There are myriad reasons why founders decide to start a company, but regardless of the initial motivation, both public and private companies exist for one simple reason: to make money and turn a profit. While simple in concept, it's not always an easy thing to do, especially at scale. I have worked for tiny start-ups with less than ten people, Fortune 500 companies with more than thirty thousand employees, and I've been self-employed working entirely on my own. In the many years that I have been in the workforce, it's astonishing how many executives and managers seem to fail to grasp one simple concept: A company is nothing without its people.

In fact, a company is its people. What is a company if not a team (or several teams) of people all working together towards a common goal? And yet it seems remarkably common for managers and executives to fail to understand this, treating their employees as expendable resources, ripe for exploitation. Toxic managers focus on managing upward and taking advantage of their team for personal gain (to exude the appearance of competence to their own bosses). Toxic executives think that the company is just its shareholders and the entire purpose of the company is to maximize shareholder value above all else. Yet keeping your employees happy is the most effective way to keep customers happy, thus leading to growth for your business.

Yet, if you're not supporting your people, how can you be supporting the company? The natural tendency of corporate executives is to put the needs of customers ahead of the needs of their employees (by making them do things like unpaid overtime, excessively long work days, and committing to unrealistic project timelines), believing that that is the surest path to profitability. Happy customers create more profit, right? Makes sense... until the unhappy employees stop caring about keeping customers happy, or they leave and take their knowledge and experience with them. When unhappy employees aren't keeping customers happy, you risk losing them to the competition, and that's bad for business.

Happy employees make for happy customers, and happy customers are much more willing to open their wallets and spend money on your business. Making sure your employees have what they need to succeed in their job is good for business. If you're not supporting your employees, you're not supporting the company. Unhappy employees cost a company a lot more than happy ones. That's why your team should always come first.

Here are 7 ways that managers and executives sabotage the success of their products and teams:

1. They don't pay their people what they're worth

There always seems to be money to hire new people at market rates, but there never seems to be money to retain key talent. The goal of any business is to reduce superfluous costs and maximize profits, but managers and executives very often seem to make decisions without considering the future implications. Take employee salaries as an example. It's often easier to get a raise by leaving your current job for another company because your employer isn't willing to give you the raise you believe you deserve. But let's consider the costs of losing an employee that's been on the team for at least a year.

Let's say you have an excellent employee that's making $100,000. That employee knows that other companies are paying $120,000 for the same type of work. So she comes to you asking for a 20% raise along with reasonable justification (her accomplishments, the value she brings to the company, and evidence for why she's worth that much, since that's what the market will pay). You come back to her with a 5% raise. She begrudgingly accepts the raise, but just two months later she leaves to work for another company that pays the salary she wants. Now, because you didn't pay your employee what she's worth, you're going to be out far more than that 20% raise she was originally asking for.

1. The next person you hire to replace the employee who left is likely going to cost you that $120,000 per year anyway (or close to it), since that's the market rate, or you'll have to accept a less qualified candidate who will work for lower pay.
2. You now need to spend time (and money - likely in the thousands of dollars) looking for someone to replace that lost employee.
3. You'll have weeks of lost productivity while hunting for a replacement, now that nobody is doing the 40+ hours of work per week that the employee who left used to do.
4. Once you've finally found someone you like, hire them, and bring them on board, it'll take another 6 months before that person is fully ramped up and able hit the ground running at even close to the same pace as your lost employee.
5. Finally, there's no guarantee that the new hire will be as good as the one you lost and may never be as productive. Yet the new employee still costs as much (if not more) as the employee you lost. Sure, there's a chance the new hire will be better, but there's a greater likelihood that the new hire won't be as good.

2. They don't promote internal talent before hiring externally

When you lose an engineering manager or a senior-level individual contributor, managers and executives often instinctively start looking for external candidates instead of looking for someone internally who is interested in stepping up and taking on more responsibility. Your team will be far more productive if you can promote someone from within, since they'll require far less ramp time and they can also train the person who eventually takes their old role. Of course, you should still look at the market rates and provide an appropriate raise for the internal candidate. Don't make the mistake of promoting from within without providing an adequate raise to go along with the increased responsibilities. You'll end up losing another employee in short order if you add responsibilities without increasing their pay.

3. They don't incentivize high performance

Nothing kills motivation for high performers quicker than seeing their great work go unrecognized. When high performers get the same performance-based bonus as everyone else, including the low performers, it kills any motivation to go above and beyond for the company. After all, why should I work harder than my unmotivated peers if we all end up getting the same pay in the end? It doesn't work out well.

Instead, you should have a clearly documented framework that enables and encourages managers to reward their high performers. Make sure that it's clearly understood how performance is measured and how financial rewards are dispensed. The rewards don't always have to be monetary either (which often only happen once or twice per year). Frequent rewards for high performance can come in the form of swag, gift cards to Amazon or restaurants, or team-wide announcements recognizing the great work of an individual or team. There are many ways to recognize and reward high performance. The important thing is to make those incentives clear and to create a culture that rewards high performance so that your team(s) stay motivated and will stick around for the long haul.

4. They ignore the damage caused by toxic members of the team

Toxic, unhelpful employees are costly and drag everyone down. You've likely seen them before. They're the ones who are rude over email, or shut down the dialogue in meetings; they think they're above certain types of work or are too important for more junior members of the team; they're only there to collect a paycheck and do the bare minimum to not get fired; they're managers that refuse to listen to their team's concerns, or they hoard key information to keep themselves "valuable" to the company (i.e. difficult to fire)... toxic employees take many forms, but they always end up killing team morale and productivity, and they drive down profits with their poor attitudes. They make your teams unhappy, unproductive, and are a big source of attrition.

If you're a manager or executive and you don't deal with toxic members of the team (either by making them change their behaviour or firing them), then get ready for your top team members to start leaving. Once your best people have left because of bad employees, all you'll be left with are the bad ones, and at that point you'll be in real trouble. When all of your good people leave, it'll be much harder to hire and retain other good people.

5. They don't have a clear set of values that define their culture

This is especially important now that software companies are increasingly eschewing offices and moving towards remote-first work environments. If you aren't deliberately creating the culture you want to foster, you'll end up with a culture of ambiguity, confusion, and frustration by default. Your team(s) won't understand why they're doing what they're doing, which will lead to low morale, poor motivation, and attrition.

I've witnessed this first hand while working at two different Fortune 500 companies where leadership didn't understand how to create an intentional team culture. They were used to relying heavily on forming culture organically through office camaraderie, which masked the lack of an explicitly defined culture that communicates the organization's vision, values, and goals. When the pandemic hit, and remote work became the norm, the managers and executives that were used to the in-person office environment couldn't figure out why attrition was so high. They chalked it up to the "Great Resignation" and just ignored it instead of taking responsibility and making changes.

What they should have done from the start is clearly define, document, and share the organization's values (what should we care about most and why?), the vision (so we all know where we're going and why), and goals (both short and long term) so that we know what we need to do in order to support the vision. Then make sure everyone on the team understands them (through a townhall meeting, or some other method) so that everyone knows what's expected of them. This also helps new hires understand how they fit into the company culture. Without a clearly defined culture, it's very hard for anyone to understand how to effectively make decisions that will lead to the outcomes that executives and managers want.

6. They don't have a clear vision with achievable goals

Going hand in hand with having a clear culture and values, identifying short and long term goals for your organization is extremely important as well. We all went through those awful goal setting excercises in school, never really understanding why they were necessary, but when it comes to software engineering and delivering products and services to customers, goals are extremely valuable for running an effective business. Everyone needs to know what they're trying to achieve so they can measure whether they succeeded or failed.

You need goals so that you can effectively measure team and individual performance, as well as having targets to achieve. Without clear goals for your teams to strive towards, how will you know if your teams have succeeded or not? You might successfully deliver a new feature on time, but is the feature meeting an appropriate quality bar? Is it meeting customer expectations? How do you know you're doing well if you don't have a goal to measure your team's performance? Furthermore, how do you tell if an individual is providing actual value to the company if they don't have any goals to achieve? How do you know if they're a high performer or not? They may seem like high performers, but without a measurement to quantify that performance, it's just a feeling.

7. They don't invest in their products

"You're either growing or you're dying. - William S. Burroughs"

In business, if your company isn't growing, it's dying. There are two ways to make money for shareholders. You can either cut costs to increase your profit margin, or you can invest and grow the business to increase revenue. Cost cutting measures are typical when a business is no longer profitable or when executives are only interested in short term profit margins (generally to make their numbers look better to shareholders than they actually are). Shutting down expensive North American operations in favour of hiring cheap labour in Asia is a typical course of action in our globalized world, but you ultimately get what you pay for. Sure, there are talented individuals in those parts of the world, but losing all of the talent and experience from the people in your original locations that you've just fired is often irreplaceable.

The alternative is to actually invest in your products and services (i.e. spend money to make money). If you invest in building high quality teams, products, and services, and invest in your marketing and sales team, you can significantly increase your profit margins while keeping team morale high and employee turnover low. Cost cutting gives the impression that the business isn't doing well, whether that's true or not, the perception is real. People want to work for companies that are growing and providing products that customers love. Nobody wants to work for a sinking ship.

Conclusion: The best businesses are people-centric

In the end, managers and executives need to do the opposite of the seven things we covered in this article. Building a high quality business that attracts top talent starts with being people-first. Treat your employees with the respect they deserve. Pay them what they're worth. Promote internally before hiring externally. Create incentives for high performers, and be understanding of their life's circumstances. Deal with toxic employees quickly before they drive away your best people. Have clear values, culture, and goals, and invest in growing your business. Great employers respect their people and understand that happy customers start with happy employees. If your staff is unhappy, they won't do their best work, and that ultimately costs your business more money in many different ways.