In lean times they can help you thrive—if you reimagine their roles. by
• Emily Field,
• Bryan Hancock, and
• Bill Schaninger
In recent months, amid signs that the economy might be softening, many companies announced layoffs aimed at curbing expenses, with middle management a common target. Cutting such jobs hastily or too deeply can be a costly mistake. Over the past several years of advising clients and researching workforce trends, we’ve seen that this vital organizational layer often gets severely depleted. The problem is, middle managers—positioned close to the ground but not too close—are essential to helping businesses navigate rapid, complex change. They can make work more meaningful, interesting, and productive, and true organizational transformation can occur only with their involvement. They’re the glue that holds teams and enterprises together, fostering the inclusion and psychological safety individuals and groups need to thrive.
If middle managers are to fulfill this promise, though, leaders must reimagine their roles and give them the training and support they need. Instead of eliminating them or relegating them to administrative and individual contributor work, companies should reassess their responsibilities, push to more fully understand their value, and then develop, coach, and inspire them to realize their potential as organizational linchpins.
All that may sound like a tall order, but leaders can’t afford not to take those steps, as we learned when we recently explored the economic impact of investing in the development of human capital—including the critical management layer. We studied HR data on 1,700 global companies—for example, figures on attrition, hours of training, and internal mobility. We also examined their McKinsey Organizational Health Index scores, which are based on an analysis of organizational performance outcomes (such as employee motivation and an inclusive work environment) and management practices (such as employee empowerment and bottom-up innovation). When we compared that information with the firms’ financial results, we found that companies whose managers excelled on human capital metrics had high returns on invested capital (28%), were four times as likely as their peers were to have superior long-term financial performance, and experienced more sustained revenue growth during the pandemic.
Why Middle Managers Can Be Your MVPs
Many companies don’t know how to make the most of their middle managers—the people at least one level away from both the front line and senior leadership. In survey after survey those managers report being mired in bureaucratic and individual contributor work. If freed from those demands, they can take the lead in several areas critical to the 21st-century workplace.
Responding to increasing automation. As algorithms and machines take over tasks from humans, companies will be engaged in what we call the Great Rebundling: finding ways to reconfigure employees’ work. Although such redesigns may be broadly shaped at headquarters, the details can be defined and carried out only by those with firsthand knowledge of what happens on the ground. Smart organizations will deputize middle managers to pull apart and reassemble the pieces of affected jobs.
The world’s largest private employer, Walmart, has recognized the importance of rebundling in the face of rapidly changing technologies and consumer preferences. Its Walmart Academy provides instruction and on-the-job coaching to prepare associates for supervisory positions, and its Live Better U program offers free classes and training in areas including cybersecurity, business administration, supply chain management, and logistics—all in anticipation of skills associates will need going forward. Building a strong managerial pipeline is essential, Lorraine Stomski, Walmart’s senior vice president of enterprise leadership and learning, told Harvard Business School’s Joseph Fuller in a podcast episode. The manager is “the person that believes in you—that sees you can do more than what you’re doing,” she explained.
Winning the war for talent.
Research by our firm and others has found that people are looking for more than a good salary. They want to understand how a prospective job would fit into the organization’s strategy and align with their personal purpose. They want to join a team that’s caring, trustworthy, interesting, high performing, and fun. They want their employers to participate in their development, and they want more control over what they do and when and where they do it.
Middle managers can make a huge difference in a firm’s ability to attract talent. They, far more than their higher-ups or their colleagues in HR, can craft individualized working arrangements that will enhance recruitment, retention, and diversity while facilitating high-value work.
Consider the case of Julia, a highly qualified recent graduate who interviewed at two investment firms. David, the hiring manager at one, was shocked when she turned down his six-figure offer. He’d failed to perceive that the hiring process now involves more than an economic exchange, and he’d grown tongue-tied when asked about job sharing and whether the company had pledged to go carbon-neutral.
Julia went on to take a job with the second firm, which focused on environmental, social, and governance (ESG) investing. Karl, the manager who’d interviewed her there, had talked about the firm’s values and priorities and whether they connected with her own. That kind of conversation can be driven only by someone operating near the ground level, where it’s possible to understand both the company’s purpose and that of each individual. Karl expressed his openness to remote and part-time work and sealed the deal by introducing Julia to his team, whose enthusiasm and commitment won her over.
As work becomes ever more dynamic, other hiring practices need to evolve. HR can ensure that policies are consistent, fair, and legal. But only managers understand their individual departments deeply enough to see gaps between old and new realities and identify which policies need to change. For example, do university degrees still make sense for particular roles, or are more-creative recruiting strategies called for? Managers and HR can work together to widen the hiring aperture and bring in new kinds of talent. In doing so they’ll also be helping their firms meet diversity goals while leveling the playing field for historically disadvantaged groups.
Leading employee development.
Middle managers can engage in a dialogue with HR about how the organization’s people are overseen and developed. They know their team members better than anyone else does, so they’re best equipped to provide continual coaching and to identify and address performance issues early on.
Demonstrating purpose and compassion.
The need to do this doesn’t end once employees are hired. When workers feel meaning and a sense of belonging on a day-to-day basis, it elevates their satisfaction, commitment, and performance. The CEO can begin by crafting a compelling narrative about what the company stands for. But the continuing conversation requires skilled managers who can drill down to learn what each employee values, connect it to the bigger picture, and try to tailor each job to what people find to be their greatest inspiration. This is especially crucial in light of the pandemic. In an August 2020 McKinsey survey of U.S. employees, two-thirds said that Covid-19 had caused them to reexamine their personal purpose, and nearly half said they were considering changing jobs as a result.
Middle managers can make organizational goals relevant by exploring questions such as What is the work that needs to be done? and Why does that work matter? with their reports. They can be gifted storytellers and sensemakers. With many organizations having loosened their headquarters model in response to the pandemic, connecting employees to company goals has become more complex and critical than ever.
Just as important, skilled managers understand that their employees are people with rich, deep lives and show concern not just for their work but also for their hopes and dreams. Such managers recognize that if someone is underperforming, it’s rarely because that individual doesn’t care; it’s usually because the job is a poor fit or because of personal pressures. When the former is the case, managers can scan the company horizon for something more suitable. When the latter is the culprit, they may be able to lighten the employee’s load.
Checking in on team members’ mental health is no longer a nice-to-have; it’s a must-have. In a recent McKinsey Health Institute survey of 15,000 employees in 15 countries, 59% of respondents reported having at least one mental health challenge. One-on-one conversations are an ideal way to learn what employees are coping with, convey compassion, and offer concrete help. Middle managers who have them regularly with their reports can heighten employee loyalty and performance.
Making smart use of data.
The neglect and misuse of data puts organizations at a serious disadvantage, especially in a volatile environment where the nature of work is rapidly changing. Many leaders complain that they’ve invested in expensive data technologies but seen few concrete results.
The difficulties often stem from a “last mile” issue: the challenge of making data understandable to employees who are in a position to use it and of giving them clear recommendations for its implementation. Some companies have assembled cross-functional data-science teams to wrangle, analyze, and disseminate information and help manage any new projects that result. Middle managers can play key roles on such teams by helping shape their analyses and organize their work. Because middle managers have the best understanding of how data is gathered and applied to day-to-day work, they’re essential to ensuring that data-based activities don’t perpetuate bias or impede performance.
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