Colossal cost of poor people management

Poor people management is hitting the efficiency of UK businesses by an average of eight per cent, costing UK PLC £84bn[1] a year. By Investors in People.

Poor people management is hitting the efficiency of UK businesses by an average of eight per cent, costing UK PLC £84bn[1] a year. By Investors in People.

A study by Investors in People and economic research consultancy TBR has found a performance premium of up to 11 per cent for companies focusing on better people management. Small firms (less than 50 employees) and large firms (greater than 250) could see £33bn and £32bn respectively, by closing this people management gap. The study is the first of its kind to calculate the monetary benefits of implementing more effective people management approaches.

The ‘Impact of investing in people’ report was commissioned to identify the key management factors driving workplace performance. The study investigated a set of 10 people management approaches common to many high performing businesses, finding that 6 factors were significant in explaining direct improvements in performance and efficiency. Key findings highlight employers that adopt more sustainable practices, responding flexibly to change, whilst planning for the future, will drive the most improvement in their performance.  The table below shows the people management factors that will drive the greatest financial reward.

Table 2 – Performance gain by implementing top people management factors. Note that the contribution to the UK economy is cumulative, not additive, so implementing two or more won’t equal the sum total contribution of those two factors:

The study, based on research amongst 8,750 businesses and ONS data, reveals that the health and social care industry has the most potential to improve its performance by changing how it manages its staff. Performance would be increased by 8.9 per cent, contributing £2.4 billion to the industry. The sector that would benefit the most financially is the professional and financial services industry, with an 8.2 per cent performance boost generating an additional £29.9bn output.

Table 1 – Financial benefits to different industry sectors in the UK if good people management was implemented:



[1]All monetary values are measured in Gross Value Added (GVA), a measure of the contribution to the economy of each individual producer

[2]‘Other industries’ includes agriculture, energy & mining and transport & storage.  This sector has been created to ensure a sufficient sample size.

 

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