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Middle Managers - key to success for knowledge based industries

Middle Manager Competence is Key to Success

Research conducted by Wharton Business School management professor Ethan Mollick suggests that middle managers are the key productivity enhancing variable especially for knowledge-based companies.

“The often overlooked and sometimes-maligned middle managers matter. They are not interchangeable parts in an organization,” Mollick says.

Mollick conducted research in the computer game industry, an industry that needs to be high on innovation and execution as well. The industry, he notes, is populated by companies that are relatively established, have clear product strategies and yet depend to a great extent on the "innovative output of key individuals." In addition,  "success in the game industry relies not just on managers in charge of innovation, but also on project managers capable of organizing dozens of programmers and coordinating budgets that often reach into the tens of millions of dollars."

He did not include top managers in his analysis because there is abundant research that indicates that the impact of CEOs, CFOs and other top-level executives on large firms is limited. Indeed, these top positions explain less than 5% of the variation in firm performance among Fortune 800 companies. While acknowledging that top management plays a significant role in setting the overall direction of the company they don't have a big part in deciding which individual projects are selected and how they are run.

The industry he analysed accounted for about $4 billion of revenue and included 537 individual producers, 739 individual designers and 395 companies.

Mollick found that it was middle managers, rather than innovators or company strategy, who best explained the differences in firm performance. Managers accounted for 22.3% of the variation in revenue among projects, as opposed to just over 7% explained by innovators and 21.3% explained by the organization itself – including firm strategy, leadership and practices.  Mollick writes, "individuals uniquely contribute to the success or failure of a firm…. Additionally, even in a young industry that rewards creative and innovative products, innovative roles explain far less variation in firm performance than do managers."

The best managers are able to work closely with the innovators to turn their ideas into realistic project plans, he adds, and they are effective at motivating the team and facilitating "collective creativity."

In order to see if these skills were portable, Mollick re-examined the data, looking only at individuals who moved between companies. He found that middle managers who switched employers had an even larger impact on performance than those who remained within organizations. "This is not about a person being a good fit in just one specific organization. Their skills are useful anywhere." It's more evidence that managers are not "cogs in a machine. There is something innate in them that makes them good at what they do."

The study highlighted the importance of management skills in brining about successful projects and ultimately successful products. The takeaway is simple, companies that invest in middle management training and work to provide them opportunities to test their skills and retain them will be adding far more to the bottom line than any other means available.

Posted in Business Management

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