Leaders are the engines that drive organisational success, yet the pressures of today’s fast-paced business world are leaving many leaders burnt out. Burnout doesn’t just affect individuals—it reverberates across the organisation, causing significant productivity, profitability, and employee engagement losses. Worse still, many businesses rely on outdated leadership assessments that fail to identify the right leaders, further perpetuating the cycle of burnout and poor leadership.
Let’s dive deeper into the true costs of bad leadership, how leadership burnout can cripple a company, and why a fresh approach to leadership assessment is the key to fixing it.
The High Costs of Bad Leadership
Studies have shown that bad managers can cost organisations millions. Research suggests ineffective leadership costs businesses 7% to 15% of total revenue. Additionally, poor management results in low employee engagement, high turnover, and a drain on productivity. A Gallup study showed that 75% of voluntary turnover is due to bad managers. When you consider the cost of replacing an employee can range from 30% to 50% of their salary, it’s clear that poor leadership has a steep price tag.
Beyond the financial toll, bad management stifles innovation, drags down team morale, and perpetuates a toxic workplace culture.
But the true cost of bad leadership doesn’t stop there. It also impacts how your business performs in the long term. iCIMS Insights found that leadership quality directly influences an organisation’s ability to recruit, retain, and engage top talent. With the wrong leaders in place, even the most capable teams will struggle, and the risk of disengagement becomes dangerously high.
Leadership Burnout: A Direct Consequence of the Working Environment
Leadership burnout is a growing challenge in modern organisations, often mistakenly attributed to personal shortcomings or lack of resilience. However, burnout is not just an individual issue—it is a direct consequence of the working environment, specifically the Ways of Working, Organisational Climate, and Internal Relationships. Misalignment in these areas can cause leaders to become overwhelmed, disengaged, and ineffective. In contrast, when leaders are hired into environments where they are culturally and values-aligned, the risk of burnout drops and business performance improves significantly.
1. Ways of Working
The structure, pace, and expectations that define an organisation’s Ways of Working, are critical in either supporting or straining leaders. Leaders who are aligned with the organisation’s approach to work are more likely to maintain their energy and focus. However, when there is a mismatch between a leader’s preferred working style and the operational norms of the company, stress and frustration build.
Research shows that 60% of leaders feel “used up” at the end of the workday, according to a study by the Center for Creative Leadership (CCL). This exhaustion is often due to misaligned or unsustainable working conditions that don’t match a leader’s strengths or preferred style.
Leaders who thrive in fast-paced, innovative environments may struggle in rigid, bureaucratic systems, and vice versa. When there is harmony between a leader’s approach and the organisation’s ways of working—whether through flexibility, clear structures, or autonomy—the likelihood of burnout is significantly reduced, and leaders can operate at their best.
2. Organisational Climate
The Organisational Climate—or the general atmosphere within the company—significantly affects a leader’s well-being. A high-pressure climate characterised by unrealistic expectations, a lack of support, and constant urgency fosters burnout. In fact, Deloitte’s 2022 Global Human Capital Trends found that 77% of respondents said they had experienced burnout in their current job, with a lack of support and negative workplace cultures cited as key drivers.
However, when leaders operate in a climate that aligns with their values, they are more resilient. A Gallup study revealed that 70% of the variance in employee engagement can be attributed to management. Leaders who are culturally and values-aligned with their organisation’s climate are better equipped to inspire engagement, innovation, and collaboration. This cultural fit helps leaders feel more grounded and purpose-driven, acting as a protective barrier against burnout.
3. Internal Relationships
The strength of Internal Relationships—between leaders, their teams, and their peers—also plays a decisive role in leadership burnout. According to a report by Harvard Business Review, 50% of executives report feeling lonely in their roles, and this loneliness increases their risk of burnout. When relationships within the organisation are strained, unsupportive, or conflict-prone, leaders can become isolated, leading to emotional exhaustion. However, when leaders are hired into environments where internal relationships are based on trust, respect, and shared values, they are more likely to foster supportive connections with their teams. These strong internal relationships enhance collaboration and reduce the emotional burden that can otherwise contribute to burnout. Leaders who feel supported and understood by their peers are less likely to experience burnout, as they have the social and emotional resources necessary to navigate challenges effectively.
The Impact of Hiring Leaders Aligned to Culture and Values
Leadership burnout has far-reaching consequences for an organisation, resulting in poor decisions, disengaged teams, and the loss of top talent, all of which hurt profitability. In contrast, great leaders—those who are aligned with the company’s values, mission, and culture—are essential to long-term success, driving team performance, engagement, and growth.
Research highlights the profound financial impact of exceptional leadership. Gallup found that companies with strong leaders achieve 147% higher earnings per share and 21% higher profitability due to increased employee engagement. McKinsey & Company reports that aligned leaders drive 140% greater revenue outcomes by fostering innovation and collaboration.
Hiring leaders who are culturally and values-aligned with the organisation is one of the most effective ways to prevent burnout. McKinsey research shows that values-aligned leaders are 32% more engaged and 29% more likely to stay, reducing turnover and improving team morale. Furthermore, Deloitte found that 87% of employees who align with their company’s purpose report high job satisfaction, increasing resilience and lowering the risk of leadership burnout.
In sum, engaged and values-driven leaders are critical to sustaining organisational performance, ensuring long-term profitability, and creating a positive, thriving workplace culture.
Outdated Leadership Assessments Are Missing the Mark
Despite the high stakes, many organisations still rely on traditional leadership assessments that are outdated and ineffective. Companies can spend upwards of £20,000 on leadership evaluations, only to receive the same type of leaders who don’t align with the organisation’s unique culture or challenges. These traditional assessments often focus on surface-level traits rather than environment fit and leadership impact and typically miss the mark. The result? Companies continue to hire leaders who are great on paper but drive the wrong activities, decrease engagement, and lower profitability. According to iCIMS Insights, poor leadership is the primary reason why 1 in 3 employees leave their job within the first six months. When companies select leaders who don’t fit their environment, their teams are likely to become disengaged, leading to higher turnover and lower productivity.
A New Approach: MyPeople’s Leadership Impact Analysis (LIA)
At MyPeople, we believe the key to organisational success lies in identifying the right leaders – those who fit the company’s culture and can drive positive outcomes. The cost of poor leadership is far too high to rely on assessments that merely recycle the same types of leaders without considering the unique dynamics of each organisation. That’s why we developed our Leadership Impact Analysis (LIA), which provides a fresh, data-driven approach to leadership evaluation. Unlike traditional assessments, LIA focuses on cultural alignment, leadership impact, and long-term fit. What’s more, we offer this cutting-edge assessment at 1/100th of the cost of traditional methods—without sacrificing quality.
Our assessment methodology helps companies select leaders who inspire teams, drive performance, and boost employee engagement. This approach ensures your organisation avoids the pitfalls of leadership burnout and bad management, leading to higher profitability and lower turnover.
The MyPeople Solution: Transforming Leadership Assessment
If your organisation is still relying on outdated leadership assessments, it’s time to rethink your approach. The cost of bad leadership, both in terms of financial impact and employee engagement, is simply too high. At MyPeople, our Leadership Impact Assessment (LIA) offers a fresh, innovative approach that ensures you find the right leaders for your business and that they are aligned with your mission, values, and long-term goals. Don’t let leadership burnout cost your business any longer—invest in leaders who will inspire and drive positive change with MyPeople’s LIA. It’s time to elevate your leadership game.
References:
- Forbes Article: Leadership And What It’s Costing Your Business
- Kevin Eikenberry: The True Cost of Bad Managers
- iCIMS Insights: Leadership and Employee Engagement
- McKinsey & Company: Business Growth – The Leaders Blueprint
- McKinsey & Company: How Executives can help sustain value creation for the long term
- Deloitte: Global 2024 Gen Z and Millennial Survey