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What’s the True Cost of Poor Management in Your Company?

poor management cost

The Staggering Costs Of Management Gone Bad

In 2004, the Future Foundation surveyed more than 700 executives in 7 countries worldwide to get a sense of the real cost of poor management. The results of that survey were sobering:

  • US executives were each wasting an average of an hour every day – that’s 34 days (or nearly 7 full weeks) per year – cleaning up after poor performers.
  • 68% of the mistakes that employees made were never noticed by their managers.
  • In the US alone, it was costing companies $105 billion every single year to correct problems that bad management and hiring practices created.

And the costs don’t stop there. The problem with tolerating poor performance from your managers is that it pushes away your high performing employees. Not only does that contribute to brain drain in your company – it also costs a lot to replace them.

Back in 2011, the US Department of Labour estimated that the average cost of replacing an employee in private industry was $13,996. Other experts estimate that figure to be closer to 50% of the salary of the employee you’re losing.

And remember: those figures are historical, so you’d need to adjust them for inflation to get today’s equivalent. In other words: managers who perform poorly do more than just make the employees who report to them miserable. They can also have a catastrophic effect on your business’s bottom line.

So what can you do to reduce your company’s management-related losses?

Senior Communications Specialist Tatiana Beale says that the first step to avoiding the losses associated with poor management is hiring the right people in the first place.

This doesn’t mean those people need to arrive with all the skills required to be a good manager. It does, however, mean they need to understand that engagement is necessary for business success. They also need to understand how to connect with their employees on an individual level – to see employees as people, rather than robots.

Beyond this, one of the most essential attributes for a good manager is the willingness to be a lifelong learner. If someone lacks a skill, you can help them to learn it – but if they have the wrong attitude, no amount of training will help them (or the people who work for them!)

Some of the most important skills your managers need to excel in include:

  • Effective delegation: this ensures they get the best possible results from their team by assigning the right tasks to the right people in the right way.
  • Giving feedback: this helps to keep team members motivated and engaged; and ensures that any necessary performance corrections are made.
  • Mentoring and being mentored: this helps managers to continue to develop their own skills; and ensures that they contribute to developing the skills of their team.
  • Authentic leadership: this helps managers to become great leaders – understanding the strengths and needs of their team members; and helping them to act with integrity at all times.

Ensure your company’s managers have the skills they need:

My new book How to Make Yourself Promotable provides managers with a step-by-step framework for developing each of the essential skills I’ve mentioned above.

What do you think?

What examples of poor management have you seen in past workplaces? What costs do you suspect were directly attributable to that management? Share your thoughts in the comments below!