Why your manager sucks [Finance Fridays]

Looking at all the layoffs and shutdowns, this question needs to be answered.

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Over the last week,

Twitter and Meta both axed thousands of employees. Another Crypto ‘revolutionary’ went under. Markets everywhere are taking a huge hit. Usually, each of these events would be a good basis for several articles. However, all these events (and the other crashes going on in the field) had me curious about a more fundamental question- how are so many managers, decision-makers, and leaders so incompetent?

How is it that Meta, a company that hires only the top talent, ended up with a surplus of 11,000 employees? It feels like someone somewhere should have maybe raised a few questions.

Why is it that Elon Musk, ‘the smartest man in the world’, had to reverse his own lay-offs at Twitter within a few days? Clearly, the management responsible for evaluating important employees was not good at their jobs.

Bloomberg spoke to people familiar with the matter, who said some of those being asked back were apparently laid off by mistake, while others who were dumped were actually necessary to Musk's $8-a-month fee-speech future for Twitter.

Source

And why was it that so many institutional investors (including Blackrock, an investment firm with 10 Trillion Dollars under management), investing/finance gurus, and other experts got seduced by FTX and their worthless token?

How do so many organizations end up with terrible managers?

And yes factors like nepotism, bad hiring, and corporate politics are a problem. But I’m not talking about them. Those are more complex cases that are harder to fix (nor do I know anything about them). They are also not as prevalent as you would think.

Let’s answer these questions.

Key Ideas Discussed

1. The Dilbert Principle- Sometimes companies promote incompetent employees to management to get them out of the workflow. We’ll explain how this happens and what you can do to avoid this.

2. The Invisible Man Principle- This is related to the above idea. Often a group’s stars will be tied up with critical projects. So when a new huge project rolls around, the only one free is the weakest member of the group. This principle explains how so many mediocre people end up in some of their firm’s most lucrative projects. This is a principle I came up with, after talking to various Tech Leaders.

3. The Peter Principle- This is another principle loved by the management people. It states that competent workers are promoted until they end up in a role that they aren’t great at. At this point, they won’t be promoted anymore. This happens with a lot of software engineers, who might be great at coding what they’re told, but don’t know how to manage/find the best value adds. Has kinda happened with me (I’ll share the story).

Each of these principles represents a different way that someone not competent might find themselves in roles where they’re outta their depth. Fortunately, there are some learnings in each of these cases, which we will also go over. Strap right in because we’re gonna have a great time together.

To those of you that like videos, How Money Works has a great video on this topic. He covers Principles 1 and 3 really well. His videos are a must for anyone interested in business and finance. Even if you decide to skip this video (since I will be covering many of the same ideas), subscribe to his channel. It’s a gold mine.

The Dilbert Principle

To quote Wikipedia- “The Dilbert principle is a concept in management developed by Scott Adams, creator of the comic strip Dilbert, which states that companies tend to systematically promote incompetent employees to management to get them out of the workflow.”

How would this happen? As the author beautifully put it-

I wrote The Dilbert Principle around the concept that in many cases the least competent, least smart people are promoted, simply because they’re the ones you don't want doing actual work. You want them ordering the doughnuts and yelling at people for not doing their assignments—you know, the easy work. Your heart surgeons and your computer programmers—your smart people—aren't in management. That principle was literally happening everywhere.

This might seem outlandish at first, but consider the following situation-

In your project team, Willy Wipeout is the weakest performer. He occasionally breaks things, and the time of the team’s more competent members is often taken up helping him because he doesn’t know what he’s doing. Willie is not terrible, but he’s also not good. So you as an amazing manager decide to shift him to another role, helping onboard new people/keep track of progress in various projects. This allows you to move him to a place where he doesn’t impede your stars performers and still utilize his familiarity with the organization and its projects. Willy is able to do an ‘important’ task and company saves on the costs of firing someone. Good job you!!

Now comes the good part. You’re a reader of this amazing newsletter. So you’re going places. This means your managerial role is up for grabs. So who will the management decide to promote-

1. Big Mama- Your star dev. May or may not be a good manager. Definitely contributes a lot to your development. Replacing her as a Dev would be costly.

2. Willy Wipeout- Someone who on paper has experience both handling others AND working as a dev. He’s been working with teams and onboarding people so it’s a smaller jump. He’s also not directly involved in the development process, so moving him into the manager role will not cause disruption.

So our boy Willy Wipeout becomes a manager. Because of a job that he only got because of this incompetence. Big Mama thinks she’s not appreciated enough and quits. Devs that knew Willy grumble about how he was a terrible developer, dropping Morale. A terrible situation all round, that happens all too frequently.

So how can we avoid this? Patience my Paduan. We will get to it towards the end. For now, let’s get into the next principle.

The Invisible Man Principle

This is similar to the idea discussed above. Many firms have multiple projects happening. Naturally, the best performers will be put in to deal with these projects. The weaker people will not be seen. They will be overlooked as if they were invisible.

What happens when we have another important project pop up? All the stars are tied up with these super important projects, that they can’t be pulled out of. So you send one of your invisible men. These people ended up in amazing projects just by being free in the right place and at the right time.

This happens a lot more than you’d think. As you know, I love to talk to different leaders in the Tech Field. One of the questions that I like to ask them is along the lines off, “What advice would you give your younger self?” or “What is something you learned that no one told you but you wish they had?” Amongst the most common replies is the importance of keeping your eyes open. They have told me many stories where people ended up with amazing promotions/projects just because they were free and no one else was prepared to take the opportunities. The situation I described above was something I heard multiple times (especially in consulting-oriented firms).

Always be on the lookout. Photo by shaian ramesht on Unsplash

This can be terrible for team morale for similar reasons. If your stars constantly feel like they are passed on for roles they really wanted because they were tied up with something else, they can become demotivated.

Organizational lessons from a Director of Analytics at LinkedIn [Storytime Saturdays]

With that out of the way, let’s cover the final principle. This is another principle that is taught in business schools.

Peter Principle

The Peter Principle is relatively simple to explain.

The Peter principle states that a person who is competent at their job will earn a promotion to a position that requires different skills. If the promoted person lacks the skills required for the new role, they will be incompetent at the new level, and will not be promoted again.[1] If the person is competent in the new role, they will be promoted again and will continue to be promoted until reaching a level at which they are incompetent. Being incompetent, the individual will not qualify for promotion again, and so will remain stuck at this final placement or Peter's plateau.

Source

As I mentioned earlier, this happens a lot to Software Devs. Take a Junior Dev who is exceptional at coding. They can churn out features, fix bugs, and hit goals very quickly. This dev is a beast with algorithms and coding, so you move them up to Mid Engineer. However, this is where you notice a problem.

This developer is very engineering focused. So when it comes to engineering, they can make all the right calls. However, they can’t think outside of that lens. They might spend months working on the perfect solution, even if the better move is to move on and work on more pressing issues. They lack the decision-making to differentiate what is important and what is not.

Avoiding the Billion Dollar Mistake Managers and Engineers Make [Storytime Saturdays]

Thus this developer will be unable to proceed any further. They will go from rockstar Junior Dev to bad Mid-Dev because they will waste people’s time pursuing relatively meaningless tasks. God save the Juniors that report to them.

Something similar happens to people who are exceptional ICs (individual contributors) but don’t have the inclination/interest in management roles. They might get ported into roles that involve leading teams. While they have the technical ability and insight to work on the most valuable problems, they might struggle with the social part of such a role.

This story has sort of happened to me. As you might know, I’m part of a Rev-Ops startup Clientell. We raised money using a demo AI tool that I had built. Since I was amongst the founders, I became the ‘Head of Data Science’. Notice I landed in this position, not because of my leadership skills, but purely because of my skills in Machine Learning. I had never managed any people before this moment. One of the reasons I became so proactive about talking to Tech Leaders was that I had no experience managing people. I reached out to all the leaders in my network mostly to learn from them. It also ended up as good content for my writing.

None of the people that report to me have been particularly inspired by the French Revolution (yet), so I think I’ve done an okay job so far. Whether I’m actually cut out to be a manager will be seen as the company grows and I actually have to do mostly management-related things.

With these out of the way let’s talk about what can be done to mitigate these problems. We will look at things from the perspective of a business (avoiding these problems) and an employee (how to not end up with a bad manager). If you’re someone looking to become a better manager, then make sure you read through the posts we have done on management and leadership.

You can find their link here

How to avoid bad management

All the principles have one root cause- ignorance. Let’s cover how devs and orgs should deal with each case-

Case 1

Organizations- Case 1 happens often because the people in charge of the promotion decisions are out of touch with the realities of the project team. They tend to boil decisions down to the papers in front of them, without taking the context into account. Thus to fix this, your decision-makers need to take more time to understand the team and their needs better.

Developers- If you’re Big Mama who doesn’t want to end up under Willy Wipeout, then start making moves. Make sure you’re talking to your managers, highlighting your contributions etc. I’m not advocating for any politicing but a closed mouth doesn’t get fed. Lay the foundations so that you can harvest the seed when the time comes. Too many people make the mistake of waiting to reach out and start building the case when the opportunity comes. That’s too late. Prepare your case before opportunities arise. This way, when you see something you like, all you need to do is present your case. Obviously, if you don’t want to end up in a managerial role, but know someone who should, then you should start pushing them.

Case 2

Organizations- Create a culture of communication and transparency. If you have multiple projects coming up, let your developers know ahead of time so that they pick the ones that they like the most. Giving them more agency will ensure that they don’t feel bad if they see others getting projects they liked because they were too busy. Remember it is very expensive to replace your stars.

Developers- The same holds true for case 2 (as for case 1 devs). By communicating your wants clearly and consistently, networking to learn about upcoming opportunities, and constantly building up your case, you will find yourself in a good place to snap up the roles that suit you best.

Case 3

Organizations- Better metrics are your best friend. And I don’t mean just quantitative metrics. Remember not everything worth measuring can be measured (hurts my soul as a Data guy). But trying to build a more comprehensive evaluation structure will help you move people into the best roles for them. But what if someone is not a good match for a role? This is where more flexible structures help. If your manager was much better as an IC, they should be able to transition back to that without it feeling like a demotion. The problem of this problem often comes from a very rigid corporate ladder, where people can’t be allocated to roles they fit best because there’s only one way to move.

Developers- Interview your managers. See if their priorities and style match yours. If you have a new manager who you don’t see eye-eye with, leave. This video by RitvikMath (fantastic channel FYI) is a great guide on how to do this.

With this guide, you should have a good understanding of why so much management is terrible and how you can avoid this.

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