By: Thea Silayro
Innovative ideas and processes will stagnate without support from middle management. Let’s explore why that is, with an emphasis on larger companies, in this article.
Innovation is a key driver of growth for any company.
That’s why it’s surprising that the success rate of innovation in companies is only 17%.
One of the reasons for such a low success rate is an aversion towards innovation in middle management.
Companies may have a creative workforce, but in order to execute an innovative idea, a go signal from decision-makers is needed.
Middle management plays a significant role in the decision-making process of companies. Even if employees come up with an innovative idea, the company will stagnate without the middle management’s encouragement. Here are some examples of corporations that failed to innovate and ultimately lost out as a result.
This post will explore the top reasons why middle management is slowing innovation – particularly in the context of large companies.
They are Extremely Conservative
Middle management is sometimes dubbed the “frozen middle.” Middle managers are notoriously conservative regarding business objectives. This attitude relates to the interests of private equity agencies and stakeholders investing in the company.
Stakeholders can accrue large debts in order to invest in a business. Thus, they expect these companies to draw healthy sales figures and provide a reasonable return on investment. Companies which have received private equity funding are compelled to meet sales projections and keep their investors happy.
Middle management is responsible for ensuring the company meets targets for revenue and profit. That’s why they prefer to continue with strategies that have been able to show returns in the past. They are reluctant to experiment with new ideas due to fear of failure and the associated loss of return for shareholders.
They Focus on Short-Term Results
Middle management is generally focused on generating immediate results. They are more interested in quarterly reports than what the company can achieve in five years. Thus, they fail to see the potential for growth in the long-term.
A breakthrough prototype mostly has to go through a series of trials and modifications to achieve a pragmatic shape. Of course, that’s a time-consuming journey.
It’s not that middle managers are not aware of the significance of innovation for the growth of a company. It’s just that when it comes to practicing the same in the real world, they’re impatient. Put simply, they don’t bother to allot resources or time to wait for something that will take a lot of time to show results.
They are Scared to Lose their Job
This is one of the main reasons that make middle management thwart innovation.
Middle managers are accountable to senior executives or owners of the company. If a strategy fails to provide results, they will be questioned by the higher authorities. It will not only mean a serious blow to their reputation, but also a threat to their employment.
Put simply, a failed idea may even result in termination of a middle manager who had approved the new idea in the first place.
The common tendency is to resist changes which are deemed as harmful or dangerous to the current situation. Most of the people would prefer to save their jobs over giving wings to futuristic ideas that may or may not succeed. If a middle manager approves an innovative idea and if it falls flat, his capability as a decision maker will be questioned.
In fact, chances are high that he will be held “incompetent” just for one single failure. That may jeopardize his job and career big time. This very thing deters most middle managers from taking the risk to innovate.
The Quotient of “Loss-Aversion”
Loss aversion is a widely discussed subject in both psychology and economics. It refers to a tendency where one would prefer to avoid loss to attain an equivalent gain. Basically, those who hold a loss aversion tendency would not want to lose anything they already have for the “possible likelihood” of gaining something bigger.
Middle managers tend to follow a similar approach. They don’t want to lose the resources or money the company already has to explore an out of the box idea. They want to avoid risks. In doing so, they slow down innovative practices big time.
It’s true — innovative projects can’t guarantee success. Breakthrough ideas may or may not succeed. When you launch an innovative campaign, you can’t guarantee its impact on your target niche. Your end users may not deem it as promising as you do.
Besides, having an innovative idea is not enough. You have to execute it in the best way possible. A number of innovative projects failed to create an impact due to poor execution.
Only less than five percent of innovation projects are able to return investment costs.
Middle managers are responsible for taking decisions that will protect the interests of the company. While innovation is crucial to take a company to new heights, failed innovation campaigns could mean a serious blow to the resources and reputation of a business.
This is why middle management prefers to stick to efficiency projects that carry a proven history of success. These projects are tried and tested and hence are comparatively “safer” than new innovative projects with no previous history of implementation.
In other words, these proven projects can at least guarantee no losses for the company. It means that such “safer” projects will always enable the middle management to protect the resources of the company.
One can’t get such assurance with innovative projects. As a result, many middle managers mostly stress on taking the same old previous projects over innovative ones.
There’s no Diversity in Hiring
This is another major reason why big firms struggle with innovation.
Middle managers play a crucial role in the recruitment process of a company. As mentioned earlier, they are averse to risk and losses. Thus, they end up hiring those candidates who follow a similar approach as that of the existing approach practiced in the company. Put simply, they prefer those candidates in the team who will conform to their conservative approaches and won’t dare disrupt the situation.
In doing so, middle managers create two kinds of problems. One, they deprive the company of acquiring A-type employees who hold the potential of being innovative leaders someday. These are those bold human resources who dare to break barriers to bring an innovative idea to life.
The second problem is that the conservative middle managers end up recruiting people who think and act just like they do. It implies no diversification of talent in the workforce of a company. This is a big threat to the possibility of the growth of a business.
If everybody in a company acts and thinks in a similar way, the firm won’t be able to give something new to its end-users. It will keep on offering the same old products or service that may lose out on its significance over time.
To sustain itself in the market, a company has to adapt to changes. An approach or strategy that was successful two years back may be considered outdated now. If a company does not allow any diversification in talent, there will be nobody to pioneer the needed changes or innovation. As a result, the company will fail to innovate and improvise and hence, will be obsolete.
It’s not that middle managers, as individuals, are willingly averse to innovation. It’s their designation or position in the company that somewhat compels them to stick to such a conservative and stagnant approach.
The senior officials or CEOs have a huge role to play here. As mentioned previously, middle managers have to face questions from higher authorities if any new idea approved by them leads to disappointing consequences for the company. They fear being held “incapable” for the company.
If the senior officers show a bit more leniency to the middle management, a lot can change. There is always a certain level of risk involved in approving innovative ideas. This is perhaps why 82% of corporations acknowledge the importance of working with startups to innovate. It’s much simpler, sans all the bureaucracy.
So here’s the gist: It’s the higher authorities who have to encourage risk-taking for the sake of the growth of a company.
It’s only then that middle managers will be able to develop the courage to think out of the box and try out novel strategies.
About the author
Thea Silayro is a graduate of Psychology and a student of Marketing Management. Born in the Philippines, she is currently delving into the young professional life in Copenhagen. Thea enjoys writing, international involvements, traveling and a good conversation over wine.