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Wednesday, June 19, 2013

Millions of Bad Managers Are Killing America’s Growth

The single biggest decision your company makes every day is who you name manager.

This is the conclusion Gallup draws from decades of data and interviews with 25 million employees, in our recently released State of the American Workplace report. But companies keep getting this decision wrong, over and over again.

In fact, the people picked to be managers account for the majority of variance in almost all performance-related outcomes. Yet leaders will spend hundreds of billions of dollars every year on everything but hiring the right managers. They’ll buy miserable employees latte machines for their offices, give them free lunch and sodas, or even worse -- just let them all work at home, hailing an “enlightened” policy of telecommuting. Hell, some of these practices might even earn your company a business magazine’s Great Place to Work award.

The problem is, employee engagement in America isn’t budging. Of the country’s roughly 100 million full-time employees, an alarming 70 million (70%) are either not engaged at work or are actively disengaged. That number has remained stagnant since Gallup began tracking the U.S. working population's engagement levels in 2000. Talk about a lost decade.

Why is employee engagement stuck? If you estimate that America has one supervisor or manager for every 10 employees -- that is, 10 million managers -- then 7 million of those managers are not properly developing, or worse are outright depressing, 70 million U.S. employees.

This has all sorts of implications for companies. Work units in the top 25% of Gallup’s employee engagement database have significantly higher productivity, profitability, and customer ratings; less turnover and absenteeism; and fewer safety incidents than those in the bottom 25%. What’s more, companies with an average of 9.3 engaged employees for every actively disengaged employee in 2010-2011 experienced 147% higher earnings per share (EPS) compared with their competition in 2011-2012. In contrast, those with an average of 2.6 engaged employees for every actively disengaged employee experienced 2% lower EPS compared with their competition during that same time period.

And here’s a finding that should worry all American executives: Gallup estimates that active disengagement costs the U.S. $450 billion to $550 billion per year.

There are three things companies must do to fix this nationwide engagement problem:

  1. Name the right people to be managers. Businesses must first understand that as goes the talent of America’s 10 million supervisors and managers, so goes the engagement, inspiration, and effectiveness of 100 million U.S. employees. Success or failure starts with the front-line manager. 
  2. Ensure that these managers encourage your employees’ development. Those 100 million employees need managers who encourage their development and who value their opinions. They need a company that gives them the opportunity to do what they do best every single day.
  3. Focus on employees’ strengths. Companies must understand that while employees’ weaknesses never develop, their strengths develop infinitely. And employees’ strengths never stop growing throughout their career -- particularly when they have talented managers who build unique development strategies around their individual, innate talents, and who make sure they are always in roles where they get to use those strengths every day.
Here’s my big conclusion: For the United States to become a global economic powerhouse again, it has to have the most engaged and productive workplaces in the world. Right now, only 30% of U.S. employees are engaged in their jobs. That number needs to double -- which means companies need to double, as soon as possible, the number of talented people they are naming managers.

Starting tomorrow, every candidate for a management position in the United States should be tested by a Gallup assessment. We have a validated assessment of Yes/No talent for supervisors and managers. If candidates don’t score as a manager/supervisor, but they have other talents, they should be put in a role as an individual achiever or a team member --- a role where they can succeed limitlessly. What’s more, companies should have all of their employees take the Clifton StrengthsFinder assessment and make sure they build programs for each of those employees to get the most of their innate talents and strengths at work.

The biggest gains businesses will see in the next 10 years -- with the world likely facing stagnant growth -- will lie within hiring the right managers and maximizing the strengths of every single employee. Doing these things will not only transform companies, but America and the world, too.


Jackie Acho said...
June 22, 2013 at 8:30 AM  

Dear Jim -
Well said.
Engagement and innovation/performance are intertwined. Managers are key, as well as development focused on strengths. Not only do organizations pick the wrong managers, as people rise, their humanity/empathy declines. I agree that it's vital for the US and the world that we stop this cycle. In my experience a handful - not a lot - of other things are necessary to bring humanity back to leadership: Humanity doesn't naturally emerge from simply optimizing profit, but can and must be stewarded for business to prosper.
Thanks for using your platform to make a positive difference. We have no time to lose.
Best, Jackie

william seidman said...
June 23, 2013 at 8:07 PM  

While this post begins discussing an important topic – the role of managers in employee engagement – it offers no new insights about engagement and degenerates into a crass sales pitch for Gallup services. The post makes a good case though that there is a huge problem with weak employee engagement but the prescription to just “hire better managers” is lame. Smart people have been hiring and training managers – including recommending more development and focus on strengths -- for decades with little impact on employee engagement. Something is clearly being missed.

In our more than 15 years of work with managers, we have found that the real problem with managers is a significant confusion about what it means to be a manager. For many, management is about being a charismatic leader, making forceful decisions. For others, managers should decentralize their authority and empower their people. Few managers know what to be or when and certainly don’t understand and can’t execute the delicate balance required to ensure long-term employee engagement. We have never seen a management training program that addresses this balancing issue.

Much of our work has been with star managers who never have an employee engagement problem. These managers ensure employee engagement by doing just two things: they guide their groups to develop a compelling social purpose for their work and a clear path for everyone in the group to master the functions needed to achieve the purpose. When people are striving for something important and are good at achieving it engagement soars, without having to worry about hiring the right people or buying a Gallup service.

Seasoned said...
June 24, 2013 at 2:04 PM  

Enjoyable post! My A (manager) uses Strengthsfinder assessments and has tried to get the company to see the value.

How does a person develop themselves? I don't want to wait until something is offered.

I am looking forward to reading your new book (Tfe Coming Jobs War)

Thank you Jim!

g clinite said...
June 26, 2013 at 12:48 PM  

Thanks for the hyberbolic sales pitch. Did you really use the word, limitless? If I hurry and buy a Strengthsfinder now will I receive a second one free?

Hire better managers as well as maximize strengths of all employees. Thanks simpletons.

Chuck Blakeman said...
June 27, 2013 at 1:57 PM  

The answer actually lies in the end of management. The manager is an invented construct created by the Factory System in the late 1800s because Frederick Taylor, the father of scientific management, declared the average worker "so stupid he more resembles the ox than any other type", and that the same worker would "soldier - work only as hard as they have to in order to not get fired."

Peter Drucker said Taylor's impact in the 20th century was as significant as Freud, Marx, and Darwin. All management theory harkens back to his "stupid and lazy" theory. If the average worker is stupid and lazy, the only solution is to create a class of individuals who are smart and motivated to manage the stupid and lazy ones - and modern management was born.

For thousands of years people weren't stupid and lazy, but somehow they became so when they walked through the doors of the Factory System. Why? Simple - people are not actually stupid and lazy, management just believed that and created a structure that reflects those two basic assumptions in every way.

We might live beside someone who works for us and expect them to be an adult, cut their grass, be civil at the grocery store, and generally take care of themselves. But then we tell them exactly when to show up at work, what time recess and lunch are, and exactly what time the school bell will ring to go home. And we manage every second of their time while they are there. Pretty much what we would expect to do with a four year old.

70% of employees are not engaged because they work in managerial systems that believe they are stupid and lazy, and are managed to the Lowest Common Denominator (LCD Management). If you believe people are stupid and lazy, and create a system that treats them that way, why would you be surprised if they are as disengaged as a pre-schooler waiting to be told it's time to pick up his toys?

People are not stupid lazy. Management MAKES them stupid and lazy. The solution is to stop managing people, and lead them like adults. A management system needs at least one smart and motivated manager for every ten stupid and lazy employees. But a leadership system needs one leader for every 50-100 Stakeholders (no managers required).

Our little, but fast growing company has no managers and never will. We looked around to see if we were crazy. We found a lot of others doing the same thing.

Semco is a 60-year old company with 3,000 Stakeholders and not a single manager, no HR department, not a single written policy, and no office or factory hours (it manufacturers washing machines, meat slicers, etc.). It is the most profitable company of its kind. Everyone in leadership even sets their own salary with no need for an approval. Stakeholders get voted on every six months by their peers to decide if they get to keep their jobs. Turnover is less than 1%.

W. L. Gore has 10,000 Stakeholders with the same "no manager" set up, no office hours, and no hierarchy. It is very profitable and is only one of 13 companies to make Fortune's "Best Places To Work" every year they have published the list.

This article said, "The people picked to be managers account for the majority of variance in almost all performance-related outcomes." Another bit of research says twenty of the top twenty-five reasons a Stakeholder will leave their job is related to the incompetence of their manager (the supposed smart and motivated class).

Do away with managers and you do away with the overwhelming majority of both the performance related issues and the reasons why someone will quit.

Disengagement is not an employee problem. It is a hangover from the Industrial Age that invented a middle tier in companies so useless and intrusive that a cartoon strip called Dilbert is the best picture we have of how it functions.

Manage stuff. Lead people.

George said...
July 10, 2013 at 9:17 PM  

Chuck! awesome post! I haven't heard of those two companies you mentioned, but sounds good to me.

Sandy Brickel said...
July 10, 2013 at 9:37 PM  

I have to say this is a well put statement and wish others would listen and engage in employee enlightenment. Frustration is only the beginning and when no one cares to listen to workplace issues and turns a blind eye, you are left alone as an outsider attempting to do the right thing. I am left debating searching for another job or staying and being like them but why should I? I feel as though values are lost and all the schooling I have has been a waste. Thank you for telling the truth.

Charles Little, SPHR said...
July 11, 2013 at 2:53 PM  

I agree with this article. Companies seemed to be destined to promote people for all of the wrong reasons without using any assessment tools to help reach a good decision. Most companies do not even track turnover cost by manager, or use engagement or satisfaction surveys to improve.
The money being lost is outrageous.
Charles Little, SPHR

Thomas Smith said...
July 12, 2013 at 1:14 PM  

People build people - not a tough concept to grasp but one that seems to have escaped the minds of exec mgt in the last decade (two decades actually). I have been in technology my entire career I know the fantastic things it can do - but the answer was NEVER in the Hardware or Software alone. You still had to get "people" to engage, use and apply it and that took -- Managing (not telling or simply monitoring), Educating (not expecting everyone to just learn by themselves) and Mentoring (addressing the heart and soul not just the mind). The art of effective quality middle mgt essentially has been lost for a very long time -----

Anonymous said...
July 12, 2013 at 10:55 PM  

This comment is 100 times better and more insightful than the article itself. I have never believed in of any type hierchy (social, economic or political). They lead to no clear solution to the vast complexity of problems, especially in the workplace.

Anonymous said...
August 12, 2013 at 5:14 PM  

Mr. Clifton, I agree with your Article 100%. "Bad Managers are killing America's growth". I too have noticed that organizations are not like they use to be. (an honest days work for an honest pay). There are a lot of managers and supervisors who do not possess the skills and training needed to be an "Effective Manager/Supervisor". You also mentioned about "employees not being engaged"...absolutley true! Most employees now-a- days are not happy in their current employment because of their managers/supervisors being bullies or they are clueless about how to manage or supervise. Being an effective Manager/Supervisor does start with the CEO/President(and trickles down to mangers, supervisors and employees.

I think all business owners can learn a lot from the TV Show, "Undercover Boss".

Anonymous said...
August 18, 2013 at 7:46 PM  

I'm glad to see someone with the guts to say it. Too many managers are biased in their decision making. Simple, managers are manager and should manage, and they do not know how.

aliaclark said...
September 3, 2013 at 6:47 AM  

Managing others takes specific facets of personality, presentation and experience to do well. Occasionally, however, it is instructive simply knowing what not to do. Here are some
of the most frequent blunders supervisors make, wringing every drop of malaise and agony from what should be a lively, collaborative office - as well as some ideas for making things right.

jesse gotschall said...
September 4, 2013 at 2:37 AM  

It is short minded people that think it is unacceptable for some one better than them to pass them.

Anonymous said...
March 2, 2014 at 9:19 AM  

Absolutely agree with the previous poster. I've found myself thinking about and referring back to this comment for months now; figured it was time I said thanks, Chuck!

Anonymous said...
May 13, 2014 at 5:28 PM  

Gradually and incrementally the can-do and will-do spirit of our workforce is being extinguished. It is clear from the evidence that the state of the American workplace has been on a slow creep downward for several years. It could soon become a mad dash to the bottom unless managing is viewed as a skill-based activity executed in a space no larger than four feet by four feet where manager and employee interact. To find out what is needed to rekindle the spirit of the American workforce ask a manager his/her strategy for accomplishing work through employees and what tools he/she uses to execute that strategy. My experience as found no answer or incomplete answers. To prevent the American workplace from taking a mad dash to the bottom identify the tools of a manager that optimize employee performance, structure them into models, and teach managers how to utilize them in that small; but mighty place, where manager and employee interact.

Craig Canter said...
May 26, 2014 at 4:43 PM  

While I agree with the premise of your article - bad managers lead to disengaged employees and poor productivity - I don't agree with the conclusion that a testing service can weed out bad manager hiring. I believe the key is for organizations to continue to monitor, train, and develop managers as they would any other talent. Organizations must also be alert for signs that a manager may achieve results by whipping their slaves harder instead of developing a proactive and engaged team.

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