Management results, according to a new Gallup report, are largely driven by an often-unlikely factor: bad managers.
New data from Gallup suggest that front-line managers are a key factor for improving management results. Using Moneyball-style analytics, Gallup finds that managers account for 70% of employee engagement, and higher employee engagement is correlated to better profitability, productivity, and quality across companies.
Strikingly, companies fail to choose the right manager 82% of the time. No wonder 87% of workers worldwide have been disengaged from their jobs for the last decade.
Managers are a Leverage Point for Breakthrough Earnings Growth
In Insigniam’s work with the world’s largest companies, we have found that front-line managers are a leverage point for enterprise transformation and breakthrough improvements in earnings and other management results.
Case: Aerospace CEO Invests in Managers, Reduces Inventory by $700 million
How does employee engagement correlate with management results? The new CEO of an aerospace manufacturer threw up a red flag when he saw the abysmal engagement and quality scores in the factories. He said it was the equivalent to a “plant on fire”. He hired Insigniam to catalyze a breakthrough in manufacturing performance. Insigniam coached a series of leadership projects led by front-line supervisors and managers on the factory floor.
Working in teams for six months, the managers sustainably:
- Reduced the cost of quality errors by 92%
- Reduced the labor-hours to assemble an airplane by 38%
- Measurably improved overall quality
The next year, the managers (on their own) reduced the labor-hours for assembly again and further increased gross margins.
Over two years, the company reduced inventory by $700 million and increased the gross margin per plane by $100,000.
Many managers said that the projects were the best experience of their careers. The EVP Global Operations remarked, “I’ve never seen change like this.”
As you may have guessed, employee engagement scores rose from the bottom quartile to the top quartile in a name-brand consulting firms database.
Your next source of sustainable earnings growth might be found in an undervalued asset: front-line managers.