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🔢 Key Takeaways

  1. Advancement in one's career may not always align with personal goals. It is important to consider the pros and cons of moving up the ladder and weigh them against one's desired level of autonomy and impact within a company.
  2. Before accepting a management role, consider the potential emotional toll of supervising others, and ask yourself if it is truly the right career move for you.
  3. Bad bosses can lead to high employee turnover rates and effective management requires key skills and traits. Promotions based solely on sales skills may not lead to effective management.
  4. Good people-management skills, including coaching, communication, and trust-building, can significantly increase productivity. Surveys can help managers assess their own performance, but more research is needed in this area.
  5. Good managers have a significant impact on retaining their best employees, whereas a poor boss might drive them away. Compassion may be an important factor for a good boss, though it is difficult to measure.
  6. Surveys aren't always accurate in rating good or bad bosses. More data is needed to understand boss behavior and there is no single recipe for success when it comes to leadership.
  7. Promotions must be based on skills rather than job performance alone, to avoid promoting employees beyond their level of competence. Employers must be vigilant in ensuring employees are promoted to suitable roles.
  8. Promoting based on current success may not lead to success in new roles. Companies should identify candidates strategically based on their skills and alignment with role requirements.
  9. Promotion decisions should not be based solely on job performance. Companies must ensure that employees possess the necessary skills for the new role to avoid the Peter Principle and promote success.
  10. Sales performance and managerial competence are not the same, and firms should prioritize collaboration experience over sales numbers when selecting managers to improve overall sales by 30%.
  11. Promoting based on past performance can incentivize workers, but may result in bad managers and hurt profits. A dual-career track that recognizes contributions without moving to management could be a solution for some firms. Finding a balance benefits both the firm and employees.
  12. Companies are recognizing the flaws in the traditional promotion model of promoting individual contributors into managerial roles and are creating alternative paths to career advancement. Personality tests can identify managerial abilities, and it's time to challenge traditional models.
  13. Being promoted to management may not be the best fit for everyone, and recognizing and rewarding technical-specialist roles can create incentives for those who want to utilize their skills and expertise without feeling excluded. Happiness and success come from doing what you love.
  14. Moving into a managerial role can bring greater autonomy, respect, and personal fulfillment. Despite societal judgments, it's important to prioritize personal values and aspirations over external perceptions of success.

📝 Podcast Notes

Balancing Career Advancement and Personal Goals

Katie Johnson, a data scientist, wanted to become a manager to have more autonomy over her work, have more impact at companies she worked for, and to show herself that she had achieved success. However, she faced the downside of more meetings and less time for coding and thinking. Her father, who was a network engineer, had no aspiration to become a manager. Johnson's journey highlights that defining success by career advancement may not always be the best mindset, and one must weigh the pros and cons of moving up the ladder.

The Downside of Being a Boss

Becoming a boss isn't always the best career move, as managing people can be draining and sometimes miserable despite getting good reviews. Standard operating procedure for most firms around the world is promoting employees to become bosses, but it raises the question of whether it produces good or bad bosses. The horrible boss caricature is well-known, but truly horrible bosses are rare in real life. Hollywood has produced some examples, but these days abusive behavior is harder to get away with even in the entertainment industry. Employees should consider if they truly want to be bosses before pursuing management roles.

The Impact of Bad Bosses on Employee Turnover Rates

Bad bosses, whether incompetent, overstretched or simply miserable, can lead to high employee turnover rates, with roughly 50 percent of American employees leaving a job due to bad boss behavior. However, boss behavior is not a well-studied science and this number may not accurately reflect the true situation. Good employees do not always make good bosses and promotions based on sales skills alone can lead to ineffective management. Despite this, bosses do matter and can have a significant impact on outcomes. While not all individuals thrive as bosses, it is important to understand the key traits and skills that make for effective management.

The Impact of Quality Bosses on Employee Productivity

Research suggests that the quality of a boss can have a significant impact on employee productivity, with excellent bosses potentially increasing output by up to 50%. However, it's difficult to pinpoint what exactly makes a boss 'good', as there are many variables in the boss-employee relationship. One metric that researchers have focused on is people-management skills, which encompasses how well managers coach, communicate, and build trust with their team. This type of skill appears to have a tangible impact on productivity. Surveys are a common way to collect data on people-management skills and can be an effective tool for managers to assess their own performance. Yet, despite the potential influence of bosses on workplace outcomes, knowledge in this area is still limited.

The Impact of Managers on Employee Retention

A study by economists Steve Tadelis and Michael Hoffman found that the subjective rating of a manager doesn't necessarily impact their employees' performance, promotions, earnings, or patent applications. However, it was found that managers have a significant impact on employee retention. Employees who moved from a poorly rated manager to a highly rated one showed a 60% decrease in attrition. Furthermore, managers had a greater impact on retaining their best employees. This suggests that a good boss keeps the best employees happy and productive, while a poor boss might drive them away. Tadelis suggests that compassion may be an important factor for a good boss, though it is difficult to measure.

Understanding Boss Behavior: The Gap Between Perception and Reality

The literature on management and bosses is not entirely based on empirical evidence, and surveys conducted by employees to rate their managers can often be unreliable. Behavioral economists like Steve Tadelis and management experts like Nicholas Bloom have been trying to demystify the black box of boss behavior, but a significant gap still exists between what people say and how they behave. There is a need to gather more data and ask relevant questions to advance our understanding of good and bad bosses. Furthermore, the criteria for what defines a good or bad leader is subjective, and there is no single recipe for success that can apply to all cases.

The Peter Principle: Why Incompetence Rises in the Workplace

The Peter Principle states that an employee tends to rise to his level of incompetence. This means that often, people who are good at their jobs are promoted to new roles that require different skills, where they may not be as competent. This phenomenon is prevalent in many organizations, and it results in the rise of incompetent bosses. The Peter Principle has been a popular theory since Laurence J. Peter introduced it in his book with Raymond Hull, The Peter Principle: Why Things Always Go Wrong. Kelly Shue, along with Alan Benson and Danielle Li, published a paper on this principle's impact on job promotions, called "Promotions and the Peter Principle". Employers must keep a check on employees' skills and ensure that they are promoted to suitable roles, avoiding promoting them to their level of incompetence.

The Peter Principle Exists: Promoting Successful Employees May Not Lead to Success in New Roles.

The Peter Principle, which suggests that employees are promoted based on their success in their current role rather than their potential to do well in a new role, has finally been tested with real data. Kelly Shue and her co-authors studied data from over 40,000 business-to-business sales workers and found evidence that the Peter Principle does, in fact, exist. Stronger sales performers were more likely to be promoted to managerial roles, but these promotions did not translate into higher overall performance. This suggests that companies need to be more strategic when identifying candidates for promotion and consider whether their skills align with the requirements of the new role.

The Peter Principle and Promotion Decisions

The Peter Principle, where employees are promoted to their level of incompetence, applies to almost all industries and even government structures. Even the ancient Chinese imperial examination system used classical poetry to select tax collectors. The problem is that the skills required for a job may not match the skills that got someone promoted in the first place. Empirical evidence shows that job performance is often used as a trigger for promotion, but this alone is not evidence of the Peter Principle. Companies need to ensure that the best salesperson is also the best manager of salespeople before making a promotion decision.

The Pitfalls of Promoting Good Salespeople to Managers

Good salespeople don't always make good managers, as shown by research on measuring manager quality through subordinate sales. The Peter Principle is a real phenomenon where people get promoted into positions they are not qualified for and end up making their organizations worse off. Firms can improve overall sales by 30% if they put more weight on collaboration experience and less on sales numbers when selecting managers. Despite this knowledge, many firms continue to choose managers based on their sales performance, particularly for large teams. The key takeaway is that sales performance and managerial competence are not interchangeable, and firms should focus on the latter for optimal performance.

Balancing Incentives and Managerial Potential in Employee Promotions

Firms often promote employees based on past performance rather than managerial potential, which can result in bad managers and hurt profits. However, firms do so because promoting based on past performance is a strong incentive system and can be cheaper than offering pay for performance. The trade-off is that promoting bad managers can hurt profits, but it motivates workers and increases their status in society. One possible solution is to create a dual-career track that recognizes an employee's contributions in a public way without moving them to management. This can be seen in some technology-focused firms in Silicon Valley. Overall, firms face a trade-off between incentivizing workers and promoting good managers, and it's important to find a balance that benefits both the firm and employees.

Rethinking Traditional Promotion Models - Focusing on Management Abilities

The traditional model of promoting great individual contributors into management roles regardless of their managerial abilities is flawed and leads to the Peter Principle. Companies like eBay and Google are rewarding great technical talents without making them managers. Consulting companies are following suit. However, most firms still follow the traditional model. Personality tests can identify individuals who are great data scientists but not great managers. It is essential to distinguish between management talent and individual contributors. There should be alternative paths to career advancement for those who don't want to become managers. The traditional model of promoting great ICs into managerial roles needs to be challenged.

A New Approach to Job Satisfaction: Emphasizing Technical Specialist Roles

Many people are promoted into management as a reward for being good at their job, but it doesn't necessarily make them happy. Katie Johnson, a former data manager, found more personal satisfaction and happiness as a data scientist. She believes that there is a growing trend of technical-specialist roles that pay good money and should be recognized and rewarded, in addition to management positions. This helps create incentives for those who may not want to become managers and allows them to utilize their skills and expertise without feeling excluded from high-level conversations. Ultimately, doing what you love and are passionate about is the key to success and happiness in your career.

The Rewards of Becoming a Manager: Autonomy, Respect, and Fulfillment

Becoming a manager may feel like a loss of status, but having a seat at the table and being respected can be more rewarding than a new job title. People value autonomy, respect, and being heard, which should come with the managerial role. While some may judge the decision to move backward in the career hierarchy, it's important to focus on what brings personal fulfillment. Management science is a constantly evolving field, and there are many opportunities to make meaningful contributions that go beyond job titles. Ultimately, it's important to prioritize personal values and aspirations rather than external perceptions of success.