The Hidden Business Cost of Leadership Blind Spots

Introduction:

Did you know that the more senior you become, the less feedback you tend to receive?

I recently observed a leadership team meeting and found it fascinating to see what happens beneath the polished PowerPoint slides and courteous conversation. As the leader spoke, his team cautiously suggested ideas—nothing especially bold or innovative. After each suggestion, there was a long pause before the leader responded, and I could feel the collective relief when he finally said, “Great idea.” Yet, the truly creative ideas—the ones that would have required change on his part—were quickly dismissed and swept aside.

The feedback from the meeting initially seemed positive, but as we dug deeper, comments like “A bit demotivated by the dismissal” and “Quite dejected, actually” started to surface. These types of behviours happen daily in our companies and we might think, it's not causing any harm. Then consider the VP who tried to impose his way of doing things at a daily 15-minute stand-up meeting and being frustrated that it took an hour before the team complied. His disengaged team lost another six hours of productivity just because of this incident as they spent time talking about what had just happened to them! He was oblivious to the decreased productivity and to his negative impact on the team until I provided feedback—something he would have never received otherwise.

Self-awareness has profound implications for organizations. When leaders lack insight into their own behaviour, it can stifle team morale, decrease productivity, and ultimately harm financial performance—often without anyone realizing the cause. Investing in self-awareness is not just about personal growth; it’s a strategic business imperative that directly impacts profitability.

In this newsletter, we’ll explore how common leadership blind spots affect effectiveness and financial outcomes, presenting research and practical steps to help leaders uncover these blind spots and build a more successful, sustainable business.

Key Points:

1. Self-Awareness Links Directly to the Bottom Line

Studies have shown that self-aware leaders have a distinct financial impact. Research by Zenger and Folkman reveals that extraordinary leaders can double their organizations’ profitability. A similar study by Rosen & Brown suggests that improving leadership alone has the potential to double worker productivity, directly impacting the bottom line. This productivity boost translates into higher operational efficiency, reducing costs associated with turnover, low engagement, and inefficiency.

Moreover, companies with self-aware leaders experience stronger employee retention, as effective leaders foster an environment where employees feel valued and motivated. Ultimately, organizations that prioritize leadership development are not just investing in their people—they’re securing a financial advantage in a competitive marketplace.

Extraordinary leaders create far more economic value than leaders who are simply “good.” Zenger & Folkman

2. The Leadership Self-Awareness Gap

Tasha Eurich’s research highlights the alarming reality that most leaders are blind to their own blind spots. Zenger Folkman’s findings further reveal that as individuals climb the corporate ladder, the amount of honest feedback they receive decreases significantly. This can create a vacuum where leaders are unaware of the negative impact their behaviours may have on their teams.

Without regular, candid feedback, leaders may operate under outdated assumptions about their effectiveness, unaware of how others truly perceive them. This feedback gap not only risks creating disconnects within teams but can lead to lower morale and higher turnover when employees feel their concerns go unaddressed. Over time, this lack of awareness can hinder innovation, stifle engagement, and limit an organization’s overall growth potential.

While 95% of people claim to be self-aware, research shows that only 10-15% actually are. Tasha Eurich

3. Blind Spots as Strengths No Longer Required

Often, a leader’s greatest blind spot is a former strength that, over time, becomes misapplied or overused as the organization’s needs change. This happens when a skill that once contributed to a leader’s success—such as decisiveness, persistence, or a strong goal orientation—no longer aligns with the current needs of the team or organization. Without self-awareness, leaders may fail to recognize when these traits have shifted from assets to liabilities, resulting in behaviours that inadvertently hinder team performance.

For instance, decisiveness is a key strength that helps leaders make quick, confident decisions, especially in high-stakes environments. However, when this trait is overused, it can lead to a top-down management style that overlooks team input and erodes trust. What once positioned the leader as effective and action-oriented may now appear as stubbornness or disregard for team contributions. The transition from strength to blind spot often goes unnoticed without regular reflection or feedback, as leaders naturally rely on behaviours that contributed to their success in the past.

4. The Impact of Unspoken Organizational Rules

Dr. Jim Detert’s research on organizational “deep rules” (unwritten codes that dictate what employees can and cannot say) sheds light on how self-awareness and transparency can be stifled, even in environments that promote psychological safety on the surface. Detert suggests that these unspoken rules can lead to organizational blind spots where leaders are unaware of—or unwilling to address—certain issues, from engagement levels to decision-making transparency. I worked with one company where the common view was; "Just keep your head down, don't say anything and you will be fine. Speak up and that's your career over"

Because these norms discourage open dialogue, employees may avoid raising critical concerns, fearing repercussions or believing that certain topics are simply “off-limits.” Over time, these hidden rules create a culture of silence, where problems are ignored rather than solved, resulting in missed opportunities for improvement. This lack of transparency not only limits growth but also erodes trust, ultimately compromising both team cohesion and the organization’s long-term resilience.

Actionable Steps for Leaders to Address Blind Spots:

Seek Out Constructive Feedback Regularly

Self-awareness can only be developed when leaders actively seek feedback. Create a culture of continuous feedback, regularly seeking insights into what you are doing well and what can improve. Ask questions like, “What should I start doing as your leader? What should I stop doing? What should I continue doing?” Tools such as 360-degree feedback and psychometric assessments can provide valuable insights. Consider weekly reflections to look back on your interactions and observe how others reacted to your behaviour. Did a team member go quiet after you spoke? Reflecting on such moments can reveal potential blind spots. I know many leaders who keep a weekly leadership journal and it's obvious they do this when I meet them, their self awareness is high.

Create Safe Spaces for Open Dialogue

Make it a practice to openly discuss the “undiscussables.” Dr. Detert suggests prompts like, “What undiscussables would we discuss if we decided to discuss our undiscussables?” to encourage honest conversations. In many companies, “real” conversations are sacrificed for meetings and presentations. When I hear “You can’t say that,” I always ask why. Understanding these boundaries can help leaders foster a more open, innovative environment.

Shadow and Observe

Spend a day shadowing a team member or working in another department to understand their daily challenges. This firsthand perspective helps leaders develop empathy and self-awareness, revealing how their actions impact others. Meeting frontline workers and hearing their stories gives leaders direct insight into the real dynamics within their organization, avoiding the filtered messages that often reach the top.

Leaders who engage with frontline workers and hear their unfiltered stories also uncover perspectives that highlight gaps between the organization’s goals and employees’ actual experiences. These observations can inspire leaders to implement changes that not only improve processes but also enhance employee engagement by showing a willingness to understand and address their needs.

Develop Emotional Intelligence as a Competitive Edge

Research by HBR shows that companies with high-EQ leaders report 20% higher performance ratings and a 60% increase in employee engagement. Emotional intelligence (EQ) helps leaders understand and manage their reactions, making them more receptive to feedback and adaptable to changing situations.

Leaders with strong EQ are more self-aware, reflecting on how their behaviours affect others. This self-awareness enables them to build trust, create psychologically safe environments, and respond constructively to challenges. By continually developing EQ, leaders can recognize blind spots early, ensuring their actions align with team and organizational goals, creating a competitive advantage in an evolving marketplace.

Conclusion

Blind spots are costly—not just to individual leaders but to the entire organization. By proactively working to uncover and address these blind spots, leaders can foster a culture of openness, trust, and resilience that translates into measurable financial results. Self-awareness is more than a personal growth journey; it’s a powerful business strategy that can create competitive advantages, fuel innovation, and improve profitability. Leaders committed to discovering their blind spots will not only enhance their own effectiveness but also drive their teams and organizations to new levels of success.

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Liz Rider is an Organizational Psychologist, LinkedIn Top Voice on Leadership and Former Global Head of Leadership. Her expertise lies in executive coaching, leadership development, and delivering impactful speaking events for large multinationals globally. She believes that work is becoming unsustainable and through human centric leadership, we can change this.