In praise of middle managers
If the popularity of Dilbert cartoons is any indication, middle managers do not enjoy a sterling reputation. They are often perceived as bumbling bureaucrats who get in the way of the real work being done in the sales, production or finance departments. New Wharton Business School research published in their Knowledge@Wharton newsletter may change that perception. The findings suggest that middle managers have a greater impact on company performance than the business strategy, organizational structure or contributions from individual innovators and leaders.
The author, management professor Ethan Mollick, studied the role of individual, team and strategic contributions on firm performance in the computer game industry. Specifically, he looked at “how performance changes as you combine different people in different companies in different ways.” He used the revenue of each company, controlling for costs, to measure corporate performance. Mollick’s research focused on the development of individual games over a 12 year period. These projects represented $4B of revenue and included 537 individual producers, 739 individual designers and 395 companies.
Mollick’s findings negated conventional wisdom that says: 1) performance differences between firms are due mainly to organizational factors – such as business strategy, leadership and practices – rather than to differences among employees and; 2) middle managers are typically interchangeable between companies, possessing few unique attributes that propel project success. Mollick concluded that it was middle managers, rather than innovators or company strategy, who best explained the differences in corporate performance. Within the research, managers accounted for 22.3% of the variation in revenue among projects, as opposed to just over 7% explained by innovators and 21.3% explained by the organization itself.
“Far from being interchangeable,” Mollick writes, middle managers “uniquely contribute to the success or failure of a firm…. Additionally, even in a young industry that rewards creative and innovative products, innovative roles explain far less variation in firm performance than do [middle] managers.” While innovators may come up with new games and new concepts, middle managers assume the more crucial role of project manager i.e. executing the initiatives. Specifically, they decide which ideas are given resources and figure out how to coordinate various initiatives within the larger organization. Other essential roles played by middle managers included motivating the team, managing budgets, ensuring a free flow of information and facilitating “collective creativity.” Fortunately for most employees and organizations, these are teachable skills.
In order to see if these skills were transferable, Mollick analyzed individuals who moved between companies. He found that middle managers who switched employers had an even larger impact on performance than those who remained within organizations. “This is not about a person being a good fit in just one specific organization. Their skills are useful anywhere.” It’s more evidence that managers are not “cogs in a machine. There is something innate in them that make them good at what they do.” A middle management “skill set” appears to be a prerequisite for driving performance in industries and fields that value knowledge, problem-solving and collaboration, like software, advertising, life sciences and professional services.
The above conclusions, however, do not necessarily translate to scale-driven, process-based industries. In these enterprises, Mollick writes, “Individual workers are ultimately replaceable and interchangeable with others who have received the same extensive training.” The business model “does not rely on any individual worker’s skills but rather firm-level processes to hire and train the appropriate individuals for the appropriate roles.”
Mollick’s conclusions have a number of organizational implications:
- Pay closer attention to hiring and fostering the right skill set, and less so on corporate fit;
- Link a manager’s decision and information rights to their true role and responsibilities;
- Align a middle manager’s performance and reward system to a project’s revenue contribution.
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