How managers make a (major) difference

Today's post looks at one of the most misunderstood, underrated and ignored areas of a company's potential: the lowly manager.

Managers are often the last call for any organisational initiative, with companies instead embarking on any number of transformational programmes, changes to operating models, or 'employee experience' or 'branding' reboots before they tackle (if at all) the development of their managers.

And here's the thing. None of these - NONE - come close to delivering the value to either the organisation or its employees (yep, that includes the employee experience) that managers do. And that's not me just talking off the top of my head. These findings come from robust multi-wave, multi-decade studies undertaken by economists, including from the OECD.[1]

The incredible difference managers make

The most notable set of studies into manager contribution has come from the World Management Survey . This organisation has employed hundreds of analysts to conduct tens of thousands of manager interviews within 35,000+ companies, then benchmarked manager practices against the actual company performance data, normalised per industry. It's an awesome undertaking, yet very few of us know about the groundbreaking work done by this group.

What they found should make every CEO, HR and Change professional alike put whatever they are doing to the back burner, and instead simply focus on the single area of manager development as a strategic priority. That's because:

• Management skill contributes more to a company's productivity and profitability than any other organisational factor, including a firm's R&D, Technological investments and even reorgs and transformations.
• The difference effective management makes (and we can exclude any value-add of 'strategy' in this) makes a very large difference to a company's Enterprise Value in numerous ways - and this can be calculated. The numbers are, literally, off the charts:

• The financial difference just a one point (approx 20%) increase in management makes as a whole can also be calculated in revenue terms. Take a look:

Now, 1.4% in revenue may not seem like much. But let's have a look at what this gain looks like for three company types: Scaleup, Small and Medium:

These gains (above) have been found to be lasting, so need to be considered as ongoing, multi-year streams of value. An investment in management effectiveness is like the gift that keeps on giving.

In a recent study on management, McKinsey also reached a similar finding, showing the massive contribution to Total Shareholder Returns from effective line management:

Thus, even small companies are losing tens of millions of dollars through ineffective management. That's clearly a huge opportunity for companies of all sizes if they just take investing in their Human Capital more seriously.

The World Management Survey findings also suggests that companies should at least invest as much in their manager development as they do in their R&D, given that managers accrete even more value to the company than R&D investments do. Many companies spend $200m or more in R&D - will they spend just a hundredth of this on manager development?

But wait - what do we see? In his latest report Josh Bersin finds that companies are not only underinvesting but also cutting back on their manager development.

This might explain why company cultures are so broken.

Don't forget the Employee Experience

So much for hard-nosed company economics. What about the human side?

Well, while HR Departments might fret and fuss over the Employee Experience, here's news to all: managers, not HR or anything else, are the biggest influence on an employee's experience - and this includes wellbeing. The quality of a person's line manager has been found to account for 70% of the variance of Employee Engagement, while whenever I analyse exit interviews, 80% of employees leave based on factors within a manager's circle of control.

But the role of the manager goes much further than this.

In a recent study, the CIPD (The UK's HR Association) found that the rise in workplace stress experienced by employees is due to poor management, something that Deloitte estimates is costing employers ￡56bn pa :

But instead of addressing this issue by better training of managers, HR's response has been to throw mental health first aiders at the problem. Why not address the problem at root?

What you can do to turbocharge your company via manager excellence

If you would like to develop your managers fast with a 20% target improvement within 6 months, have a look at Leading Engagement.

The programme is comprehensive and takes managers through all the skills they need to manage effectively, engage their Direct Reports consistently and achieve the kinds of productivity gains described above.

[1] Bloom et al 2016 - Management as Technology?;

OECD Dec 2021 – The Human Side of Productivity: Uncovering the role of skills and diversity for firm productivity The Human Side of Productivity - Organisation for Economic Co-operation and Development ( oecd.org )