It may also help explain, among other factors, the elusive gains in productivity despite technological advances and the ostensible skills gap (which may actually be an 'I don't want to work for you' gap).
Most employees perceptions of the organization for which they work and of the broader economy are refracted through their experience with their immediate supervisor. Smart companies realize that issue needs to be addressed to attain optimal results. JL
Sam Walker reports in the Wall Street Journal:
A company’s productivity depends, to a high degree, on the quality of its managers.What no one saw coming was the size of that correlation, something Gallup calls “the single most profound, distinct and clarifying finding” in its 80-year history. The study showed managers explained a 70% of the variance. If it’s a superior team you’re after, hiring the right manager is nearly three-fourths of the battle. No other single factor, from compensation levels to the perception of senior leadership, came close. The top 10% of companies, ranked by engagement, posted profit gains of 26% through the last recession compared with a 14% skid at comparable employers.
In 2018, the U.S. economy benefited from historically low unemployment, brisk spending, an aggressive tax stimulus and hordes of game-changing advancements in technology. This singular combination of tailwinds yielded a growth rate of 2.9%.
That’s not terrible, especially compared with many wheezing economies abroad, but it’s not even in the ballpark of historic highs.
For the better part of three decades, economists have worn out their chalkboards trying to map a path back to the glory days of 7% growth. So far, the only point they agree on is that we must be doing something wrong.
Here’s a crazy idea: What if it’s something simple? What if companies could fix the problem by hiring better middle managers?
Five years ago, the Gallup organization embarked on one of the most ambitious deep dives it has ever conducted; an analysis of the future of work based on a decade of input from nearly 2 million employees and more than 300,000 business units. The results confirmed something Gallup had seen before: a company’s productivity depends, to a high degree, on the quality of its managers.
What no one saw coming, however, was the sheer size of that correlation—something Gallup calls “the single most profound, distinct and clarifying finding” in its 80-year history. The study showed that managers didn’t just influence the results their teams achieved, they explained a full 70% of the variance. In other words, if it’s a superior team you’re after, hiring the right manager is nearly three-fourths of the battle.
No other single factor, from compensation levels to the perception of senior leadership, even came close. “That blew me out of my chair,” says Jim Clifton, Gallup’s chief executive.
The study’s conclusions, laid out in Gallup’s forthcoming book, “It’s the Manager,” struck a particular chord with me. I, too, had exhaustively studied teams—although my subjects were the top dynasties in sports. I’d reached a similar conclusion: The overwhelming driver for sustained excellence in sports was another kind of middle manager, the team captain.
Gallup’s favorite metric for rating business teams is “engagement,” or a belief among employees that they’re doing meaningful work in a climate that supports personal growth and development. Gallup and others have shown, over many years, that highly engaged teams have significantly lower turnover and higher productivity and profitability, among other things.
Roughly a third of employees in the U.S. are highly engaged, Gallup found, but inside successful businesses that figure can run north of 68%. It’s not surprising that many companies have started measuring internal engagement and tinkering with new perks and initiatives to juice their scores.
Gallup’s deep dive reconfirmed all of this, but it also pointed to something many companies don’t fully appreciate: why engagement is so important.
In previous decades, when Gallup asked people to order their priorities, they ranked family, having children, owning a home and living in peace above having a good job. Starting in 2002, around the time millions of people started comparing their lives on social media, the order shifted. Today, Gallup found, having a rewarding job ranks first.
Put simply, having a great job means having a great life.
This finding, which Gallup’s Mr. Clifton calls “seismic,” suggests that some portion of the vast number of people who feel disengaged at work experience an inspiration gap. While many jobs haven’t changed, the expectations we bring to them have metastasized. The wider that chasm becomes, the unhappier we are.
In theory, then, a shortage of good jobs and inspiring bosses might explain why some companies struggle to recruit and retain purpose-driven millennials. It could also explain why lavish perks don’t always produce the desired effect on worker engagement.
It’s also conceivable that this inspiration deficit helps explain America’s stubbornly stagnant levels of worker productivity and, if you game it out, why the economy isn’t growing faster.
To state the obvious, dreadful bosses are not the sole barrier to growth. In this newspaper, we’ve explored the shortage of bold, innovative new ideas and a lack of genuinely transformative business models. Some theorists say the gains promised by radical innovation haven’t kicked in yet because the technology is still too costly and complex for many businesses to adopt.
Nevertheless, those explanations don’t address the emotional, illogical human consequences of feeling unfulfilled at work. It’s fair to wonder whether this problem explains recent polls that suggest 70% of Americans would support a presidential candidate who promised to reform our economic system, or the growing number of young adults who hold an unfavorable opinion of capitalism. If you have a bad boss and a purposeless job, Gallup’s Mr. Clifton says, you might conclude that “whatever this system is, it doesn’t work for me.”
In any event, when it comes to hiring managers for the modern world, there’s no question business can do better.
One highly questionable tradition is the persistent urge to promote superstars into management roles. A growing body of evidence suggests there’s a weak correlation between an employee’s isolated talent and their leadership ability, and that quiet, selfless, middling performers often would be better choices. Gallup advises companies to seek out managers who infect their teams with a sense of purpose and function more like “coaches” than conventional top-down bosses.
It’s also important to understand what engagement really is. Some companies try to measure it by asking employees to rate their “satisfaction” on a five-point scale. But the threshold for feeling satisfied is pretty low—decent pay and reasonable hours might accomplish that for most people. Today’s workers aren’t truly engaged unless their jobs generate feelings of purpose and personal growth.
Finally, there’s the problem of “culture.” It’s fine for companies to embrace a set of values and impose a culture of positive engagement. But for most workers, the real company they work for is the team they’re on. The only way to make a culture stick is to install middle managers who transfer it to their teams.
What sort of return can businesses expect from doing this? According to Gallup, the top 10% of companies, ranked by engagement, posted profit gains of 26% through the last recession compared with a 14% skid at comparable employers.
As for the future of free-market capitalism, it’s impossible to say whether hiring more superstar middle managers will provide the rocket fuel we seek. In December, U.S. officials issued a gloomy forecast calling for three straight years of declining growth. It’s possible that future economists will unearth this column someday and laugh at its naiveté.
Then again, maybe they won’t. Maybe they’ll marvel at how simple the fix turned out to be.
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