The Staggering Cost of Bad Managers

 

 

 

 

 

When bad managers are allowed to run free, everyone suffers.

Employees suffer — Employees feel unsupported, undirected, bullied, confused, unmotivated, unappreciated, frustrated, and constantly questioning, “is it me?” So they are not engaged and they are not productive. 

Executives suffer — When executives lack confidence in the team beneath them, they have to cover for, or recover from poor work and decisions from ineffective managers. They become overloaded because they have to do their job AND the job of their managers. 

Business suffers —  When managers are not stepping up to do their jobs — making clear, good decisions and building a strong, capable team beneath them — then executives can’t fully do their jobs because they keep getting dragged down. Business progress slows or stops.

The Costs

Humu, the workplace software company led by former Google HR chief Laszlo Bock, points out that bad managers cost US companies at least $960 billion per year. This is according to Gallup data from 2019—and it likely underestimates the true cost, Bock adds. (More recent data from Gallup’s 2021 State of the Global Workplace report (pdf) show that a lack of engagement—a result of bad management—costs the global economy $8.1 trillion in lost productivity each year.)

Even if some of the costs listed here can’t be tracked by the finance department directly, they still have real impact. And it doesn’t take much imagination to see how each can lead to real dollar costs.

• Turnover. The number one reason people voluntarily leave a job is that they fire their boss.  Even when they cite other reasons (like pay), they would be less likely to be looking if they had a great relationship with their immediate leader.
• Reduced engagement. Seen by many organizations as the solution to organizational problems, employee engagement won’t be solved solely by EAP programs, job and work flexibility, great facilities or even top quartile pay. Most people will be immediately more engaged in and committed to their work with they have a skilled and effective manager.
• Reduced productivity. Productivity typically tracks engagement, but additionally when people have a bad boss, people may be less focused on the work, take more sick days, and generally be laxer about their job responsibilities.
• Increased health care costs.  Beyond more “sick days” (whether actually sick or not), one real cost of bad managers is an increase in stress-related health care costs.
• Poor decisions.  Even if the manager is brilliant, if they make decisions with little or no input from team members, they will have less perspective and may make poorer decisions – or at least make decisions that have less commitment from the team to implement.
• No decisions. Some of the bad bosses you’ve encountered may make no decisions or take no action on issues brought to them.  This is equally ineffective, may lead to missed opportunities and broken trust.

This is just a short list.  Your experience with a bad boss might give you other examples and issues. Ultimately, they will likely roll up to the big three – increased turnover, reduced engagement, and reduced productivity.

The Business Value of Good managers

The research in this HBR blog post by Randall Beck and James Harter, Why Good Managers so Rare, shows that the quality of the managers impacts the success of the business more than anything else.

Here are some highlights:

• Gallup has found that one of the most important decisions companies make is simply whom they name manager.

• Bad managers cost businesses billions of dollars each year, and having too many of them can bring down a company.

• Businesses that get it right, however, and hire managers based on talent, will thrive and gain a significant competitive advantage.

• To make this happen, companies should systematically demand that every team within their workforce have a great manager.

• If great managers seem scarce, it’s because the talent required to be one is rare. Gallup finds that great managers have the following talents:

• They motivate every single employee to take action and engage them with a compelling mission and vision.
• They have the assertiveness to drive outcomes and the ability to overcome adversity and resistance.
• They create a culture of clear accountability.
• They build relationships that create trust, open dialogue, and full transparency.
• They make decisions that are based on productivity, not politics.
  

Imagination and permission

I find that the key manager skills above listed in the HBR article — motivating, driving outcomes, clear accountability, building trust, and good decisions — are indeed rare but can be improved.

Many managers end up in management positions for reasons other than these. The mistake I see many companies make is to expect people to automatically turn into good managers simply because they are in the job.

They miss the key step of telling their managers what makes a good manager, or setting clear expectations about what the job is.

Managers tend not to step up on their own because of issues with either imagination (they don’t know they are supposed to), or permission (they are not sure they are allowed to).

• Imagination: You need to get it into the mind of your managers that they need to be good at and do these new manager-things. Some poorly performing managers will do better, simply be being made aware of the game.

• Permission: Some people don’t think they have the permission to step forward and lead in this way — especially if no one has ever talked to them about it. You need to make it clear that not only is it OK, it’s required. And if they don’t have the skills or a plan to lead in this way, you need to train and coach them or let them go.
  

Make your company stronger

My favorite line in Why Good Managers so Rare is this one:

 "Companies should systematically demand that every team within their workforce have a great manager.”

Amen!

A Cost Reduction Plan

If you want to reduce the cost of bad managers, you need better managers. 

There are three major ways to improve the overall skill and effectiveness of leaders in your organization: 

• Fire and replace 
• Have better selection and hiring processes 
• Develop the managers already in place

The most egregious examples might warrant immediate replacement or reassignment.  If you simply replace one bad boss with another, you didn’t really improve anything (but you did further lower the morale and hope of the team).  Certainly, you can work on your hiring and selection practices (for both internal and external candidates, but that doesn’t give much immediate help.

The single best way to reduce the cost of bad managers is to help them develop into good managers. That happens with feedback, coaching and training. Many organizations have reduced their focus and investment in leadership development during the turbulence of the past couple of years. That turbulence has made the job of a leader/manager even more complex. The mix of a harder role with less support is a recipe for more bad bosses.

It is time to look carefully at the skills and results of our managers and provide them with the support they need to grow and improve.  Doing this will create positive ripples beyond what you might image and cut operating costs at the same time.

 To your greater success and fulfillment,

Peter Mclees, Leadership Coach, Trainer and Performance Consultant
SMART DEVELOPMENT

 

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Smart Development has an exceptional track record helping service providers, ports, sales teams, restaurants, stores, distribution centers, food production facilities, wealth management services, third-party maintenance providers, real estate services, nonprofits, government agencies and other businesses create a strong culture, leadership bench strength, coaching skills and the teamwork necessary for growth.

Having worked with several companies throughout their growth cycle, we have valuable insights and strategies that would help any late stage startup, small or medium sized company achieve sustained growth and prosperity.

Having worked with several companies throughout their growth cycle, we have valuable insights and strategies that would help any late stage startup, small or medium sized company achieve sustained growth and prosperity.