Source: Unsplash/Amy Hirschi
By Emily Field, Bryan Hancock, 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 organisational 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 organisational 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 realise their potential as organisational 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 organisational 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.
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