Management failure isn’t just a leadership issue; it’s a systemic problem undermining organisational productivity, employee engagement, and bottom-line results. Research highlights a glaring disconnect: while good managers can nearly double team productivity compared to top individual contributors, most organisations fail to prioritise management training or accurately identify future leaders. In short, the way businesses promote and support managers is broken—and it’s costing billions annually.
The Shocking Truth About Managerial Impact
Let’s start with a stark fact: a great manager significantly impacts team performance. According to a study released by the US National Bureau of Economic Research (NBER), a high-performing manager improves team productivity nearly twice as much as an exceptional individual contributor. Managers achieve this by aligning team members to tasks that suit their skills, keeping employees engaged, and ensuring effort isn’t wasted. They act as the linchpin, orchestrating the complex interplay of talents and responsibilities that drive success.
Despite this profound influence, many organisations treat managerial development as an afterthought. Research from the Australian HR Institute (AHRI) shows just 14% of employers prioritised management training in 2024. Even fewer—only 25%—viewed upskilling managers as an effective way to boost productivity. This oversight reveals a dangerous pattern: businesses continue to set managers up for failure by ignoring two critical issues.
The Two Fatal Flaws of Modern Management
- Underinvestment in Management Training
Many organisations assume managerial skills can be picked up on the job. The reality? Effective management requires specific training in decision-making, delegation, and communication. Expecting someone to succeed without guidance is like asking a chef to fly a plane—it’s not impossible, but it’s certainly high risk and reckless.
Despite overwhelming evidence supporting management training, AHRI’s findings confirm that most organisations underinvest in this area. This trend is particularly perplexing when considering the high cost of managerial failure. Gallup research estimates that bad management costs the global economy $7 trillion annually in lost productivity and disengagement.
Undertrained managers often lack the skills to navigate complex team dynamics, handle conflicts, or inspire innovation. This deficiency not only hampers individual teams but can also ripple through the entire organisation, stalling growth and competitiveness.
- Promoting the Wrong People
Organisations frequently rely on outdated promotion practices, favouring employees who excel in their current roles. This approach assumes that great individual performers will naturally evolve into great managers—a myth the NBER study debunks. Management success hinges on entirely different skill sets, such as economic decision-making, delegation, and people management. Yet, companies often overlook these traits during promotion processes.
The Peter Principle, introduced by Laurence J. Peter, suggests that employees are promoted based on their success in previous roles until they reach a level where they are no longer competent. By promoting based on past performance rather than managerial potential, organisations set employees up to reach their “level of incompetence,” causing frustration and decreased productivity.
The Hidden Costs of Bad Management
The consequences of managerial failure extend far beyond productivity losses. Consider these ripple effects:
• Employee Disengagement: Poor managers are the leading cause of employee disengagement. Gallup reports that 70% of variance in team engagement can be attributed to the quality of management. Disengaged employees are less productive, more likely to leave, and can negatively influence their colleagues as emotions are contagious.
• High Turnover Rates: Misaligned managers drive employees to quit. The adage “people don’t leave jobs; they leave managers” holds true. The cost of replacing a single employee ranges from 50% to 200% of their annual salary, depending on the role. This includes recruitment costs, training, and the loss of institutional knowledge.
• Burnout and Mental Health Issues: Ineffective managers contribute to toxic work environments, increasing burnout rates. A study by Deloitte found that 77% of professionals have experienced burnout in their current roles. Chronic stress leads to absenteeism, decreased performance, and higher healthcare costs.
• Innovation Stagnation: Teams led by unskilled managers are less likely to collaborate effectively or take calculated risks, stifling innovation. In today’s rapidly changing business landscape, the inability to innovate can render organisations obsolete.
• Damage to Employer Brand: Word spreads about poor management practices. Negative reviews on platforms like Glassdoor can deter top talent from joining the organisation, making it harder to attract skilled employees.
Why Organisations Ignore the Problem
If the evidence is so clear, why do organisations continue setting managers up to fail? Several factors contribute to this inertia:
- Short-Term Thinking: Training and development require upfront investment. Companies often prioritise immediate profits over long-term growth, neglecting initiatives like management training. The focus on quarterly results can overshadow the benefits of developing effective leaders.
- Legacy Systems: Many organisations rely on outdated promotion practices, valuing tenure or technical expertise over leadership potential. Changing these systems requires a cultural shift and can face resistance from those comfortable with the status quo.
- Misplaced Confidence: Senior leaders may overestimate their ability to identify managerial talent without formal assessment tools, leading to subjective and often flawed decisions. This overconfidence can prevent the adoption of more effective, evidence-based selection methods.
- Resource Constraints: Smaller organisations might lack the resources to invest in comprehensive management development programs. However, the cost of not investing often exceeds the investment in the long run due to the hidden costs of poor management.
How to Fix the Managerial Crisis
Addressing the systemic failure of management requires bold action and a commitment to change. Here’s what organisations can do to build stronger, more effective managers:
- Invest in Leadership Development
Organisations must treat management training as an essential investment rather than a discretionary expense. Effective programs cover:
o Decision-Making: Training managers to make informed choices that align with organisational goals.
o Delegation and Task Alignment: Teaching how to assign tasks based on individual strengths and team needs.
o Emotional Intelligence and Communication: Enhancing skills in empathy, active listening, and clear communication.
o Employee Engagement Strategies: Learning how to motivate and inspire teams for peak mental performance.
Leadership development should be ongoing, with opportunities for managers to refine their skills through coaching, mentoring, and workshops. Programs should be tailored to address the specific challenges managers face in their roles.
- Revamp Promotion Criteria
Promotion decisions based on prioritising leadership traits over technical skills. Implementing data-driven tools and assessments can help identify candidates with true managerial potential. Techniques include:
o Psychometric Assessments – PRISM Brain Mapping: Evaluating personality traits, cognitive abilities, and emotional intelligence.
o Behavioural Interviews: Focusing on past behaviour as a predictor of future performance.
o Simulation Exercises: Using real-life scenarios to assess decision-making and leadership abilities.
By making promotion processes more objective, organisations can ensure that the right people are placed in management roles.
- Provide Continuous Support
Even the best managers need support. Establishing a culture of continuous learning helps managers stay adaptable and effective. Support mechanisms include:
o Regular Feedback: Implementing 360-degree feedback systems to provide insights from peers, subordinates, and superiors.
o Mentorship Programs: Pairing less experienced managers with seasoned leaders for guidance and advice.
o Peer Networks: Creating forums for managers to share challenges and solutions - Adopt Neuroscience-Based Approaches
Neuroscience offers valuable insights into human behaviour and motivation. By understanding how the brain processes stress, rewards, and collaboration, managers can create environments that enhance productivity and well-being.
o THE F.O.O.D Framework: Tools like Vannessa McCamley’s The F.O.O.D Framework (Fuel, Organise, Overcome, Drive) provide actionable strategies to improve brain health, resilience, and performance.
o Mindfulness and Stress Reduction: Incorporating practices that reduce stress can improve decision-making and team dynamics. - Measure and Reward Management Success
Organisations to track metrics like team engagement, turnover rates, productivity, and innovation output to evaluate managerial performance. Recognising and rewarding great managers reinforces the value of effective leadership. Incentives can include bonuses, public recognition, and opportunities for career advancement. - Cultivate a Leadership Pipeline
Developing future leaders does not start when an employee is promoted to a management role. By identifying and nurturing talent early, organisations can build a robust pipeline of potential managers who are prepared for leadership challenges.
o Talent Spotting: Regularly assess employees for leadership potential, not just technical ability.
o Development Opportunities: Offer stretch assignments, cross-functional projects, and leadership shadowing experiences.
o Succession Planning: Proactively plan for future leadership needs to ensure continuity.
The Future of Management
In an era of rapid change and increasing complexity, organisations cannot afford to neglect management training. Leaders must view managers as the linchpins of their business—critical drivers of productivity, innovation, and employee well-being.
Companies that prioritise effective management will not only see improvements in performance and employee satisfaction but will also be better positioned to adapt to future challenges and innovations. As the workforce evolves, so too must the strategies for leading it.
The future of management lies in:
• Embracing Diversity and Inclusion: Effective managers will need to lead diverse teams, fostering an inclusive environment.
• Adapting to Remote/Hybrid Work: Managers must develop skills to lead distributed teams effectively, maintaining engagement and productivity regardless of remote/hybrid workplaces.
• Sustainability and Social Responsibility: Managers will play a crucial role in aligning team objectives with broader organisational commitments to sustainability and ethical practices.
Call to Action
Are you ready to transform the way your organisation develops and supports managers? Start by evaluating your current leadership practices and identifying areas for improvement. Invest in your managers today to secure a more productive, innovative, and resilient organisation. Take the first step towards better management by booking a meeting today to explore neuroscience-backed strategies tailored to your organisation’s unique requirements.