The Real Costs of an Underfunded People Strategy

Why Cutting Corners in HR Will Cost You More in the Long Run

Ask any CEO what their most important asset is, and they’ll say: our people. But then look at the budget — and you’ll often see HR, L&D, and culture sitting underfunded and overburdened.

A “lean” people strategy may save money on the surface, but beneath that, it’s often quietly draining your business through churn, low productivity, and missed growth opportunities.

Let’s break down the real costs of treating people strategy as a back-office function — and what to do instead.

1. Turnover Is a Tax on Bad Strategy

Replacing one employee can cost 1.5–2x their salary and even more in clinical or technical roles. In industries like healthcare, ABA, or tech, turnover isn’t just expensive, it disrupts relationships, reduces trust, and burns out the people who stay.

Example: A company with 100 employees and a 25% turnover rate loses ~$750,000/year in direct and indirect costs from turnover alone.

The fix:
Invest in structured onboarding, development pathways, and leadership training. Retention is an outcome of intention.

2. Unengaged Teams Are Quietly Expensive

Gallup’s 2024 report showed that only 33% of employees are actively engaged, the rest are coasting or disengaged. That’s a productivity drag that doesn’t show up in your P&L until it’s too late.

Lost productivity due to disengagement costs companies 18% of annual salary per employee.

The fix:
Build a people strategy that includes pulse surveys, career growth plans, recognition, and manager enablement. It’s cheaper than managing disengagement later.

3. No HR Tech = No Data = Bad Decisions

Underfunded people ops teams often lack the tools to give executives the data they need to lead well, meaning hiring plans, pay strategies, and performance management are based on anecdotes, not evidence.

“We don’t have data” is not a strategy, it’s a risk.

The fix:
Equip HR with real tools: people analytics, DEI dashboards, engagement platforms. People deserve the same data-backed decision-making as finance.

4. Culture Debt Compounds Like Interest

Tolerating toxic managers, unclear expectations, or inconsistent hiring practices adds up over time. You may not see the damage immediately, but one year later, you’re facing lawsuits, mass attrition, or reputation damage on Glassdoor and LinkedIn.

Culture debt is the silent killer of scale, especially in service-based and mission-driven industries.

The fix:
Fund early-stage leadership development and codify your values into real behaviors, not posters. Culture costs nothing to talk about and everything to ignore.

5. Burnout Is a Brand Problem, Not Just an HR One

When people are stretched too thin for too long, the brand suffers, slower delivery, lower client satisfaction, and missed growth targets. Burnout isn’t a soft HR issue. It’s a productivity and reputational risk.

The fix:
Design sustainable org structures. Invest in workload equity, mental health access, and manager coaching.

Final Thought: People Strategy Is Business Strategy

If your organization is bleeding talent, misfiring on hiring, or unclear on how to scale culture, it’s not an HR problem. It’s a leadership opportunity.

CEOs who fund people strategy with intention, just like product, finance, or marketing, build companies that last.

How We Help

We work with leadership teams to:

• Build data-backed people plans aligned to business goals

• Diagnose root causes of turnover, burnout, and disengagement

• Implement scalable processes for onboarding, feedback, and culture

• Develop leadership programs that actually build leadership

• Design HR functions that earn a seat at the strategy table

People are your strategy. Underinvesting in them is a bet you don’t want to lose.