It’s not surprising to read that good leadership is the cornerstone of any successful organisation. Effective leadership improves morale through a clear vision, increases employee engagement and improves worker retention levels. Good leadership helps organisations to improve efficiency and achieve business goals.
It’s equally unsurprising to read that repercussions are far-reaching when leadership falters. In the UK, poor leadership is not just a matter of ineffective management - it has significant economic, social, and psychological costs that ripple through businesses and society.
The hidden costs of poor leadership
The economic cost of poor leadership is staggering. Research shows that poor management can drain the resources of a business faster than almost any other factor.
According to Investors in People, poor management and leadership cost UK businesses around £85 billion annually in lost productivity. In the US, studies show that bad managers cost companies up to $360 billion annually due to turnover, productivity loss and decreased engagement.
Many businesses underestimate the financial and operational impact of ineffective leadership. The cost isn’t just limited to poor decision making – it extends to every aspect of the business. Here’s a closer look at some of the consequences.
Disengaged workers
Poor leadership often leads to disengaged employees which directly impacts productivity. Studies show that employees who feel undervalued, unheard or micromanaged are far less productive than those who feel supported and empowered.
Disengagement manifests in various ways including lack of motivation, reduced effort and higher rates of absenteeism. If you are not fully committed to your job, the quality and efficiency of your work will decline, leading to financial losses for your business.
High turnover/low retention
People don’t leave bad jobs, they leave bad bosses. A toxic leadership style, whether due to micromanagement, a lack of empathy or failure to develop your team, can drive talent out of the door.
According to the Chartered Management Institute (CMI), one in three employees have left a job due to a negative work culture. While replacing staff is costly, averaging around £12,000 per individual, high turnover also disrupts workflow, lowers team morale, and can damage an organisation’s reputation. It also leads to a loss of institutional knowledge.
Poor decision-making
Leaders who lack the necessary skills often make poor strategic decisions. They may fail to analyse data properly or implement change without considering long-term consequences. The result – financial losses, missed opportunities and even reputational damage to the business.
In today’s rapidly changing business world, adaptability and decision-making under pressure are essential skills. Without leadership training, managers may struggle with crisis management, often making reactive rather than proactive decisions.
Toxic culture impacts on employee wellbeing
Poor leadership often creates a toxic work environment which can cause conflict between employees. This, in turn, leads to increased stress and burnout among team members. Employees who feel undervalued and have no support are more likely to experience mental health problems. The Health and Safety Executive (HSE) reports that stress accounts for a significant portion of work-related ill health in the UK.
Customer retention
It’s not just internal operations that are affected by bad bosses. Poor leadership also impacts customers. When employees are disengaged, undertrained or overworked, the quality of customer service declines. Attracting new customers is costly. In contrast, keeping your existing customers happy is more cost-effective and ensures a steady revenue stream.
Amateur bosses
A study by the CMI highlighted the volume of managers who are in the role without the skills to do the job. Research revealed that eight out of ten (82%) of new managers take on management responsibilities without any formal training. More than half (52%) of managers do not hold any management or leadership qualifications. And 26% of senior leaders and managers have never received any formal management training.
Known as accidental managers, these individuals are promoted because of their technical capability but frequently are without the skills to lead a team.
The way forward
Investing in structured management training such as CMI accredited qualifications or a Level 3 or Level 5 leadership apprenticeship will help managers to develop the skills and knowledge to be proficient in their job and to achieve results for the organisations.
As well as offering a range of CMI accredited management qualifications, Reed Learning has recently launched a Team Leader Level 3 Apprenticeship to ensure new managers get off to a flying start in their first leadership role.
Suited to any new leader who works for a levy paying company, this programme equips apprentices with essential management skills including:
Managing resources
Effective decision making
Project management
Managing risk
Supporting change to drive operational activities and performance.
Invest in leadership
Businesses which invest in management and leadership training experience on average:
23% increase in organisational performance
32% increase in employee engagement and productivity
£62k boost to business revenue every year and £310k over five years.*
The true cost of poor leadership is far greater than most organisations realise. From low productivity and high staff turnover to poor customer service and financial losses, the consequences to a business can be devastating.
Developing our current and future leaders is not just good practice, but a critical strategy for gaining a competitive edge in today’s business environment. Investing in leadership today will ensure a more productive and engaged workforce in the future.