepreneur

This article is a section out of the book Team Design: Building Great Teams By Attracting the Right People. Download the Free PDF version.



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