Nothing turns on management theorists more than conflicting incentives. (If the idea of an aroused management theorist has ruined your breakfast, sorry.) They ruminate on financial motives—the adverse impact that individual bonus schemes might have on team collaboration, say. They churn out studies and books on the competing interests of shareholders and the executives who act on their behalf.
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A new paper, published by Achyuta Adhvaryu of the University of California, San Diego, and Emir Murathanoglu and Anant Nyshadham of the University of Michigan, casts fresh light on the problem. It shows that clashing incentives are not always financial, and that conflicts can occur even between different levels of management. In the process it underlines that a much-mocked group deserves to be taken far more seriously.
The authors examined the decisions of middle managers at Shahi Exports, one of India’s largest garment-makers. The firm has about 70 factories, where multiple teams of cutters, sewers and finishers produce clothing. In their study the academics tracked which team supervisors were being recommended for soft-skills training by their own managers, and then looked at the effect of that training on productivity and retention.
What they found was curious. On average the training worked. Teams whose supervisors had been through the course saw big productivity gains compared with control groups. But these advances were distributed unevenly. Teams whose supervisors were most highly recommended by middle managers for training experienced no productivity gains; the benefits were concentrated on supervisors who were less recommended. The pattern for retention was the reverse: there was a big drop in subsequent quit rates among supervisors who had been highly recommended by their managers, and little change among less recommended ones.
Mr Adhvaryu et al look at a variety of explanations for this strange pattern and conclude that it reflects a deliberate calculation: managers were nominating those supervisors whom they regarded as flight risks. That did not necessarily suit the interests of the company’s senior leaders. But it did suit the interests of middle managers, who bear the burden of filling in for missing supervisors and training new ones. Losing workers, in short, makes their lives a lot harder. Retention matters more to them than productivity.
The paper provides three lessons, beyond the hoary one that incentives matter. The first is that agency problems can occur wherever power is delegated. A decentralised organisation often makes a ton of sense, but it also risks introducing layers of competing interests. Another recent paper by Ingrid Haegele, then of the University of California, Berkeley, found that German managers at a big manufacturing company tried to hoard the best workers for their own teams. When managers are themselves about to move into new positions, they have less incentive to discourage good employees from job-hopping. Ms Haegele found that workers’ applications for internal promotions more than doubled during these temporary periods of selflessness.
The second lesson is that middle managers deserve respect more than ridicule. The type of behaviour observed by the academics is possible because these managers have valuable private information: they know who is thinking of leaving the company and who is worth keeping. People in corner offices and boardrooms are usually too distant from the action to have this kind of insight.
All of which means that middle managers can have a hugely beneficial effect on the performance of the workforce if the incentives are right. The third lesson from Shahi Exports is that money is not always the root problem. Its middle managers were making their training recommendations to avoid the extra work that comes from higher churn.
That might make them sound lazy. In fact, they are suffering from a common problem. “Power to the Middle” is a forthcoming book on middle managers by Emily Field, Bryan Hancock and Bill Schaninger, a trio of consultants at McKinsey. It argues that a lack of time and resources bedevils these unfortunate souls everywhere. A survey of 700 middle managers conducted for the book finds that they are spending one full day a week on administrative tasks. Replacing good workers is never fun, but it is a lot worse if a manager is already running on empty. You don’t need to be a theorist to work that out.■
Read more from Bartleby, our columnist on management and work:
“Scaling People” is a textbook piece of management writing (Jun 22nd)
The upside of workplace jargon (Jun 15th)
Why employee loyalty can be overrated (Jun 8th)
Also: How the Bartleby column got its name
Source: Business - economist.com
