UK businesses miss out on £84bn a year due to poor people management

SPONSORED CONTENT: Companies that focus on better people management can boost their bottom line significantly, says a new study.

Last Updated: 26 Oct 2015

Poor people management is hitting the efficiency of UK businesses by an average of 8%, costing UK PLC £84bn* a year, according to a study by Investors in People and economic research consultancy TBR.

The study found a performance premium of up to 11% for companies focusing on better people management. Small firms (less than 50 employees) and large firms (greater than 250) could see £33bn and £32bn respectively, by closing this people management gap. The study, based on research among 8,750 businesses and ONS data, is the first of its kind to calculate the monetary benefits of implementing more effective people management approaches.

"It has previously been difficult to determine the true impact of people management on the bottom line. This study provides the evidence that focusing on excellence in people management can lead to significant performance gains across sectors and for the economy as a whole,’ says Paul Devoy, head of Investors in People.

The Impact of Investing in People report was commissioned to identify the key management factors driving workplace performance. The study found that six factors were significant in explaining direct improvements in performance and efficiency.  

It found that employers that adopt more sustainable practices, respond flexibly to change, while planning for the future, will drive the most improvement. The table below shows the people management factors that will gain the greatest financial reward.

Table 1 Performance gain by implementing top people management factors. Note that the contribution to the UK economy is cumulative, not additive, so implementing two or more won’t equal the sum total contribution of those two factors:

The study reveals that the health and social care industry has the most potential to improve its performance by changing how it manages its staff. Performance would be increased by 8.9%, contributing £2.4 billion to the industry. The sector that would benefit the most financially is the professional and financial services industry, with an 8.2% performance boost generating an additional £29.9bn output.

Table 2 Financial benefits to different industry sectors in the UK if good people management was implemented:

The study also reveals which people management approaches offer the greatest financial return by industry. For example, developing strong and inspiring leaders generates the greatest efficiency gap in Construction. Whereas recognising and rewarding performance has the greatest impact on efficiency in manufacturing (115%), accommodation, food and leisure (109%), and wholesale and retail (109%).

"The effect of poor people management is hitting the UK economy hard. Better people management within firms should be recognised as a key mechanism by which the UK economy can drive gross value," says Paul Devoy.

"To make it easier to identify and compare approaches of the best performing firms, Investors in People has launched the first ever real-time People Management Dashboard. Anyone can now access a unique set of common metrics, showing the management performance of workplaces across the UK. It’s a simple way to see how well employers are leading and supporting their people.

"This knowledge comes from working with thousands of top businesses across the country, from Allianz Insurance, McDonald’s restaurants, to Brompton Bikes. Hundreds of academics, business leaders, and industry experts were involved in the creation of the sixth generation Investors in People standard, which was launched on 15 September."

*All monetary values are measured in Gross Value Added (GVA), a measure of the contribution to the economy of each individual producer

**‘Other industries’ includes agriculture, energy & mining and transport & storage. This sector has been created to ensure a sufficient sample size.

View the ‘People Management Dashboard’ here >>> 

For more information about Investors in People, please visit here >>>

About Investors in People: Investors in People is the Standard for people management. Since 1991 Investors in People has defined what it takes to lead, support and manage people well for sustainable results.  With a community of 14,000 organisations across 75 countries, successful accreditation is the sign of a great employer, an outperforming place to work and a clear commitment to sustained success. 

Find this article useful?

Get more great articles like this in your inbox every lunchtime

A simple cure for impostor syndrome

Opinion: It's time to stop hero-worshipping and start figuring out what greatness looks like to...

I was hired to fix Uber’s toxic culture - and I did. Here’s ...

Harvard’s Frances Frei reveals how you know when your values have gone rotten, and what...

Social responsibility may no longer be a choice

Editorial: Having securitised businesses’ loans and paid their wage bills, it’s not inconceivable the government...

What went wrong at Wirecard

And how to stop it happening to you.

Leadership lessons from Jürgen Klopp

The Liverpool manager exemplifies ‘the long win’, based not on results but on clarity of...

How to get a grip on stress

Once a zebra escapes the lion's jaws, it goes back to grazing peacefully. There's a...