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Posted by on Nov 8, 2011

Dump the Analysts!

I’ve figured out how to have never-ending growth in the stock market—get rid of the analysts! Have you noticed how every description of downward-spiraling stock values concludes with the simple comment, “… but it was lower than analysts’ predictions”?

“XYZ Corp’s stock dropped two percent today. Although they made $27M more last quarter than the same quarter a year ago, it was lower than analyst predictions.” Clearly, the analysts don’t know anything. Why else would they be so far off in their estimates for the past three years?

Okay, it should be obvious that my suggestion to dump the analysts is said tongue in cheek … sort of. So another option is to have all the analysts grossly underestimate the companies’ quarterly performance. This way every company will always outperform the analysts’ predictions and stock values will go up. Again, tongue in cheek.

What does this have to do with leadership? Two words: managing expectations.

I’m not suggesting that leaders should low-ball estimates or standards when communicating with their employees. Rather, I do suggest this prescription for managing expectations:

1. Be realistic with your employees—not overly optimistic, but also not pessimistic. Say what you expect; explain your desired outcomes. The number one job of a leader is to establish and explain the vision. Describe what you expect in the way of employee performance toward those outcomes.

2. Be prepared to fight for resources—the number two job of the leader. Nothing dampens employees’ expectations for success more than knowing the needed resources aren’t forthcoming. Demanding high performance with no resources leads to frustration, anger, burnout, apathy, and, ultimately, high turnover.

3. Help remove obstacles. Have an honest conversation and be realistic about what you see as the challenges, but be careful not to unwittingly limit your employees’ opportunity to succeed. Truthfulness goes a long way toward limiting workplace drama. In the absence of information, employees will make things up. So eliminate confusion by discussing up front what’s known and what’s unknown.

Employees are smart. Believe it or not, they care about the success of the projects they are working on. Set your organization on an upward spiral: manage employee expectations by having honest conversations about what’s expected of them and what they can expect from you.

Then watch your organization’s capital grow!

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