By: Britt Andreatta, Ph.D.
Chief Learning Officer
Employees’ new demand to work from home is not the only element driving The Great Resignation. Alongside shifting values and pandemic burnout, poor managers are driving away your best people.
Even before the pandemic, 84 percent of U.S. workers said poorly trained managers created a lot of unnecessary stress. Fifty-seven percent say they have quit a job because of a bad boss, and of those who stayed, one-third seriously considered leaving. Managers create the day-to-day experience for most of your workforce, so the real culture of your organization lives in their hands.
With stressors only magnifying as the workforce continues to shift, a focus on upskilling your managers can improve the entire ecosystem of your organization and can keep your valued employees from leaving.
Calculating the costs of poor managers
With record shifts in play, leadership teams are craving data, but measuring the impact of training can be difficult. These calculators can help you determine the various ways that poor management skills are costing your organization, demonstrating the urgency for and value of manager training.
There is no doubt that poor managers are costing your organization both time and money. But it’s easy to lose sight of those somewhat invisible costs unless we find a way to quantify them. There are four main categories of costs where your loss, and therefore potential to improve, are greatest.
Cost of disengagement. Disengaged employees act out their unhappiness at work in a variety of ways that impact your bottom line. Gallup estimates that one disengaged employee costs an organization approximately $3,400 for every $10,000 of salary, or 34 percent. Even in a relatively small organization of 500 people, and assuming the national average of 16 percent of your employees are actively disengaged is true, the annual cost can exceed $2 million! Yikes. Using this data, you can determine how much those employees are costing you each year. Gallup also found that managers account for at least 70 percent of the variance in employee engagement across business units. Let’s assume, conservatively, that poor managing skills accounts for 40 percent of that number. Even a small shift in that percentage yields a big payoff in savings. When leaders see the real costs of disengaged employees, they see the value in, and return on, investing in manager training.
Cost of attrition. We all know that employee retention is important, and you’ll certainly hear leaders talk about it, but most have not fully appreciated the financial costs of losing talent. Serve as a strategic business partner by showing that impact. SHRM has determined that turnover costs an organization 50 percent to 250 percent of a position’s annual salary plus benefits (which is often 50 percent of salary). The range reflects entry-level or easy-to-replace roles up to senior or technical roles.
You can use this data, along with your organization’s current attrition rate, to show what it would cost to replace those employees. One entry-level employee who makes $50,000 costs you nearly $40,000 to replace, and a senior or technical role could easily cost $560,000. Multiply that by the number of people you lost and the costs become exorbitant very quickly. If you assume that half of your people left due to a poor manager, then investing in creating better managers will pay for itself ten times over.
Cost of stress and absenteeism. One study found that one in four American workers dread going to work. Everyday, an estimated one million employees are absent from work because of stress. According to the U.S. Centers for Disease Control, absenteeism alone costs employers $225.8 billion annually, or about $1,685 per employee per year. If we take a more conservative view, we can assume that 50 percent of workers are stressed, and poor managers are the source of that stress for half of them. In a 500-person organization, that would be an annual cost of over $200,000. Changing these numbers, even just a little, would create a real and measurable financial impact.
The National Association of Mental Health’s “2022 Mind the Workplace” study revealed that developing managers who knew how and when to be supportive correlated with higher scores on workplace health. Sadly, only 40 percent of employees agree that their company invests in developing supportive managers. But this is easily changed by investing in the right kind of manager training, driving significant savings in stress and absenteeism.
Cost of lost productivity/performance. Your organization’s success depends on the productivity and performance of your employees, but again, this can be impacted by poor management skills. One study found that 50 percent of employees feel their own performance would improve if their boss received the right kind of manager training. A Harvard study found that management techniques explain 18 percent of the difference between highest and lowest performers, and every 10 percent increase in manager effectiveness yields a 14 percent increase in productivity.
To calculate these potential savings for our organization, you can take some measure of your current productivity — such as sales closed, items manufactured, etc. — and multiply it by 14 percent. Even a conservative 10 percent often yields significant income, making the ROI for manager training a clear imperative.
Use this information in your organization to more effectively communicate how investing in your managers aligns with important business goals. The definition of return on investment means that the benefits gained outweigh the costs — study after study indicates that manager training pays for itself, and sometimes many times over.
Critical skills for today’s managers
For employees, the pandemic has driven an increased hunger for purpose. To no surprise, many are looking to satisfy this drive by finding meaningful work. Jessica Stillman states, “The Great Resignation isn’t primarily about the logistics of work. It’s about its meaning.” It seems that Aaron Hurst’s prediction of “The Purpose Economy” has come to fruition.
Successful managers know how to connect their people’s sense of purpose to their job duties and the bigger mission of your organization. They enliven their teams with a shared sense of purpose that motivates everyone to do their best.
Employees also want to feel safe at work, both physically and psychologically. Studies show that psychological safety is the single-most important factor for creating high-performing teams. But do your managers know what it is and how to create it through their daily words and actions? Training can turn your managers into your best asset for creating a positive workplace culture, one that not only keeps your best people but draws in the next generation of top performers.
Workers are also demanding opportunities to learn and grow — it’s one of the top three qualities Millennials look for when choosing a place to work and also a top three reason for why they leave. Giving your managers strong skills in coaching, training and mentoring will help the employees who report to them feel that their professional development is a priority. In addition, your organization will reap the benefit of a workforce that is constantly being upskilled to meet your current and upcoming needs.
Change management is often an overlooked skill, but the last two years have taught us how critical it is. Giving your managers training in leading change will help your organization whether future change, both the planned and the unexpected.
Emotional intelligence is how smart we are with the human connection — in other words, how effectively we manage ourselves and our relationships. In fact, in the workplace, 80-90 percent of the professional competencies that differentiate top performance are related to emotional intelligence.
Because managers shape much of the day-to-day work environment, their emotional intelligence is critical to your workplace culture. Implementing EQ training for managers can yield lots of savings through increased productivity, increased sales, improved customer service and better decision making. Studies show that ROI can be as high as 1,000 percent.
Revisioning work requires upskilled managers
Making it through The Great Resignation and turning it into The Great Rebuilding requires us to authentically explore how to make work more meaningful, connected and productive while supporting wellness and balance. The organizations that do so will attract great talent now and well into the future.
We now have an amazing opportunity to re-vision work. To do that effectively, leaders need to understand what’s at the core of this pivotal moment in history. The key is in your managers’ ability to create environments where employees can thrive and feel like they matter.
When given the right training, managers not only improve, they also become the secret sauce that turns a good organization into a great one. The data is clear — investing in your managers will pay off for now and years to come.