Poor people management costing the UK billions

2004

Poor recruitment and people management practices are costing British businesses £12 billion a year – a figure that represents 1.6 per cent of the country’s total GDP.

A new report, 'Getting the edge in the New People Economy', by consultancy SHL and think-tank The Future Foundation, has some up with the £12 billion price tag by calculating the average earnings of managers and the amount of time they spend managing poor performers.

It suggests that it takes almost eight months for a UK employee to reach a reasonable level of performance in a new job, with managers spending a quarter of their time dealing with poor performers. Yet one in eight people leave their jobs before even getting to this point.

But SHL's chief executive, John Bateson, said that the figures only scratch the surface of the problem.

"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," he said

"Firms say that people are their most valuable asset so we wanted to test this. It appears that they do not mean what they say. Not enough time is spent getting round pegs into round holes and it is costing billions."

Other research carried out by SHL has found that one in five businesses claim that half the people they recruit don’t work out in the long term, with a further thirty per cent stating that one fifth of all new employees are not up to the job.

This is despite the fact that the average company spends more than £2,000 per head on recruitment.

The latest findings suggest that more than a quarter (27 per cent) of UK workers think that their colleagues are incompetent. In addition, while they may be critical of their colleagues' performance, they also admit that three-quarters of mistakes they personally make never come to their manager's attention.

The survey, based on a sample of 700 managers in seven countries, including 100 from the UK, in organisations with turnovers of more than £1m, revealed a similar picture across the globe, with the United States estimated to be loosing $105 billion a year for the same reasons.

As Bateson points out, a FTSE company in the UK employing 20,000 people will loose £20 million a year through poor selection and management of its employees – over and above the costs of other aspects of areas of people management such as absence control.

"It may only be one part of the picture but if you take the top quarter of employees based on performance and compare them to the bottom quarter, the former performs three times better," he said.

"It is time firms started living up to what they say about staff being an asset."