News | June 22, 2004

US Companies Lose $105 Billion To Poor People Performance

Across the seven economies surveyed the figure equates to $153 billion

Chicago, IL and London, England - Though companies across the globe are vocally committed to shareholder value, results from an independent report from SHL show they are falling short in the critical area of people performance. The United States is losing $105 billion a year to poor hiring and management practices. This shortfall is worth 1.05% of total US GDP*.

Worldwide companies talk about people being their biggest asset yet they are not taking enough time to ensure they effectively select and utilize their single most important factor – their employees. Hundreds of billions are wasted as businesses squander the talent and potential of their workforce and fail to match the right people to the right jobs.

Failure to match the right people to the right jobs is widespread. Currently, one out of eight US employees leaves their job before becoming competent. With an average 8 months necessary to attain the required performance level, a mismatch proves costly for the employee as well as the company. Time as well as money is lost.

Yet these figures are only the tip of the iceberg. According to the report, nearly a quarter (23 per cent) of US workers believe their colleagues are incompetent. Globally this figure is 22 per cent. More worrying still, while they may be critical of their co-worker's performance, US employees also admit that 68 per cent of the mistakes they personally make never come to their manager's attention.

The good news is that change is possible, and companies that improve their hiring and management practices can reduce costs, increase productivity and rejuvenate their workforce in doing so. The new report – Getting the edge in the new people economy – conducted by The Future Foundation and downloadable from, is the first in an ongoing program of research exploring the "hidden costs" of hiring, selecting and managing employees. The report uncovers the root of underlying problems and draws attention to the solution: a new breed of manager, a new look at culture and assessment, and a more comprehensive understanding of the workforce.

Laurence Karsh, CEO for SHL Americas, commenting on the report, said: "The global distribution of these startling figures suggests that no single country or culture is wrestling with this problem. Rather, business as a whole is preparing for an inevitable sea change. With the means for global reach a reality, we are now recognizing that knowledge and human capital are the true drivers of profit and innovation. To excel in the 21st century, leaders will need to focus on people first and technology second; the advantage will go to those who can redefine skill sets, reconcile cultural differences, and match the right people to the right jobs through intelligent and objective assessment."

SHL funded the report to find out if it was possible to quantify the true cost implications of selection errors and to investigate the potential value that exceptional people can bring to a business. The report uncovers the underlying reasons behind the colossal amount of money wasted on hiring the wrong people and draws attention to the need for further investment from firms in the selection process.

About SHL Group PLC
SHL is the world-leading provider of psychometric assessment and development solutions. The company supports organisations in the selection, recruitment, promotion, succession planning and development of talented people at all levels and across all sectors. Operating in 40 countries and more than 30 languages, the SHL Group devises innovative approaches to help organizations increase productivity and gain competitive advantage through the more effective use of their human capital. SHL has over 5,500 organizations as clients, including many of the Global and Times Top 1000, and is recognized as the foremost provider of objective assessment products in the world.

Source: SHL Group PLC