Is it worth doing management training to help managers become effective managers?
Well of course I’m going to say yes but don’t let that persuade you, look at the facts and then see what you think. The reason why I’ve given up everything else to focus on improving manager skills is because I think manager skills are the single most important thing to get right in every firm. In my opinion manager skills are the difference between workplace satisfaction and employee discontent. The difference between business successes and business failures.
Before I Get into the Logical Stuff I’d Like to Ask a "Meaning of Life" Sort of Question...
Where do you want to work? Until the robots take over, for better or worse, we’re still spending half of our waking day at work. It’s a great thought that if you enjoy your work you will never have to “work” a day in your life. But the reality is most of us don’t really like work. I expect that just like me you’d like:
- To work in a place where you can grow and use your potential;
- The flexibility to do the job the way you want to;
- To do work that has meaning, to be valued and to have your contribution acknowledged;
- A good relationship with your boss and;
- For your staff to do their jobs with the minimum of conflict and management pains;
... and the funny thing is that this is what your employees want too. I know this because I have the research that says so. What’s the relevance of this? These things don’t just happen on their own. More than 70% of the workforce is unengaged which leads to unhappiness and unprofitable firms.
The Manager Foundation is exactly about making happier more engaged staff which leads directly to higher profitability. This is not by spending money or making managers work harder. This is by engaging staff by tapping into common, basic human desires using the right techniques and carefully selected words. This helps managers to create the sort of environment that gives people job satisfaction and by that creates an environment that people like working in. It's about using employees internal motivators to make them want to work harder and to get job satisfaction from a job well done.
That's why I've made the www.boss.camp program. Many people study MBA’s to advance their careers. And in MBA’s you learn about things like marketing, finance, operations and commercial law etc which are really important in business. But what you don’t learn is practical people management techniques like what to do and what to say to your employees. To progress in your career the skill that will do more for you than anything else is the ability to select, motivate and retain employees. This is the mission of Boss Camp - to show you what they didn’t teach you in school about managing employees.
Job satisfaction and motivated employees.
I’d like to think that this alone is reason enough for manager training but if you’re like me and like a bit of logical justification then think of these:
- The multiplier effect: Training an individual staff member only improves their productivity. Training a single manager how to engage employees and motivate staff improves the productivity of the whole team.
- Employees are your largest untapped asset: Even in some of the best firms more than half of the employees are not fully engaged. Small improvements in employee engagement result in large increases in profitability. In one study1 across 90 000 employees, the companies in the top quartile of employee engagement grew profits by 32% whilst the companies in the bottom quartile of employee engagement had a decline of 19%
- Manager training increases retention: Staff turnover is extremely expensive. An average staff turnover of 20% costs you around 10% of your total payroll in direct costs alone (recruitment costs, training costs, learning curve)
- It's your best option: Other employee productivity alternatives (for example automation, incentive programs, team building exercises) are costly, complex, riskier, less enduring and/ or take longer to implement.
A thought experiment about the difference that employee motivation makes:
Before I get into the numbers a small thought experiment on employee motivation. Think of a time when you were fully engaged by a task – you believed in it’s importance and you wanted to do it. How much better did you do this task than something that you only did because you had to do it. It’s not that one task was any better than the other, it is more about the state-of-mind that you approached the task with. The difference comes from the perceived importance of the task and the perceived impact on other people. These are just two examples of employee motivators. In the work place this is the difference that manager skills can make to employee performance. The manager who as not been trained in employee motivation and effective management techniques relies on formal role power and giving staff orders. The effective manager is good at getting their staff to want to do what is good for the organisation. The effective manager doesn't rely on role power or employee incentives to motivate employees. The effective manager uses intrinsic employee motivators to get employees to want to do a better job. This increases employee performance at the same time as increasing job satisfaction. This isn’t an easy thing to do and that’s why a little help (in the form of training of manager skills) goes a long way.
Ok - Now Show Me Some Numbers for Management Skills training:
I hope that you’re sufficiently persuaded about the logical reasons to do management skills training. But I understand that a lot of people just want the hard numbers.
As you can imagine we are dealing with soft management skills and complicated factors with different variables. This means that putting exact numbers for the effect of people management skills is a bit of an inexact science. To compensate for that I will use figures towards the bottom end of what the research shows.
Improving Manager Skills Will:
Improvements expressed as a percentage of payroll cost:
- Increase staff performance through better employee engagement, more effective performance management feedback, improving the skills of staff (through staff training) and better delegation. Range 10% - 40%. Use 5%
- Dealing with under-performing employees faster (fix or fire). An average team has around 20% of employee performance that is below an acceptable level. A realistic target is to reduce below standard employee performance to 10%. Use 5%
- Good Hiring practices: Hiring good staff by avoiding bad hires. Getting the right staff for the job is a key manager skill. The bad hire rate (employees who do not meet hiring expectations) is between 25% and 50% - for this we will take 25%. On average firms hire around 20% of the workforce every year. Direct costs of a bad hire include recruitment fees, wasted payroll, training etc. These could easily amount to a years worth of payroll per bad hire. If you can halve the number of bad hires the benefit of your total payroll is: 50% (improvement) x 25% (bad hires) x 20% (staff turnover rate) x 100% (annual cost per bad hire) = 2.5% of total payroll
- Good hiring practices: Hiring better staff by improving the quality of good hires. The range on this is incredibly large. In some roles the difference between bottom quartile and top quartile is an order of magnitude. You could hire an absolute superstar that becomes the next CEO. For this we will take a typical scenario: moving from average to above average (but not even the top quartile). By the time you turn your whole team, this is approx. a 25% difference in employee performance. But for these purposes we will just use the first year effect. 5%
- Reducing staff turnover by one quarter (Reduce staff turnover rate from 20% to 15%). Ignoring the cost of lost organisational knowledge and lost customer relationships. The payroll saving in direct costs alone from better retention (recruitment costs, training, learning curve) is 2.5%
- Sundry efficiency improvements (Better time management, running Meetings that Matter etc.). In fact inefficient meetings may be your single biggest time waster - see this article for why: 5%
In total, conservative estimates for partial improvements to manager skills is around 25% of your total annual payroll bill. Some of these effects cancel each other out and some of them have a multiplier effect. These effects are for Year 1. Year 2 will be larger. The 25% benefit is for putting 6 of the 7 “Foundational Techniques” into practice. It is possible to use only some of the techniques for some of the benefit.
The Accountant’s Favorite Question is: “Yes, But How Much Will This Cost?”
Not all situations are created equal so some accountant-friendly conservative numbers will be used. Assumptions: a team of 5 staff and the manager makes 30% more than their direct reports.
The investment in time and money (including two to four weeks of the managers time) is between 1% and 2.5% of your total payroll. The benefits are 25% of total payroll. This means your Return on Investment (R.O.I.) starts at the 1000% range and your 5-year IRR (with the cost all in Year 0 and benefits only starting Year 1) is also in the 1000% range. I’ve had years of doing financial modelling for many multi-million dollar investments and acquisitions for some of the largest companies in the world. So I know that you’re probably thinking the same thing as me – these numbers look too good to be true.
My personal view on the importance of Manager Skills:
I’ll tell you something personal here: Yes the mission of Manager Foundation is to make work a better place like I described in the beginning. But this isn’t just some fluffy nice to have. I believe that improving manager skills and increasing employee engagement is the best business investment that anyone can make. In every company I’ve worked for and client I’ve had, which includes professional accounting firms, famous brands, working with successful operators and great leaders. The single thing that all these companies could do better was to improve their manager skills. This is a major the reason why out of all the other things I could be doing, I have chosen to do the Manager Foundation.
Of course your scenario will be different (team sizes, turnover ratios etc.). So my numbers won’t exactly match your business. And even though I feel I’ve used the lower range of numbers you might think some of the increases are too high. And you know more about your business than I do. But what I think this demonstrates is that even just a small increase is a very worthwhile return. You could get one tenth of the benefit that I have seen other firms get and it would still be a worthwhile endeavour.
What difference has manager training made to other firms?
One last data point: Using a real world study that tested the difference that manager skills makes to the output of their team (2). This study found that the top bosses compared to the bottom bosses added the equivalent of an additional worker to the team. This is comparable to the benefits above.
So in conclusion is it worth doing management training? I believe the real question is can you afford not to? I’m not an unbiased source because of what I do but I can tell you that I chose what I do exactly because I saw the potential. In summary:
- Better manager skills make the workplace the sort of place that you and I want to work at. As staff and as the boss. Manager skills lead to job satisfaction and workplace happiness,
- There are several reasons (multiplier effect, raw potential etc.) why manager training is a smart place to put your focus,
- When you look at the financial returns. I don’t think you will find an alternative business initiative that can come anywhere close to manager training and
- Economists have studied the impact that bosses make and have shown that other firms have seen significant increases from improved manager skills
What are your feelings? Is this an argument that makes sense to you? Do you feel I’ve got an assumption or calculation wildly wrong? Please let me know one way or the other your feedback is appreciated. I also need your help to spread this message. If you know companies with low employee productivity or friends recently promoted to a management role, help me to help them by sharing this with your network.
Further Assistance that Manager Foundation offers:
- Read more management articles on the blog
- Sign up to the newsletter for a free bonus, management secrets and tips
- Download a free resource from the library
- Support us to create this content by buying a module. Note this is the best method to find out about our management system which will save you management time and improve employee performance
1. Towers Perrin study of 90,000 employees in 18 countries, 2007-2008
What are your thoughts about manager training? Help the rest of us out by sharing in the comments below.
Don’t you think it’s funny how you need a license to drive, you need to study for years to be a doctor, a lawyer, accountant engineer etc. But you can be the boss without any special training. WWW.BOSS.CAMP shows you what they didn’t teach you in school about managing and motivating staff. And that’s why I need your help to reach all those managers who didn’t get any training. Together we can make work a great place by sharing boss camp with managers everywhere. The program includes topics such as:
- How to motivate employees,
- What are bad employee motivators,
- What you must do as a manager but isn't on your job description,
- How leaders get power.