A Sobering Look at the Impact of Bad Management on the Bottom Line

A consistent source of good advice and cross-industry perspective on company culture, Blanchard Leader Chat is one of my must-read blogs.

Last month, for example, they featured recent global research from McKinsey, Stanford, and the London School of Economics that showed: “A one-point improvement in your company’s management practices is worth as much as a 25 percent increase in your labor force, or a 65 percent increase in the amount of your invested capital.”

Indeed, I cannot count the number of times I’ve heard the truism, “People leave managers, not companies.” Now the impact of poor management to the bottom line is clearer than ever.

3 essential managerial behaviors

Blanchard rightly points out the problem does not lie in not knowing what good management practices are, but rather in implementing those practices:

“Here are three well-known manager behaviors essential to good performance. Consider the degree to which these practices are used in your own company. Remember that the key is not knowing about these practices, but actually using them. How would you score your organization when it comes to actually implementing these performance management basics?

Performance Planning: Employees have written goals that clearly identify their key responsibilities, goals, and tasks.

Performance Coaching: Employees meet with their supervisors on at least a twice per month basis to discuss progress, identify roadblocks, and get the direction and support they need to succeed.

Performance Evaluation: There are no surprises when it comes to annual reviews. Managers and direct reports are “in-synch” because performance against goals is being measured on a regular basis instead of once a year.”

The power that HR truly has

I’m sure most HR Pros would agree they’ve invested much time and energy in establishing these management principles in their organization, training managers on implementing these practices, and following up on those efforts. I’m equally sure most HR Pros would agree a significant percentage of their managers fail on many of these points.

What’s our usual reaction to this failure? Too often, we simply shrug our shoulders and move on. We can no longer do that. The research shows HR Has the power to drive significant improvement straight to the bottom line simply by ensuring managers get better at frequently, regularly and very specifically engaging with their employees on performance and achievements.

There’s no better, easier, faster or effective way to do this than strategic, social recognition. Instead of rehashing the same old performance management tools, HR needs to move on to social performance management through strategic recognition. Give managers (and all employees) the ability to recognize and reward those who meet and exceed goals while demonstrating desired behaviors based on your values.

Or you could simply recruit, hire, train, and fund a 25 percent increase in your total headcount.

You can find more from Derek Irvine on his Recognize This! blog.