Do you know who your most dangerous employee is?

It’s depressing sometimes to pick up the business newspaper – on one recent Wall Street Journal front page I counted three business scandal stories out of the five pieces on the front page.

A picture of a CEO being “perp walked” by federal marshals in handcuffs after fraud arrest. A large construction company CEO indicted on money laundering, corruption, and organized crime charges - just days before he was to deliver a big address at his alma mater business school in Switzerland. Another story was about the manipulation and legal fallout from the chicanery in China's stock market, with a focus on self-dealing by government regulators there, of all people. And on…and on.

Having recently co-chaired a commission on ethics and leadership for a big agency in our government and looking at this issue across industries, it is sobering to see the challenges that businesses, non-profits, and governments face from dangerous employees, the so-called bad apples.

When a rogue trader costs a company and its shareholders billions of dollars  - as has happened half a dozen times in the past ten years (and a dozen more if you merely count losses in the hundreds of millions), when accounting scandals bring down whole companies that were formerly stock market darlings, when a set of employees violate a government regulation that forces an expensive settlement, when whole school systems or universities cheat on test score reporting and cause unmitigated reputation damage….well, those are some pretty dangerous employees.

But, even so, those are not likely your organization’s most dangerous employees.

Thankfully, even with the problems we have in organizational and individual ethics, those instances are few and far between in the grand scheme of all the institutional activity happening in business, non-profits, and government. They are spectacular sometimes – like a wreck at a car race – but they really only represent a tiny fraction of the activity in that race.

Some leaders think their most dangerous employees are their “problem children” –  those employees who show no malfeasance in their activities, but are just not meeting the standard of work, or are causing a lot of friction in the team.

In today’s management culture, with its emphasis on self-assessment, improvement, and coaching (good) or on litigation (bad), leaders spend a lot of time dealing with problem employees.

Performance improvement plans, ruthless documentation, labor laws scrutinized from all directions, etc.  Problem employees are a real “time suck.”

Despite that, leaders muscle through those non-performers or serial can’t-get-along’ers.  Legendary GE CEO Jack Welch identified a more subtle kind of problem employee – he called them “disrupters.”

He defined them as “individuals who cause trouble for sport - inciting opposition to management for a variety of reasons, most of them petty.  Usually these people have good performance - that's their cover - and so they are endured or appeased.”

In my experience these sorts of employees are “moved along” at some point – either transferred within the enterprise or encouraged to fit in better elsewhere – but rarely fired.

Even so, none of those types are your most dangerous employees either. Your most dangerous employee is even more subtle than that – and their threat to the progress of the enterprise is even more insidious as a result. 

Ironically, what most leaders discover is that their most dangerous employee is the eminently capable, completely competent, totally likeable, and many times highly respected team member who simply doesn’t have what it takes to lead or perform at the next level.

This is especially true of enterprises that are dynamic - moving their institution in a direction that requires constant change.

I’ve experienced and observed this over dozens and dozens of companies, and not a few non-profits and government agencies in which I’ve been involved as well.  Institutions go through constant change as they make their plans to grow and progress. 

In particular, in the journey of growth companies they often hit predictable inflection points - all of which mark a “we have arrived!” moment. It is usually a cause for celebration for the team that got them to that level. Whether it is winning the first big customer, successfully putting out multiple product lines, raising outside capital successfully, operating in multiple geographies, doing an acquisition – all of these events mark stages of growth and maturity that every large company we know of went through at some point or another.

What these successful enterprises discover is that the new stage at which they’ve arrived is also almost always a whole new ball game. It requires a different organizational construct, different processes, resources, and capabilities – perhaps even some different values to complement the core values that made the company successful in the first place.

Some companies tackle that piece well. What very few companies do well is plan for the fact that the new stage also almost always requires a re-assessment and re-alignment of the executive team and the individual executive competencies of each team member. 

For the most part, at each new stage of development or inflection point in the life of the enterprise, almost everything about the top executives’ jobs should be different from what they did before in order to get them to this stage.  If your company has gone through an inflection point and your job had not radically changed within six months……something is wrong.

Some teams and some executives can scale their own skills and competencies along with the company. People seek, learn, and grow after all. Some cannot.

Even when all the executives can grow individually, the team alignment may still need to change to accommodate the new tasks, new priorities, and new structure that is necessary to succeed at the new level of achievement. 

“Do’ers” suddenly need to learn the fine art of delegation and oversight rather the skills they honed in execution and achievement. To flip an old saw on its head, you don’t get to dance with the one that brung ya.

Instead, executives need to learn whole new skills around developing the people behind them to scale into what was formerly their role and also learn all new skills that are usually more strategic than technical in order to excel at the new level.  Imagine, for instance, how a CFO’s job changes when a company raises outside capital for the first time.  All of the sudden Ms. Inside needs to be Ms. Outside in her skills and orientation.

Your most dangerous employee in this common growth trajectory? The amazingly competent and wholly likeable professional who cannot or will not recognize that the transformation of the company requires a transformation of themselves and their job.  They are usually really, really good at what they do to get the company to this stage – but the thought of dropping “old me” and re-acquiring a “new me” while making sure the tasks of old me are covered by people they have developed and coached is a bridge too far.

So, we stick with them.  After all, this is the team that got us there – all for one and one for all!  But, inevitably, even with foresight and mapping of this phenomenon (which, sadly, few teams do even though it is going to happen according to their own business plans), companies tend to wait until they are disappointed to change. They stick with the leaders, the team, the processes, and the alignment that worked at Level 3, assuming and willing it to work at Levels 4 through 6.

It almost never does.  Top leaders of notable enterprises are constantly being replaced by outsiders (which then dilutes the culture and has its own risks) because they re-proved the age-old adage that a hero at one level might be an under-achiever at the next. 

Your most dangerous employee?  The competent and experienced old hand who can’t be what you need them to be at the next level, and yet shows you no reasons until it is too late to radically redevelop them or move them to a better position.  More than the fraudster, the malcontent, or the disruptor, these employees are the ones most likely to hold your organization back.