HR-related costs

Reducing HR-related costs in a large company

Background

A large company was facing increased HR-related costs associated with involuntary managerial turnover, stress-related claims and poor productivity levels. A suspected cause of these issues was poor manager behaviour towards employees. It was difficult for the organisation to quantify and put forward recommendations to management about how to respond to the rising problem.

The Genos Solution

Using the Genos 180° Emotionally Intelligent Leadership Feedback Assessment, Genos assessed and tracked the emotional intelligence of almost all leaders in the business to determine:

  1. Whether emotional intelligence predicted leadership effectiveness and levels of employee engagement in the business.
  2. Whether low levels of emotional intelligence were related to involuntary managerial turnover in the business.
  3. Whether improvements in managers’ emotional intelligence would decrease rising human resource costs associated with aforementioned issues.

Using company demographics within the Genos Surveys platform, the organisation was able to look at levels of emotionally intelligent leadership across different locations, functions, and managerial levels and the relationship these levels had with HR-related costs associated with them. All assessed managers received a personal debrief of their results, a self-paced emotional intelligence development guide and learning experiences designed to boost their emotional intelligence.

The Direct Reports of managers rated:

  1. How important it was to them personally, that their manager demonstrated emotionally intelligent leadership behaviours.
  2. How well their manager demonstrated emotionally intelligent leadership behaviours.
  3. How effective the overall leadership of their manager was.
  4. Their level of employee engagement.

Results

There was a direct link between managers’ emotional intelligence and leadership effectiveness (r= .7). Emotional intelligence accounted for about 50% of what it took to be an effective leader. Considering all the different competencies and experiences required to lead effectively, this is significant. Effective leaders drive greater shareholder value, net profit and levels of innovation[1].

A positive correlation between levels of employee engagement and managers’ emotional intelligence was also found (r=.22). At this company, emotionally intelligent leadership contributes to employees’ level of engagement (about 5% thereof), which is not insignificant when you consider all the different factors that influence levels of employee engagement (often outside of their manager’s direct control) such as the remuneration, working conditions, career opportunities and so on. Consider also that a 5% increase in engagement typically returns around $14m to the bottom line of ASX 100 listed entities. This result suggested that improvements in managers’ emotional intelligence at the company may in turn improve their direct reports’ levels of productivity.

 

Assessment results by company demographics also revealed a relationship between low levels of emotional intelligence in managers and elevated human resource related costs. Regions and functions with the highest levels of human resource costs also had the highest percentage of managers with below-average levels of emotional intelligence. Indeed 80% of managers with emotional intelligence in bottom quartile of the population (below the 25th percentile), left the organisation within a 24 month period.

The findings of this assessment project indicated that:

  1. Emotional intelligence was a strong underlying determinant of effective leadership at the company.
  2. A manager’s emotional intelligence has a bearing on levels of employee engagement among their direct reports. The more emotional intelligence a manager demonstrates, the more likely their direct reports are to be engaged.
  3. Because of key findings 1 and 2 above, it was highly likely that emotionally intelligent managers drove productivity and kept HR-related costs low.

It was highly likely that improving the emotional intelligence of existing managers, particularly those that are low and average, will improve entity performance and reduce HR-related costs.

The Outcome

The findings of this internal study helped the organisation:

  1. Quantify that poor levels of emotionally intelligent leadership caused elevated levels of human resource related costs and poor productivity.
  2. Determine that investments in emotional intelligence development for managers would more than pay for itself via reductions in turnover and other human resource related costs.
  3. Target emotional intelligence development for managers where it was most needed in the business.
  4. Add emotional intelligence assessment into recruitment practices to reduce the chance of poor hires.
  5. Include emotional intelligence assessment in talent assessment and management practices within the company.

Participant Feedback 

This study helped us build a strong business case to senior management that investment in emotional intelligence assessment and development for managers would produce a return. While poor leadership was costing us money it was difficult to convince senior execs that soft skills (or a lack thereof) were the answer. The findings of the study also help us gain manager buy-in for emotional intelligence development programs we are now rolling out. Based on the Genos model and measure, emotional intelligence is helping us build a more supportive, mentally healthy and positive work environment free from incivility and discrimination and high on inclusiveness and respect.

[1] DeGroot, T., Kiker, D. S., & Cross, T. C. (2000). A meta-analysis to review organizational outcomes related to charismatic leadership. Canadian Journal of Administrative Sciences, 17(4), 356– 371.