At a glance
It’s hard to attach a single figure to the cost of bad management – but most will agree it’s a stratospherically large figure.
According to Gallup, the global cost of poor engagement is about US$8.1 trillion [A$11.6 trillion].
The dollar figure aside, two experts say bad management is also a significant cultural problem in Australian professional services firms and have suggestions on how to address it.
What does bad management look like?
Bad management is a “broad term” that encompasses many different things, says leadership expert Stacey Ashley.
“It can be everything from poor communication and poor connection – not being able to provide clear planning and priorities for a team, for example, so they’re not sure what the agenda is and what to focus on – to not following through on commitments that they make or following a personal agenda,” she says.
Or a bad manager could fail to “focus on developing their people and offering the opportunity to grow and to realise their potential”.
Bad management affects the operational side of the business as well, says Ashley.
“They don’t manage their cost structure and they don’t achieve their key performance indicators, whether it’s about service delivery or sales or project delivery.”
The cost of bad management
In Australia, “businesses are competing for customers, capital and talent,” says Rodney Coyte, program director for the Master of Professional Accounting and Business Performance at the University of Sydney Business School.
The war for talent is “exacerbated by the pandemic and skilled labour shortages” which makes it particularly fierce.
In this highly competitive environment, poor management can significantly affect an organisation’s performance.
“Bad management can result in really low levels of engagement and productivity and performance,” says Ashley.
“It can also result in people leaving organisations, and the cost of replacing someone and all their knowledge and expertise is incredibly high.”
A poor manager might fail to manage risk appropriately or fail to ensure compliance, which can be very costly for a firm.
While some costs are quantifiable, other effects are “less visible” so it’s harder to apply a dollar value, says Coyte.
Poor management can “affect the mood in the workplace”, he says, which research shows can affect factors such as the intake of information and decision-making.
Another cost incurred is the decline in trust and quality of relationships.
“If I don’t trust that you are going to be a good – or at least reasonable – manager, then the level of loyalty I have for you, as an employee, is going to be compromised,” says Ashley.
Do I have a management problem?
Signs of poor management may include a pattern of people leaving a particular team or consistently poor results in engagement surveys.
Ashley says general observation – listening and engaging in conversations – typically exposes bad management.
Assess whether a manager is delivering. “Do people seem super stressed? Are they working excessive hours?” she suggests.
“You can tell [whether] a team is happy or unhappy with their leader – you don’t need to be a superhero to be able to do that.”
Protecting against poor management
All levels of leadership throughout an organisation need “to recognise they have a part to play in developing the leaders who report to them”, says Ashley.
“They can’t just expect them to know what to do – they’ve got to give them … knowledge and experience.”
Education is vital to the equation, Ashley says.
“Organisations have a real responsibility to be teaching their people at all levels about the fundamentals of running a business and those core skills around being responsible for a group of people who are [in turn] responsible for a group of tasks,” she says.
“The earlier that we can start to equip people, the more we’re going to avoid long-term issues.”
One of those critical skills good managers require is emotional intelligence, a fact “firms are starting to recognise”, says Coyte.
The good news is that “interpersonal skills can be developed within the firm”, he says. “You can train people to improve their emotional intelligence.”
Another defence against poor management is a rigorous performance review process and a willingness among managers to deliver potentially difficult feedback.
“As soon as we recognise a problem or a gap, we need to step in and begin to address it, which can be a really constructive, positive process,” says Ashley.
A failure to give timely feedback rules out the opportunity for employee development and increases the chance that an issue “degenerates over time and becomes even more of a problem”.
Ashley believes bad management has become an issue of growing concern in recent times.
“In the last few years, as people have re-evaluated what’s important to them, their expectation of employment … has changed – they now have higher expectations,” she says.
Post-pandemic, Ashley says, “the impact of bad management is going to become much more significant.”