The extraordinary failure of people management

Managing people is both more obvious and less simple than it appears

The only conceivable response to the research about worker engagement and company performance is: ‘duh’. Come on, wouldn’t you expect a happy workforce to be more productive than a unhappy one? Engaged and secure staff more likely to go the extra mile for the boss and the customer than bitter and twisted ones who are scared of losing their jobs? And isn’t it common sense that that would pay off in better business performance?

Yes in each case: and you’d be right. Although it is hard to be categorical about what causes what, the evidence is that high employee engagement and satisfaction is indeed reflected in superior business outcomes, including profit. Among a stack of similar studies, the most recent scholarly research finds that a value-weighted portfolio of the ‘100 Best Companies to Work for in America’ outperformed the market average by a cheerful 3.5% a year over 25 years – hardly a flash in the pan.

Nor is there any mystery about what causes people to enjoy their jobs and work at them. Things like responsibility for doing a worthwhile job, work autonomy, opportunities for personal growth, working with good colleagues and recognition head the list. Salary and working conditions – another ‘duh’ – rate barely a mention. They are ‘hygiene factors’, demotivating people when inadequate but never becoming a positive source of satisfaction, however high they go.

Yawn. Tell us something new.

Yet the commonplaces contain a large puzzle.

Because the ‘alpha’ garnered by companies that put employees first shouldn’t exist. It resembles the economists’ hypothetical £5 notes that really are lying around in the street because no one has picked them up. Think about it. We know that overall, global levels of employee engagement are dismally low, the proportion of those highly engaged plunging downwards from 20 per cent in the US and 12 in the UK to single digits in France, China, India and Japan. We know also that raising them would improve business performance. Finally, we know what good management looks like.

‘So, if something doesn’t work very well, and a (proven) better alternative exists, surely we would expect everyone to gravitate towards that alternative?’ ponders London Business School’s Professor Julian Birkinshaw, who has just spent a year investigating the subject, with fascinating results.

One factor, Birkinshaw and his team surmised, was that management is always approached from the point of view of those doing the managing. Unlike marketing, which has learned to view its function as ‘seeing the world through the eyes of the customer’, managers still see the world exclusively though their own eyes, not those of their employees. One result is s a hopeless mismatch between expectation and requirements on both sides.

This matters, big time, because, underlining yet another ‘duh’, the single biggest predictor of whether you will be engaged and happy in your work is having a high-grade manager. And in this area Birkinshaw’s findings are both extraordinary and damning.

In marketing, many high-performing companies (eg Apple) use something called the Net Promoter Score as a measure of customer loyalty. NPS asks, on a scale of 1 to 10, how likely you are to recommend the company to friends or colleagues. It’s a tough metric, because only 9s and 10s count as promoters, and 1s to 6s as detractors. Subtracting the latter from the former gives a single net score showing how positively (or not) customers view the company.

Now, when Birkinshaw and his colleagues asked employees at five companies to rate their managers in the same way – ‘how likely is it that you would recommend your line manager to a colleague as someone they should work for in the future?’ – there were massive variations. One company posted a NMPS (net management promoter score) of +61 per cent while at the other end of the scale another company scored -28 per cent. But the average was -15 per cent – that is, overall 15 per cent more employees gave their managers the thumbs down than the thumbs up. From an employee point of view, there were more bad managers than good.

Dwell on that a bit. Here we have perhaps the most basic building block of management, the relationship of a manager with his/her immediate report. We have an unimpeachable evidence base. Yet we still manage to get it wrong more than we get it right. In its most fundamental task, getting the job done through other people, management’s effect is negative.

Why do managers find it so hard to do the right thing?

One reason is surely ideological. As Birkinshaw notes, most large organisations continue to operate on a management operating system devised a century ago – bureaucratic coordination, hierarchical decision-making, extrinsic rather than intrinsic reward. In a world where the imperatives of efficiency and compliance have long ago ceded to commitment, initiative and discretionary effort, these principles objectively outlived their usefulness some time ago. But the framework was effectively locked in place by the shareholder-value, free-market doctrines that emerged in the 1980s (which requires all thse things), and they have permitted no movement since.

By reinforcing natural human tendencies to self-interest, control and risk-aversion, ideology makes them self-fulfilling. So even if it wasn’t originally, the behaviour that constitutes good management – focusing on people rather than self, delegating and tolerating mistakes in a larger cause – now runs against the grain. It becomes an ‘unnatural’ act. Put this together with managers’ conflicting priorities and limited time, and the fact that a check-list of things to do isn’t necessarily a good how-to-guide (all the activities require precise judgment so as not to overshoot in either direction), and good management, though obvious, suddenly seems less easy.

Birkinshaw’s research leaves some leading questions.

Why isn’t this stuff taught to all business students from lesson 1?

Why did the last government spend an estimated £70bn – enought to bail out a small eurozone economy – on IT and management consultancy, none of which addresses the elementary management issues?

Isn’t this, as Donal Carroll of Critical Difference suggests, the starting point for a manifesto for a radical, democratic, functional form of management?

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