Companies often focus on senior management to improve their bottom line, but investing in middle managers can actually yield higher returns. New research conducted by McKinsey shows that organizations with top-performing middle managers yield multiple times the total shareholder returns (TSR) of those with average or below-average managers over five years, making managerial performance a significant factor in organizational success.
Middle managers have a crucial role in developing relationships that build a strong team and boost operations. They help convert an organization’s strategic goals and vision into reality, thereby contributing to the bottom line. Yet, many companies underestimate the value of this group due to a lack of investment in them. McKinsey’s study highlighted how middle management often grapples with administrative tasks, creating obstacles to their ability to focus on critical talent development work.
This research proves that middle management is an essential part of any organization’s success, and investing in them maximizes the growth potential and financial returns. But what behaviors define top-performing managers? McKinsey’s analysis found that the top performers exhibited eleven behaviors:
Creative and entrepreneurial
Open and trusting
Based on these behaviors, organizations with top quartile managers in these practices, outperformed those with low quartile managers by three to 21 times greater TSR over five years. This research proves that middle managers are not just a nice to have from a management perspective, but an absolute necessity for financial success.
McKinsey's report suggests five ways companies can help middle managers improve their effectiveness:
Optimize the organization’s ‘spans’: Find the perfect number of employees for managers to oversee to achieve efficiency and effectiveness.
Reset manager roles: Help managers reset roles by identifying bureaucratic tasks and find ways to automate aspects such as approvals and reports, freeing managers to focus on people development and strategic work.
Pivot to capability building: Clearly communicate organizational values and offer professional learning and development opportunities for managers.
Improve manager experience: Give managers the power and resources to make meaningful decisions, encourage delegation, and provide peer group sessions and mentorship.
Develop management systems: Provide role clarity, training, incentives, and a performance feedback loop to create a coherent management structure.
Investing in middle managers can drastically improve a company’s fortitude in times of upheaval and stress. McKinsey’s study goes on to show that companies that invest in human capital yield more consistent earnings through times of crisis. By supporting middle managers, organizations boost overall performance, cultivates a healthy and competitive team culture, and increase shareholder satisfaction and an impressive TSR.