Sunday, February 12, 2012


By a quirk of evolution, managers earn more than the people they manage. There is usually a good reason for that: more responsibility. But as the results of managers are more intangible than of cooks or archtitects or surgeons, people who prefer to avoid clear-cut and concrete activities tend to flee into staff positions and into general management. If the results of managers are measured at all, they are usually measured in numbers. That's what's nice in finance: all numbers - whatever they mean. Numbers can be manipulated and interpreted and there is a broad repertory to hide behind numbers. Positive business results are explained by good management, negative results by external circumstances. Read a few annual reports and you'll know what I mean. Balance sheets and annual statements are riddled by assumptions, estimates and conventions. How are stocks valued? What is overhead? Reserves are increased or decreased at the stroke of a pen. Goodwill is also a favorite fantasy number.
When the product of an organization is produced by professionals, it has become more and more common that "general managers" take over. Schools are led by people who never have taught, department stores are led by people who never have been selling. Marketing is more intangible than selling, market development is even more intangible and strategy even more. And what about people who pride themselves to be responsible for visioning? Whatever we may think of this, one consequence is that professionals resent to be managed by people who don't understand their work and manage by numbers - and earn much more than they ever will do. Departments are downsized, while the top is upsized, in numbers and in remuneration.
In board rooms we might find people that are so removed form the real work and real performance that the only thing they can do is buying and selling companies.
More and more publicity is about managers being overpaid. There is, at least for professional organizations, a solution that is as simple as it is elegant: managers of professional groups may never earn more than the best paid professional under them. The director of an architectural firm may not earn more than the best-paid architect. Hospital directors may not earn more than the best-paid medical doctor. School directors not more than the best-paid teacher. Marketing managers not more than the best-paid salesperson.
Professionals will like that. It also means that they have a real choice to go into management or to make a career within their profession. Most managers will not like this solution. The argument will be that an organization will lose it best managers, because they can earn more elsewhere. That doubles the benefit: what you lose, your competitor has to put up with.
Management, by the way, is an essential function. It deserves to be paid well. But people who do the real work also have an essential function. And they deserve to be paid well also.
As a management consultant I have seen many managers. Rarely the best, because they didn't need me. Rarely the worst, because they kept me out. Unless I was hired by a desperate outside board. By the way, managers should earn more than management consultants.

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