The Bottom Line Fallacy

Leaders can oftentimes fall into the bottom line trap. When times are tough, they may myopically look at the bottom of the income statement with incredulous disdain and make rash decisions before funds run dry while obsessively speaking about the importance of maintaining margin to those he/she are leading. While the bottom line is important, leading from the bottom line is a recipe for disaster. Margin and the bottom line are important and must be controlled, but leading from the bottom line will instill fear, false expectations and stifle creativity which ALL lead to a decrease in the bottom line in the long term. The following topics regarding the bottom line will be discussed: fear, creativity and false expectations.

Fear

While there may be short term gains through reducing personnel and cutting resources, the psychological impact of leading with the bottom line will carry forward for months if not years throughout the corporate culture and hamper exponential growth opportunities. Instead, the bottom line should be observed and accepted without knee jerk reaction and the feeling of impending doom. Simply accept the bottom line for what it is and allow your people to be focused and empowered on what truly brings value to the entity (which is a creative workforce free to make decisions and seek out new opportunities as they arise).

Creativity

Leaders who focus on the bottom line and use such topics as the party line will stifle creativity and actually decrease the productivity and profitability of their team. Instead, empower your management team to understand and instill the importance of the bottom line and keep your head up to the horizon to seize new and exciting opportunities that are just slightly out of reach due to inadequate internal structures.

False Expectations

A focus on the bottom line from the top down will then narrow the focus of those you are leading to the nuance and details of the business that may not truly add value. Again, the bottom line is important, but leading with the bottom line and the sole purpose to make a buck will inevitably lead to ruin. Leading people with the carrot and stick method will only lead to false expectations. Motivating people to move the company to more amicable margins may work for the short run, but what happens when the market is saturated and making the bottom line more appealing becomes difficult? Placing the eggs of an organization on the bottom line will crush those who are nearest to it when the number does not meet the expectation. If the bottom line is/isn’t achieved, what motivating factor is left?

Final Thoughts

Leading with the bottom line in mind is one of greatest follies a leader can make. The fear, lack of creativity and false expectations that are transmitted through the corporate DNA will hamper any initiatives to push the entity forward. Again, that is not to say the bottom line is not important, but the leader must be enlightened to the bigger picture. If the leader is just working to make a dollar no passion will exist and eventually the business will stagnate and thus crumble. Instead, create an environment that pushes authority down the chain of command as expertise increases and foster an environment that encourages creativity.