Effective Leadership in the Cannabis Industry

Female leader with team behind her at a table

It’s no secret that the cannabis industry is here to stay. Its continued integration into mainstream culture is largely powered by the growing number of states that have legalized its use, and consequently, the growing number of consumers entering the market for the first time. As this evolution occurs, consumer expectations also grow. While in the past, one typically purchased whatever product was available and put up with relatively immature business practices, the evolving consumer base is beginning to demand similar levels of quality control, inventory reliability and corporate responsibility that it would expect from any other packaged goods industry.

This demand has revealed that subpar leadership can be a bottleneck towards these success metrics — a fact that may have previously gone unnoticed due to the chaotic, growth-at-all-cost environment of the industry up to this point. However, as companies continue to scale without addressing their leadership issues, they’ll find that their ability to effectively compete, retain loyal customers and ultimately achieve profitability becomes more and more difficult the larger they get. Therefore, it’s highly pertinent for cannabis leaders to explore ways in which they can improve their ability to move teams and organizations forward — thereby meeting these newfound demands from the marketplace, which will only increase as time goes on.

Having personally interacted with hundreds of companies — both plant-touching and ancillary — over my half-decade in the legal industry thus far, I’ve noticed that one of the most prominent issues shared by many companies is the lack of a healthy company culture. More specifically, I’ve noticed that many companies don’t value their workforce to the level they should, and while this tyrannical approach can produce early results, it eventually creates a highly-toxic work environment filled with unhappy, unmotivated and unproductive employees. Let’s take a look at three concepts related to effective leadership that can help transition such a company away from toxicity towards the healthy culture needed to remain competitive in this maturing landscape.

People Are Your Company’s Biggest Asset

One of the most important things you can do is change your perspective and realize that your people not only shouldn’t be a liability — but should represent your company’s largest potential return on investment. When treated well, employees are like beachfront property—the longer you hold them, the more valuable they become. This is because over time, employees will gain an intimate knowledge of how your company operates and communicates, which can make them much more effective at getting things done. Additionally, they’ll gain the experience that you might typically pay more for in a new employee, just by doing their repetitive daily duties (which builds mastery) and by being provided challenging, skill-stretching projects by their managers.

It’s also important to consider the cost of employee attrition. According to Gallup, the cost of replacing an employee can range from half to twice said employee’s salary. While a company with only a handful of employees might not notice the financial strain of turnover, once it has thousands of employees, attrition will become a primary sunk cost of the business if not actively mitigated. This doesn’t even take into account the loss of morale and extra workload suffered by the remaining employees, which presents its own costs. Unhappy, stressed and overworked employees do not perform at an optimal level, regardless of their pay.

It should be clear that the huge cost of high employee turnover combined with the reduced effectiveness of the remaining workforce will present an enormous obstacle for those seeking to be highly competitive at a national or global scale.

Balancing Transactional and Transformational Leadership

Let’s start by defining both terms. Transactional leadership views interactions between a manager and their reports as opportunities to get things accomplished. This is the most common “go-to” form of leadership—and within toxic cannabis companies, is usually the only approach leadership knows. This doesn’t mean the approach is inherently bad, but without balance, it can create bad results. Transactional leadership is about structure. Goals, quotas, SOPs, performance reviews and KPIs are all forms of transactional leadership, and as we can probably agree, can be massively useful tools for achieving results.

Transformational leadership, on the other hand, views interactions between a manager and their reports as opportunities to inspire and motivate their people to hold themselves accountable to getting things accomplished. To be an effective transformational leader, one has to respect, trust and care for their employees. Transformational leadership is primarily about communication and a shared vision, and it’s the leader’s responsibility to obtain buy-in on this vision from his or her team. While transactional leadership often focuses on the past and judges performance based on wins and losses, transformational leadership focuses on the future and how to continue moving towards excellence.

A big benefit to incorporating transformational leadership into your company is that you will be not only help reduce employee turnover, but will actually enable and encourage internal promotions, reducing the need for external hiring for higher level positions. As you can imagine, it’s much easier and cheaper to bring new employees into entry level positions than it is to try to bring them into middle or senior level management positions.

Learning to Trust Your Team

It’s human nature to rise to the challenge. When employees are stripped of all power, relevance and impact, they will wither away into empty shells of their former selves. Nobody wants to be a robot and perform mundane, seemingly-meaningless work day in and day out. By not trusting your team enough to share larger-scope strategic plans with them, you’re not giving them access to the larger picture that allows them to understand how their work impacts the company. By not trusting your team enough to give them challenging new tasks that are outside of their comfort zone, you’ll miss the ability to develop the skills that will increase their value to the company and potentially set them up for promotion to a higher level role.

Additionally, leaders who place their trust in their employees find that their employees develop a sense of pride in and loyalty to their workplace. This further encourages effective, creative problem-solving by the employees themselves, freeing up the leader to focus on planning for future activities rather than babysitting their team. Additionally, it reduces the instances of employee theft and the need for expensive, morale-destroying measures that make employees feel like they’re in more of a prison than a healthy workplace.

When you give your employees a sense of ownership in their roles, you’ll find that they more often meet or even exceed their goals, because they’ve bought into your vision.

Conclusion

Cannabis culture has always been about the people, and the business side of the industry is no different. The success of any company starts and ends with its people, and focusing on nurturing a healthy, productive, empowering environment will provide a big advantage for cannabis companies looking to compete at a regional, national or global scale.

Ben is an adaptable and effective serial entrepreneur with a rich background of experience starting and running companies across several industries.