People Management Magazine - CIPD

Poor quality people management ‘costs employers £84 billion a year’

Hayley Kirton 10 Sep 2015 Comments0 comments

Financial and healthcare sectors have most to gain from improving standards

UK businesses are missing out on £84bn a year because of poor quality people management, a study
by Investors in People (IIP) has found.

The report, People Management Benchmark: Impact on Investing in People, found that ‘adopting
sustainable good quality practices’ would have the biggest positive impact for an organisation’s
bottom line. For example, ensuring managers always have the opportunity to develop and update
their own people management skills and giving them access to the latest information and
techniques.

Following this, the next set of management improvements that can boost a company’s value were
‘recognising and rewarding performance adequately’ and ‘having a strong set of values’.

The report also found that particular HR initiatives could benefit particular industries. For example,
‘developing strong and inspiring leaders’ would benefit the construction industry the most, it said,
while ‘recognising and rewarding performance’ would bring the greatest results for the
manufacturing industry.

However, one practice examined by the IIP, ‘structuring work’, had a positive impact in medium and
large firms but actually had a negative impact on small firms. The results would suggest that smaller
firms benefit from a more fluid way of working rather than the formalised ‘structuring’ where tasks
or team work is aligned with business goals.

In monetary terms, the professional and financial services sector has the most to gain from boosting
the quality of its people management as the research estimated that implementing best practice
would generate an efficiency gain of £29.9bn.

Proportionally, the health and social care industry had the most potential to improve its
performance, with a boost of 8.9 per cent to its efficiency. Such development would also help to
reduce workforce disengagement, an issue that was highlighted earlier this year in a separate
survey. It showed that seven out of 10 NHS employees felt undervalued in their job and more than
half were ready to quit.
Paul Devoy, head of IIP, said: “It’s obvious that a skilled, confident workforce is essential to a
productive enterprise. However, it is difficult to determine the true impact on the bottom line, so
sometimes business leaders can forget the importance of good people management. This study
provides the evidence that focusing on excellence in people management can lead to significant
performance gains for the sector and economy as a whole.”

Jost Wahlen, head of learning and development at Allianz Insurance and an advocate of good quality
management, said that developing strong leaders had helped strengthen his business. “We have a
range of leadership programmes at each level of the organisation. Employees need to be well
prepared when they are asked to take responsibility for managing other people, so we take it quite
seriously.”

The study, which was co-authored by economic research consultancy TBR, was based on a survey
with 8,750 businesses as well as data from the Office for National Statistics.