UK wastes 12 billion managing poor performance

The UK is losing 12 billion a year due to poor people management, according to a new independent report from SHL, the world leader in objective assessment.

Whilst companies talk about people being their biggest asset, it appears they are not taking enough time to ensure they effectively select and utilise their single most important factor - their employees. Billions are wasted as businesses squander the talent and potential of their workforce and fail to match the right people to the right jobs. Managing under-performers accounts for 1.6 per cent of total UK GDP.

The 12 billion figure is based on the average earnings of managers and the proportion of time spent managing poor performers. This means UK businesses waste 1000 for every employee through managing those who fall below par. Therefore a FTSE company employing 20,000 people loses 20 million a year through ineffective selection and management of employees.

Failure to match the right people to the right jobs is widespread. One in eight disheartened employees give up and leave jobs before they become competent at the tasks set. However, job hopping incurs further costs - it takes an average seven months for a UK employee to reach the required level of performance in a new job.

Yet these figures are only the tip of the iceberg. According to the report, a third (27 per cent) of UK workers believe their colleagues are incompetent. More worrying still, whilst they may be critical of their co-worker’s performance, employees also admit that over 70 per cent of the mistakes they personally make never come to their managers’ attention.

Whilst the UK loses 1.6 per cent of GDP through management practice, the USA loses 1.05 per cent GDP. Sweden, however, squanders just 0.59 per cent of GDP. Of the countries questioned, Hong Kong loses the highest proportion through people management, wasting a staggering 2.99 per cent of GDP.

The new report - Getting the edge in the new people economy -
conducted by The Future Foundation and downloadable from www.shl.com/edge, is the first in an ongoing programme of research exploring the hidden costs of hiring, selecting and managing employees.

SHL funded the report to find out if it was possible to quantify the true cost implications of selection errors and to investigate the potential value that exceptional people can bring to a business. The report uncovers the underlying reasons behind the colossal amount of money wasted on hiring the wrong people and draws attention to the need for further investment from firms in the selection process.

John Bateson, CEO for SHL Group plc said: The figures uncovered are startling and only begin to scratch the surface of the problem. The statistics are based upon salaries, and do not take into account the amount of money each individual can potentially bring into the organisation. British firms are clearly under-investing when it comes to employee selection and as a result are failing to tap into the true potential of their workforce.

Bateson continues, The spectre of the 20th century factory floor and office hierarchy lives on, yet a ’New People Economy’ has arrived with human capital as the core means of production. Managers need to embrace the new order, radically re-define exactly what skills are needed to excel in the new roles of the 21st century workplace, and find a robust means of matching the right people to the right jobs. Business leaders will need to make an objective assessment of individual’s skills in order to harness and nurture the best talent in order to secure a sustained competitive edge, concludes Bateson.