Why Bosses Matter

Middle managers don't get lots of respect in the workplace. And for a variety of reasons, scholars have mostly studied the worth of CEOs and the efficacy of various management practices. But a new study suggests that front-line supervisors are far more important than many have thought.

In fact, replacing a poorly performing boss with a top-notch middle manager is roughly equivalent to adding one more worker to a nine-member team, the study concludes. "These bosses do matter, and they earn their pay," says Kathryn Shaw of Stanford's Graduate School of Business, and a coauthor, along with Stanford GSB's Edward Lazear and the University of Utah's Christopher Stanton, of a working paper called "The Value of Bosses."

To determine this, the authors looked at workers in technology-based service jobs where computers measure their output every hour. Daily output was measured for 23,878 workers matched to 1,940 bosses over 5 years from 2006 to 2010, resulting in nearly 6 million measurements. Although the specific employer and jobs studied are not named in the study, the authors say the employees held computer-based jobs not unlike those of many retail sales clerks, movie theater concession stand employees, in-house IT specialists, airline gate agents, and call center workers.

On average, each employee changed supervisors four times a year, which made it easier to isolate the quality of different managers. Generally, the work was performed by teams of nine employees and one supervisor. Managers were ranked by the changes in productivity that occurred when they were added or removed from a team and by changes in productivity of workers who moved from one boss to another. Assigning a tenth worker to the team raised productivity about 11%, while replacing a low-performing boss with a high-performing boss raised productivity by 12%.

According to the study, the average boss adds about 1.75 times as much output as the average worker, which is in line with the differences in pay received by the two types of employees.

So what does a good boss do better than a poor one? In a word, teach. Teaching work skills or work habits accounts for two-thirds of the gain that bosses added. That might suggest that the best bosses should be matched with poorly performing employees. However, the effect of good bosses on high-quality workers is greater than the effect of good bosses on lower-quality workers, but the difference isn’t great, the researchers found.

Although the study looked at only one workplace in detail, its findings are applicable to a growing swath of the economy. Large numbers of workers now perform tasks that can be measured by computer. Lazear says the workers they studied are "like the manufacturing workers of the '50s" in the sense that they are performing regimented, relatively low-skilled tasks. "It's not likely that this firm is unusual."

This piece originally appeared in Stanford Business Insights from Stanford Graduate School of Business. To receive business ideas and insights from Stanford GSB click here: (To sign up: https://www.gsb.stanford.edu/insights/about/emails)