- April 18, 2014
- Posted by: STEP Consulting
- Category: Newsletter, Uncategorized
How much is your organization paying its leaders to be lousy? A couple hundred grand a year is my bet. And, the worse the leader, the more you’re paying him.
Crazy as it sounds, that’s essentially what’s happening at most organizations today. While lousy leaders may not be raking in that dough directly, their malfeasance is certainly costing the organization – and that cost can be huge.
It’s been reported over and over again that employees may join a company, but they leave a manager. Less-than-effective managers are the single greatest reason for turnover of good to great employees – and, I would venture to say, the greatest reason that bad employees are tolerated as long as they are.
That turnover has direct and indirect costs associated. The Center for American Progress found that for all jobs earning less than $50,000 per year, the average cost of replacing an employee amounts to fully 20% of the person’s annual salary and the cost to replace an executive is over 200%! Direct costs include interviewing, hiring, training, having other employees pick up the work while the position is filled, etc.
There are also indirect costs associated with turnover. Estimates vary, but the indirect costs associated with losing valuable employees include loss of knowledge, loss of contribution (sales, productivity, innovation) while their replacement is found, and the morale issues that occur when others have to take on the work left by the employee.
And there are costs associated with employees who stay. Unengaged and disengaged employees reduce productivity, stifle innovation, drive away customers, and negatively impact other workers. The cause of unengaged and disengaged employees? Ineffective managers and leaders. Gallup indicates that ineffective managers not only are an obstacle to employee engagement and productivity, they actually DRIVE disengagement and cost U.S. companies $450-$550 billion a year. http://www.talentculture.com/leadership/the-steep-cost-of-poor-management/
Adding to the vicious cycle, managers now find themselves spending more and more time dealing with poor performers. U.S. managers waste an average of 34 days per year dealing with underperformance. Senior executives claim they spend seven weeks a year – or over an hour per day – managing badly performing employees. And the problems increase with organizational size. U.S. managers in larger organizations (>$8.5M in turnover) are spending 41 days, or eight weeks per year, on managing poor performers. http://www.inc.com/articles/2004/12/karsh.html Dealing with poor performers reduces the time managers could otherwise spend engaging and developing good performers.
Entelechy created a simple Leadership Effectiveness ROI Calculator to help you identify the costs of less-than-effective leadership at your company. We encourage you to take it for a spin. http://www.unleashyourleadership.com/leadership-development-roi-calculator
Use the calculator to estimate the cost of less-than-effective leaders AND the potential savings your organization to enjoy by increasing the effectiveness of your leaders and managers.
Read more valuable leadership and management-related articles in this month’s Unleash Your Leadership Potential newsletter…