There are many articles out there about the cost of a ‘bad hire’, but have you ever considered the cost of a bad promotion?

Let’s take a typical tech company where a senior developer is promoted into management, but due to a lack of experience and knowledge of management skills, he or she fails to adapt to their new role. The result is lost productivity, a drop in team morale, and perhaps even the loss of the manager and one (or more) team members.

Unfortunately this is a common story told in tech companies across the country, in fact, Gallup research suggests that organizations fail to choose the right talent for manager roles a staggering 82% of the time. It’s no surprise then that most CTOs have seen this scenario play out several times in their careers.

One of the worst aspects is that the senior developer in question is probably one of your best and brightest, which is why they were promoted in the first place. And since this sad tale probably takes a year to play out, it’s very difficult to recover from with your team intact.

Let’s take a look at some of the costs involved when a new team leader fails to be effective in their role…

  • With low worker morale being estimated as impacting productivity by up to a third, the hard cost of a team (five developers making $80k each) with low morale is $133,200 in just dollars, which doesn’t even consider the loss in terms of speed to market, customer dissatisfaction, etc.
  • Since estimates are that you’ll pay 40% (on the low end) of an employee’s salary when you have to replace them, if you lose the manager and one other team member, you rack up an additional $72k in getting those new team members up to speed, plus an average of $8k just to recruit them.
  • This total is well over $200k, just to get you back to the point you were before you promoted your star performer. And the team still needs a leader and you have no guarantees that the new manager will fare any better.

So, what do we do? Gallup estimates that only 10% of people have “natural” management talent, we must have a specific strategy in place for developing and coaching management skills. The good news is that font-line management is fairly well defined, and the requisite skills can be learned and practiced by new leaders.

The moral: before you award your next promotion, consider the structure for training and coaching that you have in place to ensure your newest managers and team leaders are effective.