Randall Beck and James Harter for Harvard Business Review:
Gallup has found that one of the most important decisions companies make is simply whom they name manager. Yet our analysis suggests that they usually get it wrong. In fact, Gallup finds that companies fail to choose the candidate with the right talent for the job 82% of the time.
Bad managers cost businesses billions of dollars each year, and having too many of them can bring down a company. The only defense against this massive problem is a good offense, because when companies get these decisions wrong, nothing fixes it. Businesses that get it right, however, and hire managers based on talent will thrive and gain a significant competitive advantage.
Managers account for at least 70% of variance in employee engagement scores across business units, Gallup estimates. This variation is in turn responsible for severely low worldwide employee engagement. Gallup reported in two large-scale studies in 2012 that only 30% of U.S. employees are engaged at work, and a staggeringly low 13% worldwide are engaged.
I remember years ago Dad trying to tell me that economic growth proved that the Peter Principle was BS. That was in the ’80s. Today I’m pretty sure that the Peter Principle was overly optimistic — at least in government.
If private industry can manage to pick the right manager only 18% of the time, how often does the right person get picked in a federal bureaucracy? And business die, to be replaced by smarter and more nimble competitors — who in turn pick bad managers who kill off the new company.
The Federal Leviathan lumbers on, getting stupider and more badly managed year after year.