People are sick of managers. The news is full of people not going back to their jobs and managers are a big reason. Commutes are seen as what they are – huge chunks of unproductive time to get to and from work so a hall monitor can loom over you and take attendance. Employees see managers more as judges and juries than as people who provide them with the resources they need to do their jobs. The Atlantic says the pandemic has exposed a fundamental weakness in the system, which has led to what many are calling The Great Resignation.
The Harvard Business Review says excess management is costing the U.S. $3 Trillion a year
Occupational data from the U.S. Bureau of Labor Statistics show that for every 100 workers, there are 20 managers – one for every five employees. If the ratio of employees to managers could be ten to one instead of five to one, 12 million employees would be freed to do work that is more productive and creative.
According to Gary Hamel and Michele Zanini, the evidence from more than 7,000 Harvard Business Review readers shows that bureaucracies slow productivity and stifle innovation. Managers make up nearly 20% of the workforce and collect 30% of the wages, so they’re gumming up the works and getting paid more to do it.
Hamel and Zanini ask a great question: How many of these 24 million managers do we actually need? They looked at management practices and concluded that business can be run with fewer than half the managers in place today.
They offer two interesting examples:
- A bank with 12,000 employees has only three levels of hierarchy. Decision-making is decentralized, meaning it is left to the discretion of the individual branch offices. Branches make their own decisions about rates, loans and marketing budgets. This case study is not one of your run-of-the-mill banks, but one that has led its peers in return on equity every year since 1971.
- An aviation company builds jet engines. One of their plants employs 300 technicians and has only one manager. That plant has been more than twice as productive as the company’s other factories.
Management is the least efficient activity in most organizations
It adds overhead and layers of insulation. The pandemic showed that management layers slowed down work by getting in the way. They decrease productivity through endless meetings about unimportant things attended by people who shouldn’t even be in the room.
Let’s take a look at that bank with 12,000 employees and only three levels of hierarchy
If they had the typical U.S. ratio of one manager per 5 employees, those 12,000 employees would need to be supervised by 2,400 managers. In turn, those 2,400 managers would need to be managed by 480 more, who would need to report to 96 more managers. Those 96 managers would be managed by 20 more, and them by 5 more and those by one more at the top. The total is 3,002 managers and 8 levels of hierarchy.
Now let’s look at that jet engine factory that has only one manager
Applying the same 5:1 ratio, those 300 technicians would need 60 managers who need 12 more who need 3 more. One manager the successful way and 75 managers the traditional over-managed way.
Multitiered management structures work like this:
Presidents tell their Vice Presidents what to do. VPs take these directives and modify them to meet their needs. VPs have control of resources and place greater emphasis on the directives they favor and less on the ones they don’t. For the sake of argument, let’s say that on average, the Presidents give their each of their VPs 10 action items for the coming year. Presidents are in charge because they are such outstanding leaders. If they’re perfect, they pass along every nuance with total accuracy – 100% of the time.
The VPs in our example are very talented, too. But not as much as the Prez, which is why they’re VPs. Let’s say that VPs pass along 90% of what was given them. VPs have agendas of their own, you know, and pass them on to their Directors after making some changes to reflect their own needs.
Directors take the modified version given them by the VPs, move some things around, omit others and add things of their own. Directors are two steps below the big chair. Because they are not as sharp as VPs and because they have less contact with the Prez or the VPs of other divisions and departments, they understand only 80% of what the VPs show them. Directors push some agendas and downplay others before issuing marching orders to the troops. Directors pass along 80% of what they’ve given by VPs.
Managers are less adept than Directors and so pass along only to employees only 70% of the 80% they get to employees. What part of the Big Picture do you think the employees get?
If the employees are somehow all giving 100%, half the things they are doing will be out of sync with the organization, but all will be elements that go into their performance reviews.
In most businesses, managers are required to sit down with each of their employees and have a forced and awkward meeting that almost never helps employees do better at their jobs. Gallup says only one employee in seven believes performance reviews are a big help. Yet many businesses continue to plod forward with a tool that doesn’t work, another example of the myopia of experts.
People started challenging the assumption the performance reviews are good things and here is what they found
- Most managers have no training in how to conduct interviews, how to assess performance, give feedback, or put together a developmental strategy.
- One third of the time, reviews are so dysfunctional that they make employee performance worse, not better.
- Performance reviews are tedious and expensive. Studies show they don’t make things better or more productive. Instead, they waste time and money and incite antagonism between managers and employees.
- Nine of every ten managers don’t like how their companies conduct performance reviews.
- Nine out of ten HR leaders say performance reviews don’t work and they waste vast amounts of time, too.
- Are an uncomfortable dynamic where the manager is judge and jury over the employee.
- Put employees on the defensive, so in many cases their performance gets worse, not better.
- Suck up enormous amounts of time. Managers spend an average of 200 hours a year on this busywork and individual employees spend 40 hours a year. There’s that one to five ratio again.
Performance reviews are a low-value management process
Evidence shows that as much as half of all internal compliance activity has no value to the individual or the organization. Non-management employees spend 16% of their time on internal compliance and box-checking. If half of that time is wasted, then U.S. businesses waste nearly 10 million worker years every year.
No wonder so many people don’t want to go back to the old workplace.
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