Is overhead good or bad?
By definition, “overhead” is good—it constitutes all the things that are needed for a business to function, even though they can’t be associated directly with products and services. And yet, the usual perception of overhead is that it represents waste and unnecessary costs.
I recently spoke with a leader of a major sales function for a Fortune 100 organization. He told the story of saving his organization $3 million by supporting its team of senior leaders as they made and implemented a series of difficult decisions. These decisions allowed them to execute more effectively. “I could have told them who to get rid of and insisted they do it immediately. In fact, a few years ago that is what I would have done. And we would have had a great short-term result. But I need leaders who can generate these kinds of results over the long-term: leaders who know how to make the hard decisions and feel comfortable doing it.”
In other words, the leader did not take the easy way out. That would be something we’d associate with “bad overhead”: overpriced, easily duplicated behavior. Instead, the leader:
- Took time to reflect on how he could lead more effectively despite the short-term pressures the business put on him
- Provided clarity for his team on the market strategy and the performance expected of all team members in their respective functions (The leader then stepped back, re-entering to emphasize and build clarity on the strategy and to help with course correction as needed.)
- Built the confidence of leaders who needed to make hard choices by sharing his own experiences and how his choices had affected the business in both good and bad ways (And he increased the leaders’ confidence by refusing to step in and make decisions for them, despite pressure from above.)
- Encouraged and supported his team members, and allowed space for their decisions and execution timeframe (He thus created short- and long-term ownership of the business. By his own estimate, it will have a $20 million impact on the bottom line over the long term.)
All these skills are ones the leader has learned—ones that translate to significant value for the organization in untold ways.