Decoding the High Cost of Poor People Management

Perceptyx’s Center for Workforce Transformation has released new research revealing the staggering economic impact of poor management: more than $500 billion annually to the U.S. economy alone. Our special report, The Great Management Meltdown: Why 58% of Leaders Want Out and What It Means for Business, combines analysis from over 5,800 managers and employees across the U.S. and Europe to expose both the crisis and the cure for organizational leadership challenges.

The findings paint a sobering picture. Employees working under poorly-rated managers are 4x more likely to leave, accounting for $323.5 billion in turnover costs alone. Meanwhile, 58% of managers want to abandon people management roles altogether, and nearly two-thirds feel pressure to take a harder performance stance while receiving little relief from employee demands. This research reveals not just the scale of the problem, but also the specific behaviors that distinguish exceptional managers and the personalized development approaches that can transform leadership effectiveness.

How Much Does Poor Management Cost Organizations?

When we quantify the impact of poor management, the numbers are staggering. Using conservative estimates based on median U.S. salaries and typical replacement costs, total turnover costs in the U.S. reach $898.6 billion annually. Of that, $323.5 billion can be attributed directly to poor management. Even a modest 5-point improvement in manager effectiveness could save the U.S. economy approximately $32 billion each year.

But turnover tells only part of the story. Sixty-five percent of employees say stress from work made it hard to be productive at least one day in the past week, with 40% experiencing this for three or more days. Using Bureau of Labor Statistics estimates of worker output at $90 per hour, even one hour of lost productivity per week costs the U.S. economy $482.6 billion annually. Workers with "fair" or "poor" managers represent 21% of those with diminished productivity, amounting to $101.3 billion in lost output. These patterns extend globally — in the UK alone, poor management accounts for £74.5 billion in employee turnover costs.

What's Really Happening With Managers Today?

Despite these costs, organizations continue to struggle with manager development. While 55% of employees say their current manager is their best boss ever — a modest improvement from last year's 51% — a significant perception gap remains. 61 percent of managers give themselves top marks, but just 51% of employees rate their managers that highly.

This disconnect becomes more concerning when we examine evolving management styles. Four in 10 employees say their manager has adopted a tougher leadership style over the past year, a trend that holds steady regardless of manager quality. The difference lies in implementation: employees with excellent managers are 2.4x as likely to strongly disagree that their manager "rules with an iron fist" and nearly 4x as likely to say new demands are grounded in real support rather than performative pressure.

Which Behaviors Separate Great Managers From Poor Ones?

Through analysis of 17 leadership behaviors, our research identified five that distinguish exceptional managers:

• Inspiring Others creates a sense of purpose and drive that encourages teams to strive for excellence. 
• Developing Others means investing in career growth and creating environments where employees continuously move forward. 
• Communication of a Clear Vision aligns team efforts with organizational goals while providing direction and purpose. 
• Valuing People demonstrates genuine care for individual team members, from recognition to well-being to psychological safety. 
• Driving Innovation challenges team members to develop new ideas that improve business results.

Interestingly, effective change management and planning (both key differentiators in 2024) have dropped in ranking. This signals a shift in the skills needed as AI adoption accelerates and employees need reassurance about their continued importance. 

How Are People Management Styles Shifting?

Our research reveals that management styles are hardening across all leadership levels. Even excellent managers are becoming more demanding, with increased tracking of time and higher performance expectations. But there's a critical difference in reception based on trust and relationship quality.

The consequences of authoritarian management without trust are severe. Three out of four employees now being ruled with an "iron fist" are actively job hunting, with nearly half taking concrete steps toward leaving in just the past month. This shift particularly impacts employees accustomed to excellent management: they are 1.7x as likely to job hunt if their previously supportive manager turns authoritarian. Even high engagement doesn't buffer these effects, reinforcing that accountability doesn't require aggression.

What Is the "Manager Squeeze" and Why Does It Matter?

Since Perceptyx first reported on the "Manager Squeeze" — the increasing pressure managers face from both senior leaders above and direct reports below — relief has been elusive. Nearly half of managers say their jobs are more challenging than last year, and about 6 in 10 would give up managing people if they could. Only about 1 in 3 managers now say their role is primarily people management, down from 4 in 10 last year.

Nearly two-thirds (64%) of managers report increased pressure to take harder performance stances while facing greater demands for empathy, flexibility, and support from their teams. Just 1 in 6 managers cite reduced demands from employees. This creates an impossible situation where top-down pressure meets bottom-up demand, resulting in managers being far more likely than other employees to be actively job-seeking and 2x as likely to quit without another position lined up.

How Does Personalized Development Help Organizations Build Better Managers?

The solution requires abandoning generic, one-size-fits-all training for development personalized to each manager's unique needs. More than three in four managers participated in employee experience or 360 feedback in the past year, providing important effectiveness data. Yet nearly half say their development is identical for everyone in their role, meaning managers with vastly different skill levels receive the same generic training.

Hope exists: 75% of HR leaders plan to increase learning personalization over the next 12 months. Mature organizations already lead the way, being 1.8x as likely to use employee experience and 360 feedback data to customize manager learning paths. These organizations understand that targeted development based on actual performance data drives superior results compared to generic training modules.

What Do Today's Managers Need to Succeed?

Organizations that are breaking the cycle of poor management focus on three critical areas. First, strong leadership from the top ensures managers receive the same empathy and support they're expected to provide. Great management cascades downward when senior leaders model desired behaviors. Second, clarity about expectations prevents managers from adopting counterproductive behaviors based on misguided assumptions. Clear definitions of acceptable and unacceptable leadership behaviors are essential. Third, data-driven personalized development meets managers where they are, addressing specific strengths and opportunities while supporting both skill-building and well-being.

Your managers want to succeed. They didn't aspire to drive away talent, but desire alone isn't enough without proper tools, support, and clarity. Every day of delay in delivering all of that to them costs money in turnover, lost productivity, and diminished innovation. But the costs compound: unsupported managers don't just drive talent away — they often become part of the exodus themselves, frustrated by their inability to lead effectively without the resources they need. This dual turnover costs the engagement and potential of employees who could be thriving under better leadership, while simultaneously losing the managers who could have developed into strong leaders with proper support.

Ready to transform your approach to manager development? Download The Great Management Meltdown: Why 58% of Leaders Want Out and What It Means for Business from the Center for Workforce Transformation for detailed insights into the behaviors that matter most, strategies for personalized development, and a roadmap to building leaders who inspire rather than intimidate. To see how Perceptyx can help you leverage employee listening data to create targeted manager development programs, schedule a demo with a member of our team.