The Cost of Low Quality Management

The Manager by Design Blog provides helpful tips for how managers can improve their people management skills and team management skills.  The blog also advocates for the new field of “Management Design,” where managers are created systematically rather than placed into an arena where they have to perform without systematic help.

But is this really needed?  Aren’t managers performing well already?  Do managers need to improve how they perform?

Here’s a survey of some recent articles that discuss this very topic.  Warning: It may not be pretty.

Poor Managers may cause illness and heart attacks: According to a recent study in Sweden, poor management increases both the amount of sick leave and creates a greater risk of heart attack.  Conversely, those with good managers had less sick time.  More info can be found here.

Poor Managers hurt productivity and profitability: In 2004, an ongoing Gallup survey that indicates poorly managed workgroups are an average of 50% less productive and 44% less profitable than their well-managed counterparts. (Cited here and here ) and in the May 1, 2005 edition of HR Focus.

Poor managers cause underperformance: An October 14, 2003 article in Personnel Today provides many statistics about the impact of poor management on performance.  Some highlights: A survey by HR consultancy Cubiks showed 70% of survey respondents cited poor quality of line management caused them to underperform on a professional level.  Personnel Today’s survey showed 73% of HR professionals are “concerned about the capabilities of their line managers.” (my emphasis)

Note:  How does this translate to middle and upper management?  When did the line managers suddenly get better at managing when they get to the next level?  Or are good middle and upper managers suddenly appearing from other sources, such as MBA schools or Consulting Firms?

Poor Managers promote conflict: In its September 22, 2003 edition, Personnel Today cited a survey by Monster.com that showed that bad management is the number one reason people lose their temper at work, with 39%.  Lack of career advancement was the second most cited reason (30%).

People leave their job because of poor managers: It is often cited that people leave bad managers.  According to The 7 Hidden Reasons Employees Leave: How to Recognize the Subtle Signs and Act Before It’s Too Late
, it appears that the number is 70% — that is, 70% of employees leave their jobs related to controllable factors by the job supervisor.  Yikes!

Bad bosses do things that very directly cause misery in the workplace: Here’s a study by FSU that provides more detail on what bosses do to make work miserable.  For example, many employees report poor boss behaviors such as receiving the “silent treatment”, not keeping promises, making negative comments about employees to others, and blaming others.

Note: This is the bad stuff.  I’m sure more research could be done on the lack of good stuff.  What are the costs of not creating an effective team environment, not providing expectations for performance, or not providing quality performance feedback?  Let alone the more advanced skills (‘style points’ as I call them) of fostering career development or strategically filling future performance needs.

Poor leadership costs a lot of money with each departed employee: An excellent article on Badbossology.com goes through the costs entailed for having to replace employees.  The example provided shows it easily costs at least $40,000 for a $65,000 per year engineer – before that new engineer walks through the door.  So assume more costs in getting that engineer up to speed. Given that we can estimate that about 70% of attrition is caused by poor management, you can do the math for your own company.

Poor quality management has an impact on the Gross Domestic Product: According to a 2004 article by Laurence Karsh in Inc. Magazine, the United States was devoting in 2004 about 1% of the GDP to correct poor hiring and people management.  Since we can assume that investments to solve poor management practices are less than the actual costs of poor quality (would companies invest more to solve the problem than the costs of the problem?), we can estimate that the actual cost of poor people management is greater than 1% of the US GDP, or about 142.5 billion dollars. So there’s an estimate of the cost of poor managers.

So what’s the cost of poor management?  Answer:  A lot.

There are huge monetary and human costs associated with poor management and poor leadership.  This gap in managerial quality should be seen as an ongoing opportunity to improve the workplace, employee experience, and fiscal returns.

The emerging field of Management Design aims at systematically creating great managers with sustainable systems rather than waiting for them to adopt strong (or at least non-damaging) practices.

The Manager by Design blog provides twice-weekly people management tips and discussion on the emerging field of Management Design. If you are looking for ideas on how to be a better manager of people and teams, subscribe to Manager by Design by Email or RSS.

Related articles:

Management Design: The “designs” we have now: Make the loudest person the manager

Management Design: The “designs” we have now: Recruit someone from a successful comparable organization

Management Design: The “designs” we have now: You can manage only if you’re from here

Management Design: The “designs” we have now: Hire the premier technical expert

Management Design: The “designs” we have now: Promote the top performer

Management Design: The “designs” we have now: You’ve managed a team before? We need you!

Management Design: The “designs” we have now: MBA graduates and Consultants

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