🔑 Key Takeaways
- Aspiring managers should weigh the benefits like autonomy and impact against the increased responsibilities and time commitments before making a career move.
- Half of American employees have left a job due to a bad boss, but the number may not be as significant as it seems, as most of us will have a boss or be one at some point. European data shows only 13% of employees rating their current boss as bad. Despite the importance of addressing this issue, research on bad boss behavior is lacking.
- Despite the complexity of the boss-employee relationship, it's clear that bosses play a crucial role in organizational success. However, assessing their impact through surveys may not provide definitive answers for the firm.
- Moving from an average boss to a high-quality one can increase productivity by up to 50%, but only employee retention shows a strong correlation with manager ratings.
- Despite extensive research, there's no clear answer on what makes a good boss, and much of the data may not accurately reflect reality due to biases and gaps between what people say and do.
- The Peter Principle suggests that employees are promoted based on past performance, leading them to roles where they lack necessary skills, resulting in incompetence. Great performers in one area do not necessarily make effective managers.
- Despite common belief, stronger sales performers were more likely to be promoted, but the Peter Principle may apply to other fields where skill requirements differ.
- Promoting employees based on current job performance alone can result in poor management, leading to decreased subordinate sales.
- Firms may promote employees with high sales numbers into management roles, potentially leading to negative consequences, but the benefits of promotions for employees can outweigh the costs for the firm.
- Some firms offer dual career tracks for tech employees, recognizing that not everyone is suited for management, allowing for advancement in technical roles without managerial responsibilities.
- Individuals' satisfaction levels can vary greatly depending on their roles. The Peter Principle may contribute to dissatisfaction when transitioning to management. Offering diverse career paths and recognizing individual contributors can help maintain satisfaction.
- People value autonomy, respect, and alignment with personal values over promotions or new job titles. Organizations should ensure non-managerial roles feel valued, and individuals should prioritize these factors in their career decisions.
📝 Podcast Summary
Considering the pros and cons before seeking a management role
People often seek management roles for reasons such as autonomy, impact, and the perception of success, but may not fully consider the increased responsibilities and time commitments that come with the position. For instance, Katie Johnson, a data scientist, aspired to become a manager for these reasons, but was surprised by the excessive number of meetings she encountered in her new role as head of data and analytics. Her experience highlights the importance of carefully considering the pros and cons before making a career move. Additionally, it's worth noting that not everyone shares the same career aspirations; Johnson's father, for example, was content with being a network engineer and had no desire to manage others.
Understanding the Science Behind Bad Bosses
Becoming a manager or boss, as Johnson discovered, can be a misstep that leads to misery and boredom, rather than advancement and fulfillment. While the stereotypical "horrible boss" is a familiar character in film and literature, less attention is paid to the more common bad boss who may be incompetent, overstretched, or simply unhappy in their role. A Gallup poll suggests that half of American employees have left a job due to a bad boss, but with multiple bosses over a career, this number may not be as significant. European data shows only 13% of employees rating their current boss as bad. However, given that most of us will have a boss or be one at some point, it's crucial to understand the science behind boss behavior and strive for improvement. Unfortunately, the research on this topic is not very scientific, and more attention needs to be paid to addressing the issue of bad bosses in the workplace.
Understanding the Impact of Bosses on Organizational Outcomes
The role of a boss or manager is essential for organizational outcomes, but the academic literature on their impact is not well-advanced due to the complexity of the boss-employee relationship. Good employees may become bad bosses, and while there are methods to assess manager skills, such as surveys, the value of these assessments for the firm is not always clear. Economist Steve Tedellis, who has experience managing teams at eBay and Amazon, questions the significance of these surveys and wonders if managers who score higher are actually contributing more. The relationship between a boss and their employees is multifaceted, making it challenging to isolate the effects of the boss. While the importance of bosses is clear, the field of personnel economics continues to grapple with understanding their impact.
Impact of good bosses on employee productivity and retention
Having a good boss can significantly impact employee productivity and retention in high-tech knowledge-based companies. The researchers found that moving from an average boss to a high-quality boss could increase productivity by up to 50%. However, when they analyzed various outcomes such as subjective performance, income, promotions, and patent applications, they found little to no correlation with the rating of a manager. The only exception was employee retention. Employees who moved from a poorly rated manager to a highly rated one experienced a 60% drop in attrition. This effect was particularly notable as good managers seemed to help retain better employees more effectively than worse managers. The findings of this study, published in the Journal of Political Economy in 2021, shed new light on the importance of effective management in retaining valuable employees in the competitive high-tech industry.
The evidence-base for good bosses is limited and may not be entirely reliable
The evidence-base for what makes a good boss is limited, and the data we do have may not be entirely reliable. Economists like Steve Tadellis and Nicholas Bloom have spent years studying leadership and management, but they've yet to find a clear answer. Much of the research relies on employee surveys, which may not accurately reflect reality as people's responses can be influenced by various factors. For instance, they might not be entirely truthful or objective, or they might rate their boss based on how they perceive their own performance. Furthermore, there is a significant gap between what people say and how they behave, as economists believe in the revealed preference approach. Researchers are continuing to explore this area, but it's essential to keep in mind that much of what we've been told about good and bad bosses may not be evidence-based. Instead, we need to keep looking for better data and asking more insightful questions.
The Peter Principle: Promoting Employees to Their Level of Incompetence
Organizations often promote employees based on their past performance, leading them to roles where they may not possess the necessary skills, resulting in incompetence. This phenomenon, known as the Peter Principle, was first proposed by Lawrence J. Peter and has been observed in various industries. Despite its satirical intent, the Peter Principle resonated with many, and organizations attempted to recruit Peter as a management guru. However, he declined, recognizing the potential for his own incompetence in such a role. Economists argue that managing is not the same as doing, and great performers in one area do not necessarily make effective managers. This insight sheds light on the common experience of encountering incompetent bosses and the challenges faced by organizations in their promotion processes.
Study finds no evidence of Peter Principle in sales
The Peter Principle, which suggests employees rise to their level of incompetence due to promotions based on performance in previous roles rather than readiness for the next role, has not been empirically proven until a recent study by Kelly Shoe and her co-authors. They analyzed data from over 40,000 business-to-business sales workers and 5,000 managers across 130 US-based firms, finding that stronger performers were indeed more likely to be promoted. However, this phenomenon may not be exclusive to sales and is likely to apply to other fields where skills required to succeed at one level differ from those required in the next. Industries like science, manufacturing, academia, entrepreneurship, and even government structures may exhibit similar issues. It's important to note that while the findings are compelling, more extensive research would be beneficial to further validate the Peter Principle's applicability and generalizability.
The Peter Principle: Promoting Employees Based on Current Performance May Lead to Poor Management
The Peter principle, which suggests that employees are promoted based on their current performance in their current role rather than their ability to perform in the next role, can lead to decreased performance when those employees are promoted to management positions. In the study discussed, researcher Kelli Shue found that among promoted managers, those with lower sales prior to their promotion actually led to better sales performance from their subordinates. Conversely, managers with high sales prior to their promotion led to a decline in subordinate sales. This finding suggests that firms may be making a mistake when they promote employees based solely on their current job performance, as it can result in poor management and ultimately, negative consequences for the organization.
Promoting Employees Based on Sales Performance
Firms may knowingly promote employees with strong sales numbers into management positions, even if they may not be the best fit for the role, due to the motivational benefits of promotions. This trade-off between using past performance as a promotion criterion and the cost savings compared to offering high pay for performance can lead firms to accept the potential negative consequences of the Peter Principle. Despite the negative impact on overall sales numbers, the status and incentive value of promotions for employees can outweigh the potential drawbacks for the firm.
Separating technical expertise from management
Some companies, particularly in the high-tech industry, are recognizing the importance of separating technical expertise from management skills. Instead of promoting employees solely based on their ability to manage others, these firms offer dual career tracks where individuals can advance in their technical roles without taking on managerial responsibilities. This approach allows firms to publicly recognize and reward employees for their contributions, while also acknowledging that not everyone is suited for management. However, this model is not yet widely adopted, and the Peter principle, which suggests that people are promoted based on their performance in their current role rather than their ability to perform in the next role, continues to be a common issue in many organizations. Additionally, identifying an employee's strengths and weaknesses early on in their career can help prevent the promotion of individuals into management roles where they may not be successful.
Career satisfaction and fulfillment
Personal satisfaction and fulfillment play a significant role in career choices. The individual in this conversation, Katie Johnson, shared her experience of transitioning from being a data scientist (IC) to a manager and then back to an IC. During her time as a maker, she reported high satisfaction levels, around eight and a half out of ten. However, her satisfaction dropped when she became a manager, with an average of four or five out of ten. After quitting her management role, she returned to working as a data scientist and reported a nine and a half out of ten satisfaction level. The Peter Principle, which suggests people rise to their level of incompetence when promoted, was mentioned as a potential reason for the dissatisfaction some individuals experience when transitioning to management roles. The idea of splitting out levels of seniority, such as technical experts, was proposed as a solution to incentivize individuals and provide them with opportunities for growth and recognition without the added responsibilities of management. It's essential to consider personal satisfaction and fulfillment when making career decisions, as individuals may not thrive in roles that do not align with their passions and interests. Employers can support their employees by offering diverse career paths and recognizing the value of individual contributors.
The importance of autonomy, respect, and values in career satisfaction
Autonomy and respect are crucial motivators for people in their careers, often more so than promotions or new job titles. Katie Johnson, a former manager who became a freelance data coach, shared her experience of feeling overlooked and undervalued when she stepped down from her managerial role. She emphasized that people want to have a seat at the table and be heard, which can be a challenge for those who are promoted from technical roles to managerial positions. It's important for organizations to recognize this and ensure that those in non-managerial roles still feel valued and respected. Additionally, individuals should consider their own priorities and values when making career decisions, as Johnson did when she chose to become her own boss. Overall, the discussion highlights the importance of autonomy, respect, and alignment with personal values in career satisfaction.