What is poor leadership costing you?

We can usually find a number for a new machine.

Purchase price. Installation. Training. Maintenance. We might argue about the assumptions, but we know how to start the conversation.

Ask what poor leadership costs, and the answer gets a lot less specific.

We know people are leaving. We know supervisors spend their days putting out fires. We know the same mistakes keep coming back. But because those costs don't arrive on one invoice, it's easy to treat leadership development as something we'll get around to when there's more money.

I think we need to do the math before we decide we can't afford it.

Start with what research actually tells us

In its 2015 research, Gallup estimated that managers account for at least 70% of the variance in employee engagement scores across business units. That's a finding about differences in engagement scores. It doesn't mean a manager controls 70% of everything an employee does. [1]

It does give us a reason to pay attention to how people are being managed.

Gallup's 2019 turnover analysis estimated that replacing an employee can cost from one-half to two times their annual salary. That is a broad estimate, not a quote for your next vacancy. The actual cost depends on the role and the business. [2]

More recent research from Gallup and Workhuman followed nearly 3,500 employees from 2022 to 2024. Well-recognized employees were 45% less likely to have left after two years. That's an association in the research, not a promise that giving more praise will reduce your turnover by 45%. [3]

These findings are useful context. Your own operating costs are where the business case needs to get specific.

Count what happens after someone leaves

For illustration, take an employee earning $50,000 a year. Applying Gallup's broad replacement range would put the estimate between $25,000 and $100,000. That calculation isn't proof that your business spends either amount.

Build your own estimate. What do recruiting and onboarding cost? How much overtime covers the vacancy? How much time does an experienced employee spend training the replacement, and what work aren't they doing during that time?

Does the learning period affect output, rework, or delivery? Count only costs you can reasonably support, and avoid counting the same loss twice.

Also ask why the person left. Better management won't prevent every departure. Pay, working conditions, career opportunities, and personal circumstances matter. You need to understand the problem before buying a solution.

Look at the cost of the daily confusion

Turnover is only one place to look.

Here's a separate example using made-up numbers. Say eight employees each lose 15 minutes a day sorting out unclear priorities, waiting for an answer, or redoing work after expectations change.

That's two staff hours per day. Across 20 working days, it's 40 hours. At an assumed loaded labor cost of $30 an hour, that's $1,200 in staff time for the month.

Those aren't measured savings, and recovering the time doesn't automatically put $1,200 in the bank. But it tells you where to investigate. Watch the work. Find out whether the time is actually being lost, why it's happening, and whether clearer management would help.

Measure whether the training changes the work

A completed class isn't the return on investment.

Pick a problem before the training starts. Maybe assignments arrive without clear priorities, supervisors delay feedback, or a handoff keeps breaking down. Establish what is happening now and what improvement would look like.

Then teach the skill, give people time to use it, and check the result. Are fewer jobs coming back for clarification? Are problems getting raised earlier? Is the supervisor able to delegate work they previously had to redo?

You don't need to promise that leadership training will fix every operating problem. You need a specific problem, a reasonable intervention, and evidence of whether it helped.

Before you decide training costs too much, work out what the current situation is costing you.

Sources

[1] Gallup, Managers Account for 70% of Variance in Employee Engagement, April 21, 2015

[2] Gallup, This Fixable Problem Costs U.S. Businesses $1 Trillion, March 13, 2019

[3] Gallup and Workhuman, Employee Retention Depends on Getting Recognition Right, 2024