Why Middle Managers Are the Key to Economic Growth
Investing in middle management is the smartest and easiest way to increase growth.
This blog post was originally published in May 2020, and was revised in June 2023.
In today’s business ecosystems, where employees no longer work in silos, a manager’s impact goes beyond his or her team and extends to overall performance and profitability. A recent study by Gallup World Poll suggests that middle managers not only play a part in company success, but they are actually the single most important factor in driving productivity. Referencing these findings, Sam Walker, Deputy Editor at The Wall Street Journal, has gone so far as to declare middle managers “the economy’s last best hope.” According to Walker, investing in middle management might be the smartest and easiest way to increase growth from its current 2.9 percent and back to the days of 7 percent.
This is because profitability, deals, employee retention and satisfaction, and company culture all rely on middle managers. Financier Worldwide Magazine says, “The power of middle management to enable companies to thrive and grow should come as no surprise for global executives. Middle management acts as the important link between the C-suite’s goals and strategies and the employees that execute them.” In short, middle managers are responsible for ensuring the translation and execution of their company’s vision—no small task.
Middle managers have the potential to drive growth specifically because of their unique position within a company. Forbes believes middle managers are the key to any company’s financial success, stating that middle management “binds purpose and execution.” Middle managers manage their own reports, but they also “manage up” to senior executives. By keeping their own team running smoothly and in-line with their company’s culture and vision, middle and senior managers make things easier for the executive team.
A Changing Workforce: Baby Boomers, Gen-Xers, and Millennials
The latest Pew research shows Millennials (born between 1981-1996) now make up the biggest share of the workforce, surpassing both Gen-Xers (born between 1965-1980) and Baby Boomers (born between 1946-1964). However, while Millennials may compose the biggest share of the employment force, 85 percent of Baby Boomers are continuing to work into their 70s. And, although they count for only a quarter of workers, Baby Boomers accounted for more than half of all employment gains in 2018. The current workforce is truly diverse and multi-generational, which leaves some employers wondering how to best deal with multiple generations of employees.
Conventional wisdom holds that Millennials bounce from job to job at a rate much higher than that of their predecessors. That stereotype, however, is inaccurate. According to the latest data from the U.S. Bureau of Labor Statistics, older millennials who were born in the early 1980s and possess a bachelor’s degree have held an average of between 7.5 and 8.4 jobs by the time they’re 30, compared to an average of 12 jobs held by Baby Boomers with a bachelor’s between the ages of 18 and 50. As people age, the data shows, regardless of generation, employment tends to become more long term. And, the median length of employment was actually slightly higher in 2016 than it was for Gen-Xers in 1996.
However, economic conditions for millennials are different than they were for Baby Boomers and Gen-Xers. Research commissioned by the Federal Reserve Board has found while Millennials do not change jobs more rapidly than Baby Boomers or Gen-Xers, earnings have declined with each generation. Controlling for demographic variables like age and work status, Baby Boomers have 24 percent higher earnings than Millennials, and Gen-Xers earn 12 percent higher than Millennials. The Federal Reserve Board states, “Millennials have more student debt, lower earnings, and fewer assets.” More than falsely-perceived generational trends, external economic factors differentiate Millennials from Baby Boomers and Gen-Xers.
Technology—and specifically, social media—has also played a major role in shifting the way all employees view the importance of work. Sam Walker points out that in Gallup polls prior to 2002 most people ranked family, having children, owning a home, and living in peace above having a good job. But in 2002, something changed. As people began comparing their lives online, having a rewarding job became most people’s first priority. For many, having a satisfying job is now the metric we use to measure overall satisfaction with our lives.
Walker then theorizes that people who feel disengaged at work are experiencing an “inspiration gap,” which leads to unhappiness. He suspects a shortage of good bosses, not fancy offices and work perks, better explains why certain companies might have trouble retaining millennial talent. If American workers stagnate, then companies stagnate, and the economy stalls.
Correlation Between Management and Job Satisfaction
Between 2014-2016, Gallup World Poll surveyed working-age adults across 155 countries on the “State of the Global Workplace.” They then developed a theoretical model of four of the most important metrics that explain the correlation between job satisfaction and overall life satisfaction: they were engagement, trust, positivity, and integration.
Engagement proved the most powerful of the metrics, and is defined as, “the sense of emotional attachment to one’s work that supports high levels of motivation and productivity.” Even more importantly, Gallup found managers “are responsible for at least 70 percent of the variance in their employees’ engagement.”
Regardless of generation, employees today want to be passionate about their organizations and their careers. According to Gallup’s findings, the best managers act as coaches. They get their employees to perform by showing them how their work impacts the company, and how maximizing that work helps them maximize their potential. By working to understand employees and their goals, managers can keep employees feeling engaged. Further, Gallup found poor relationships with managers is the number one reason unhappy employees leave their jobs.
How Managers Motivate Employees
Employers often refer to “hard” and “soft” skills. Hard skills are quantifiable skills, like computer programming. Soft skills are interpersonal skills and include things like communication, leadership, flexibility, and teamwork.
The “State of the Global Workplace” report found the most successful companies are “strengths-based organizations” that take a holistic approach to management. These companies place an emphasis on four common soft skills that Gallup recognizes as: leadership, empowerment, engagement, and development.
Leadership focuses on creating a culture built on strengths and communicated throughout the company by management. Empowerment has managers educate employees and empower them to go beyond their job titles. Engagement (much like the engagement metric) refers to creating excitement and enthusiasm among your team. Finally, development looks at having managers measure performance to evaluate, reward, and develop employee talent. These four strategies reinforce the role of a manager as a coach rather than a supervisor.
According to Gallup, “In one company, stores that coupled a new customer strategy with a strengths-based focus generated an estimated 66 percent higher sales growth than the average store, versus 26 percent higher among those that executed the new customer strategy alone.”
Given the importance of middle and senior managers, companies need to carefully consider hiring practices. Too frequently, according to Gallup’s research, managers are promoted based on previous nonmanagerial success. The hard skills that make someone excel in one role do not always translate to managerial adroitness. Gallup suggests companies need to “select managers based on their inherent talent for managing.”
How Executives Can Deal With the Challenges of a Changing Workforce
Top business schools, like the Cox School of Business at Southern Methodist University, train MBA candidates in communication and interpersonal skills necessary for managers. The Financial Times notes that MBAs originated with the goal of professionalizing management “for the good of society.” Effective MBAs prepare students with soft and hard skills. The Financial Times goes on to point out that effective communication strategies and other soft skills are not only as important as technical acumen, but are often the most difficult skills to acquire. Don VandeWalle, Altshuler Distinguished Teaching Professor and Frank and Susan Dunlevy Research Fellow at SMU Cox, explains, “The technical skills such as finance, marketing, information technology—those may get you in the door. But it’s the management, leadership skills that get you up the floor.”
Now, SMU Cox is offering its MBA program online. The Online MBA is designed to transform students into business leaders. With the Online MBA, you do not have to leave your current job or relocate to access SMU Cox faculty and the extensive corporate partnerships with some of the leading companies in the world.
The SMU Cox Online MBA prepares students to make meaningful change in their organizations or in their next role. It provides a combination of technical and theoretical training, real-world experience, and helps students develop leadership skills—the very skills economists and analysts believe have the potential to power not only individual companies but also the global economy.
Meet with an Online MBA enrollment advisor and become a leader equipped for the future.