We are currently going through a management crisis. Alarmingly, Gallup found that 50% of workers who quit their jobs left due to issues with management, supporting the idea that employees leave bosses, not jobs. What employees are now looking for are companies with less layers of management and more freedom in the workplace.
With flat organizational structures on the rise, more and more companies are reconsidering the role of managers, especially in the tech industry where internal dynamics are very different from traditional top-down companies. Top gaming company, Valve has abolished management altogether, while Zappos has replaced the management level with a new more autonomous organizational alternative. Even, tech giant Google went through a period of experimentation with a flat organizational structure and has since revamped its management practices.
This begs the question, is it time to get rid of management? What many industry leaders have caught onto is the fact that managers are still needed in today’s demanding business world but their role is being reshaped by new workplace trends. To stay on top, companies must now reassess the responsibilities of their managers and train them to effectively manage the modern workforce.
The New Employee
Today major tech companies don’t want people who will listen and carry out - they want creative thinkers who will come up with innovative ideas and solutions. As a result, rather than giving orders, managers must find ways to foster this creativity. This means companies want:
Less micromanaging and more autonomy
Faster development of new skills
Higher employee retention
Today’s highly-skilled employees are not easily replaceable. Turnover can cost a company up to 400% of an employee’s annual salary. Even when they don’t leave the company, disengaged employees are less motivated and more likely to get by doing the minimum. According to Gallup’s State of the American Workplace survey, 52% of US employees are disengaged. They estimate that the resulting lost productivity costs the US $450 - $550 billion per year.
In fact, it costs more to onboard new employees than to train your existing workforce. Providing more proof of this reality, studies have shown that higher engagement equals higher productivity. Gallup found that companies with a higher ratio of engaged to disengaged employees (9.3 to 1) experienced 147% higher earnings per share than their competition. As a result, companies are now paying much more attention to managers’ employee turnover and satisfaction rates.
The key to attracting and retaining this new workforce is understanding what motivates them. Millennials have different expectations of their managers than the previous generation. Even top companies are realizing that simply offering higher salaries than their competitors is not the answer.
Studies show professional development and leadership opportunities are more important to millennials than monetary rewards. Not only are millennials hungry for development, according to a Deloitte study two-thirds believe it’s their manager’s responsibility to provide them with training and opportunities. In fact, only 28% feel their skills are being fully utilized in the workplace.
Tired of using technology? Three-quarters of millennials believe access to technology makes them more effective at work. Growing up in the age of social media, they’re used to getting answers fast. In fact, 41% prefer to communicate electronically at the office rather than face to face or over the phone. Not only do they want to use technology, 67% judge their employers based on their technological knowledge. This means managers must be tech savvy and able to provide the answers their reports need in real time using the latest workplace tech tools.
Culture trumps benefits. According to the World Economic Forum’s 2015 Global Shapers Survey of millennials from 125 countries, company culture was the second most important attribute respondents were looking for in an employer. While some mistake culture for company-wide trips and events, these are facilitators rather than creators of company culture. A manager’s goal is to create a positive and collaborative work environment, spread common company values and, as a result, encourage a deeper sense of company loyalty.
Millennials eschew the idea of traditional employee-manager hierarchies with 83% preferring to work for companies with less layers of management. They want managers who are easily approachable and willing to take their opinions into account. This is evident in today’s millennial-led organizations that favor open work spaces where CEOs, managers and employees work alongside each other.
Another challenge facing today’s managers is the rise of remote workers or telecommuters. In the globalizing workplace, many teams are now made up of employees working from as widespread as Japan, Dubai and Germany. Managing these types of teams presents a new set of challenges.
When co-workers have never met in person, or communicate mostly via internet, creating a sense of team spirit can be difficult. In this kind of environment being open to trying out innovative ways of team building is essential. Web app-Automation service Zapier has been made up of a completely remote working team since its inception in 2011, proving that creating a virtual company culture is possible.
To face this challenge, managers are harnessing the power of modern tech tools to create a living virtual workplace. Regular all hands meetings via Google Hangouts allow people to keep up to date with what the rest of the team is working on, avoiding duplication of tasks and encouraging collaboration. Zapier has named Slack the virtual water cooler. While it streamlines communication, it’s also an important forum for creating stronger relationships between co-workers through the sharing of news, achievements, jokes and virtual high fives.
How do you develop great managers?
Not everyone is cut out to be a manager - just because someone excels in the technical skills they bring to a team does not mean they will necessarily be good at managing people - or want to do so. Only one in ten people have what it takes to be an effective manager. In fact, Gallup alarmingly found that companies choose the wrong person for the job 82% of the time. Amongst the best managers, the study makes a distinction between those with a high level of talent for managing others and those with a basic talent for management. It reported that together these managers can produce 48% higher profit than average managers.
This will also be a great concern as millennials enter into management positions. According to Deloitte’s 2016 study on millennials, only 24% saw leadership as one of their strongest personal skills upon graduation. What’s more, Deloitte reported that 71% of employees who were likely to leave their jobs in the next two years were unsatisfied with how their leadership skills were being developed.
It’s not just employees that need to be engaged, when your company suffers from low management engagement levels the impact can become widespread. Gallup found that a striking 65% of US managers are either not engaged or actively disengaged. As managers are largely responsible for employees’ engagement levels, disengagement in managers can lead to a cascading effect on employees. The financial impact of the transfer of disengagement from managers to employees costs the US a staggering $319 billion to $398 billion a year.
However, the opposite is also true. Employees who work for engaged managers are 59% more likely to be engaged themselves. If companies are able to develop and engage their managers they can also leverage the impact of the cascade effect in their favor.
For more information on how to develop and engage your managers download our free white paper.
Photo by Luis Llerena