When I was CEO I was obsessed with 2 questions: → Why are there so many bad managers? → How do I avoid them in my startup? It took me years to find the answers. Here’s what I found:
In 1969 Laurence Peter created a satirical explanation of how most companies end up with incompetent people in leadership positions: → Say, we have a friend ‘Z’ who is a great designer → ‘Z’ joins a great company’s design team as a Junior Designer → Z works an Individual contributor (IC) & perform well → Next year Z is promoted to Senior Designer → Z now has more responsibilities but is still an IC → The following year the team lead leaves & based on Z’s great performance, company management decides to make Z the team lead → Team lead = more money, prestige & growth so Z also agrees → Only 1 problem: our Z is horrible at management. Under them the team’s performance & morale drops. Also now the team isn’t benefitting from their great design skills as they have no time to design → Z’s poor performance as team lead means they won’t get promoted further → So Z is now stuck in this role till they quit or are fired The linear hierarchy has done what it does best → Find Z’s level of incompetence & stick them there. What’s the alternative? A 2018 research on 50,000 sales people across 200+ companies showed: → When the best salesperson was made the sales manager, team performance declined. → When the person with the best management ability was made the sales manager, team performance increased. So how do you gauge management ability? There are many tests but I find Julie Zhuo’s 3 questions the simplest & most useful. For each team member ask: 1️⃣ Do they find it more motivating to achieve a particular outcome than to play a specific role? 2️⃣ Do they like talking with people? 3️⃣ Do they provide stability in emotionally challenging situations? The person on your team who has a ‘Strongly Agree’ to all 3 statements has high management potential. Help them fulfil this potential via management training & coaching. What about your star Individual Contributor (IC) who has a ‘Disagree’ or ‘Strongly Disagree’ to any of the 3 statements? Don’t make them team lead. Best case they’ll be good manager but they’ll hate it & become disengaged. Worst case they will be a horrible manager & will tank the team productivity & morale. In either case, you will eventually lose them. It’s far better to create 2 parallel tracks. One for managers & one for ICs. Both of which increase in responsibilities, compensation & prestige. This leads to: → High engagement as people are doing what they enjoy. → High performance as people are doing what they are good at. I can’t think of many other Startup initiatives with a better long term ROI.