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The Hidden Cost of Bad Management: How Boards Can Spot Value Destruction Before It Hits the Numbers


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Some managers don’t just lose people — they quietly erase enterprise value.


Every board tracks Human Capital turnover. Few track who causes it — or the financial drag of their behaviour.

The World Health Organization (WHO) and the International Labour Organization (ILO) estimate that 12 billion workdays are lost each year due to anxiety and depression, costing the global economy US $1 trillion annually in lost productivity.¹The causes are not abstract: workload overload, poor communication, and hostile management behaviours — the hidden costs of toxic leadership.


Since COVID-19, the risk has intensified. The WHO reports a 25 % increase in the prevalence of anxiety and depression worldwide, alongside disruption to mental-health services.²

Your workforce is more fragile — and your managers now have more leverage than ever over both performance and value creation.

The Hidden P&L Line

The cost of poor management doesn’t show up as a neat line item. It hides in:

  • Stress leave and absenteeism

  • Voluntary turnover of high performers

  • Lost innovation velocity

  • Slower collaboration between teams

Each is a leak in intangible capital. A single divisional head can quietly erode millions in enterprise value while still hitting short-term KPIs.

Spotting Value-Destructive Managers

Look for:

  • Clusters of stress-related leave

  • High-performer flight

  • Internal transfers to “escape” a leader

  • Engagement decline while KPIs hold steady

  • Falling collaboration and morale [Inference]

These are early indicators of capital destruction, not HR trivia.

Measure What Matters

Build a Manager Behaviour Index (MBI):

  • Stress-leave ratio

  • Turnover delta vs. company average

  • Engagement-score movement

  • 360° leadership feedback trends

Correlate those with margin, delivery, and innovation KPIs.Treat behavioural risk as seriously as financial control risk.

McKinsey & Company found that organizations with strong organizational health deliver nearly three times the total shareholder returns of unhealthy ones.³Culture isn’t soft. It’s a valuation multiple.

Governance, Not HR

Boards rarely audit managerial behaviour.

Toxic leadership creates:

  • Social ESG risk (mental-health harm, inequity in turnover)

  • Governance risk (poor succession, hidden liability)

  • Operational risk (execution drag, trust erosion)

If investors can model climate risk, they can model behavioural risk.

What To Do Before the Next Executive and Talent Bench Review

✅ Commission a behavioural risk map — identify where stress, exits, and engagement decline overlap. ✅ Add psychological-safety metrics to quarterly dashboards. ✅ Tie leadership incentives to sustained engagement, not headcount churn. ✅ Discuss this at your next informal Board session.

Boards audit capital, not culture — that’s how value dies unnoticed.

If you’re not tracking which managers drive stress and exits, you’re not protecting performance — you’re quietly liquidating company value.


What you can do

Discuss this at your next informal Board session — before your valuation reflects what your culture already knows.

1 World Health Organization (WHO) & International Labour Organization (ILO).“Mental health at work: Policy Brief.” September 2022.https://www.ilo.org/resource/news/who-and-ilo-call-new-measures-tackle-mental-health-issues-work-0

2 World Health Organization (WHO).“COVID-19 pandemic triggers 25 % increase in prevalence of anxiety and depression worldwide.” March 2 2022.https://www.who.int/news/item/02-03-2022-covid-19-pandemic-triggers-25-increase-in-prevalence-of-anxiety-and-depression-worldwide

 
 
 

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