British companies are wasting ?12 billion a year because of extensive recruitment mistakes and time spent by managers trying to bring staff up to scratch, according to a report published recently. Companies squander the talent and potential of their workforces and regularly fail to spend enough time on selection and struggle to make up for lost ground, it is claimed.

The report, by SHL, a psychometric consultancy, uses data produced by a think-tank, Future Foundation, to arrive at its estimate of the cost of poor people management. It takes average earnings of managers and the proportion of their time spent on trying to bring poor performers into line in arriving at its figure of ?12billion, equivalent to 1.6 per cent of GDP. The report calculates that British companies are wasting ?1,000 for every employee because of the inroads made into the time, managers and supervisors spend trying to plug the holes caused by the poor performance of staff ill-suited for the job.

John Bateson, SHL chief executive, said: ?The figures uncovered are startling and only begin to scratch the surface of the problem. British firms are clearly under-investing when it comes to employee selection and as a result are failing to tap into the true potential of their workforce.? He feels the ?12 billion figure is only the tip of the iceberg because of the widespread failure to match the right people to the right jobs and instead put ?square pegs in round holes?.

The high rate of turnover adds to the headaches. One in eight employees throw in the towel and leave their jobs before they can reach a competent level of performance.