People Problems Will Cost You

People Problems Will Cost You

For their new book, Stop Spending, Start Managing: Strategies to Transform Wasteful Habits, management professors Tanya Menon and Leigh Thompson surveyed a group of executives and asked them to estimate how much money their companies lost each day due to people problems, “from interpersonal conflicts and unproductive weekly staff meetings to hiring the wrong employees and investing in training programs that don’t work.” In an excerpt from the book at the Harvard Business Review, they reveal, “We expected our study to reveal significant waste. However, we were not ready for the magnitude of the results”:

In the course of a day, the executives estimated wasting an average of $7,227.07 per line item per day, for a total of $144,541.30 per day, summing each of the twenty points of waste. That’s an astounding $52,757,574 of lost value and potential per year per organization on people problems. These are perceptions rather than scientific measures, but they reveal significant amount of lost value.

Other studies reveal similar waste. For example, in one study, American employees reported spending 2.8 hours per week dealing with conflict, amounting to approximately $359 billion in paid hours, or the equivalent of 385 million working days in the country as a whole. Further, 25 percent of employees said that avoiding conflict led to sickness or absence from work, and nearly 10 percent reported that workplace conflict led to project failure.

We also know from CEB’s Global Talent Monitor that people problems are among the primary drivers of attrition. People management has been the third strongest attrition driver for quite some time now (behind future career opportunity and compensation) and manager quality is usually not too far behind on that list. So, on top of these perceived day-to-day costs of people problems, organizations also are at risk of huge additional costs should disgruntled employees leave: The cost of turnover isn’t exactly chump change.