In high-tech knowledge-based companies, retaining skilled workers is crucial due to intense competition and the time-consuming process of replacing valuable employees. Extensive data analysis found that manager ratings do not significantly affect employee performance, income, promotions, or patent applications. However, when employees moved from a poorly rated manager to a highly rated one, attrition decreased significantly by about 60%. This highlights that good managers play a crucial role in retaining top employees, showcasing that their influence is most prominent in employee retention and productivity. Conversely, poor managers may drive away the best employees.
People who are good at their jobs routinely get promoted into bigger jobs they’re bad at. We explain why firms keep producing incompetent managers — and why that’s unlikely to change.
- SOURCES:
- Nick Bloom, professor of economics at Stanford University.
- Katie Johnson, freelance data and analytics coach.
- Kelly Shue, professor of finance at the Yale University School of Management.
- Steve Tadelis, professor of economics at the University of California, Berkeley Haas School of Business.
- RESOURCES:
- “People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis,” by Mitchell Hoffman and Steven Tadelis (Journal of Political Economy, 2021).
- “Promotions and the Peter Principle,” by Alan Benson, Danielle Li, and Kelly Shue (The Quarterly Journal of Economics, 2019).
- “Bosses Matter: The Effects of Managers on Workers’ Performance,” by Kathryn L. Shaw (IZA World of Labor, 2019).
- “The Value of Bosses,” by Edward P. Lazear, Kathryn L. Shaw, and Christopher T. Stanton (Journal of Labor Economics, 2015).
- The Peter Principle: Why Things Always Go Wrong, by Laurence J. Peter and Raymond Hull (1969).