Article · 8 minute read

What is the true cost of hiring a bad manager?

12th May 2023

Even with the best of intentions, good hiring practices can come unstuck when it comes to managers.

Think of a management role you have recruited for. How did you measure the key criteria? For example, ‘developing innovative strategies’, ‘producing budgets and market forecasts’, ‘motivating a team to deliver their best’. What objective data did you collect to assess those?

Too often these critical areas of management responsibility are not measured with the same robust approach, but hiring a bad manager can have a significant negative impact on staff wellbeing, staff retention, company culture, loss of productivity and ultimately your financial revenue.

On the flip side, getting it right at the hiring stage can help drive better performance, create a thriving team culture and help you retain your employees. So isn’t it time you went beyond CVs and gut instinct, and started making informed hiring choices based on real in-depth data?

Let’s take a look at some of the implications related to poor management and why selecting good managers is so important:

Staff Wellbeing

In a recent survey conducted on LinkedIn, when participants were asked if they were less stressed when their manager was off sick or on annual leave, 88% said yes (1). This suggests that rather than providing confidence and motivation, most managers could be having the opposite effect!

Another study found that 77% of employees have experienced physical symptoms of stress as a result of a bad manager, with three out of four employees saying that their manager is the most stressful part of their job (2). This can have a huge negative impact on an employee’s health and lead to an increase in sick days, affecting productivity.

Managers who fail to praise employees for their work and give recognition for their achievements can also have a detrimental effect on morale. Employees are likely to feel deflated if nothing seems to satisfy their manager, or if they feel they are constantly receiving criticism or negative remarks, leading to a lack of confidence and enjoyment in their work.

Staff Retention

It’s often been said that “people don’t quit bad jobs, they quit bad managers”, highlighting how imperative the role of management can be in staff retention. It’s very difficult for an organization to retain employees if managers are ineffective. 65% of employees recently surveyed said that they would take a new manager over a pay rise (3)

In a recent study on why people quit their jobs, 79% of respondents said that they had left due to poor management or leadership (4). Therefore, if your organization does not have the right management in place, you risk losing top talent that could otherwise thrive and progress – not to mention the time and cost associated with replacing those individuals.

A study by the US Labor Department suggests that it costs around 30% of an employee’s salary to hire a replacement (5). Other experts suggest that if you make a mistake in hiring and rectify the mistake within six months, the cost of replacing that individual is still going to cost you two-and-a-half times the person’s salary. This means a poor hiring choice for a candidate earning £50,000 per year could cost you on average £150,000 – expense that comes right off your bottom line.

Add to this the valuable time lost conducting exit interviews, interviewing candidates, and onboarding or training new hires – all of which can have a negative impact on productivity. This is time and budget that could be used for operational needs, team events, training days, or other activities that boost employee engagement instead.

Company Culture

Managers play a vital role in the promotion of a positive workplace culture. For example, a manager who ensures employees know that their contributions are valuable creates a culture of recognition. A manager who encourages team members to recognize each other creates a culture that builds stronger teams.

Conversely, bad management can impact culture negatively and often results in a culture where employees lack engagement, settle for mediocre performance and have low morale. Research suggests that as many as one in five American workers have left a job due to workplace culture (6).

Loss of Productivity & Financial Revenue

Poor management can drive down profits. Without the right culture and environment, employees are unlikely to be working to their full potential. They won’t be motivated to go ‘above and beyond’ for the organization; they are likely to simply do the bare minimum to get by.

Research suggests that employees with bad managers waste between 10%-52% of their time at work. Instead of working to their full capacity, they spend their time ruminating, networking for support, and avoiding their manager. A conservative estimate suggests lost revenue can amount to £75,000 per direct report (1).

According to research by Gallup, only 35% of managers themselves are engaged in their role, and ones that aren’t could be having a massive impact on your financial revenue (7). One of the main culprits is the ‘accidental manager’ – individuals who have progressed to management through being good at their role, but lack the operational skills to be a truly effective manager – who could be costing UK employers up to £84 billion a year, research by the Organization for Economic Co-operation & Development suggests (8).

How can manager selection be enhanced?

Enhancing your manager selection is one clear way to avoid the ramifications of bad managers.

To recruit managers who are going to be successful you need to understand what constitutes a good manager and to then make selection decisions based on real in-depth data – not just a candidate’s CV, previous experience or because they are good at the job they currently do.

The first step to enhancing manager hiring is to truly understand what the ultimate drivers of success are for managers in your organization. However, this can often be hard due to differing opinions on what constitutes a good manager or finding it too difficult to hone in on what exactly are the key differentiators.

One way to understand this is to complete a performance driver analysis. During this type of study current managers complete a short Manager Situations assessment alongside a behavioral questionnaire, such as Match 6.5. This data, alongside performance data for your managers, is analyzed to find out exactly what drives effective performance and an optimized scoring algorithm created.

Manager selection can then be enhanced by using this your optimized algorithm to power a Role Fit score and deploying the Manager Situations and Match 6.5 assessments in a recruitment campaign. Candidates can then be scored against what it means to be a successful manager in your organization, enabling recruiters to efficiently and fairly screen out those with lower potential for success.

Combining a Situational Judgment Test, such as our new Manager Situations assessment, with a behavioral screener, such as our Match 6.5 questionnaire, will also significantly increase the validity of your selection process. This massively decreases the likelihood of making a bad hire and the subsequent costs associated with this. Our data demonstrates that using a Situational Judgment Test in conjunction with a behavioral screener can help reduce the risk of making a bad hire down from 1 in 5 to around 1 in 30. (see graph below).

Validity of Saville Assessment Tools Against Overall Job Performance

With better understanding of what the drivers for success are for managers, enhancing selection with an optimized Role Fit and valid manager assessments the ramifications of bad managers can be avoided.

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Enhance your manager selection with a Free Performance Data Analysis today.