The Hidden Costs of Overbearing Bosses

At one time or another, most of us have probably worked for a boss who was self-absorbed, vindictive, or just plain inept — a real-life equivalent to Dunder Mifflin’s Michael Scott. One of my first jobs was for an HR manager who thought the best way to humble a cocky new MBA was to have him spend hours sorting files into alphabetical order. Needless to say, he didn’t get the best out of me or anyone else that worked for him.

During the recession, companies around the world have cut costs in all the usual ways—by reducing headcount, slashing capital budgets, and trimming overheads. All these measures are vital. But in their quest to root out inefficiencies, companies should also be focusing on the hidden but substantial costs of supercilious and overbearing bosses.

A global survey of 90,000 employees by Towers Perrin, conducted in 2008, revealed that only 21% of employees are highly engaged in their work. The other 79% may be physically on the job, but they’ve left their enthusiasm and ingenuity at home. This is a scandalous waste of human capability. It’s also a virtually bottomless reservoir of creative potential that has yet to be tapped.

The fact that so many workers in so many parts of the world are simply going through the motions suggests that the roots of employee alienation are deep and systemic. While in some cases the culprit may be the work itself, (who wants to spend eight hours restocking supermarket shelves?), this explanation is manifestly inadequate. If a grocery retailer like Wegmans food markets can rank alongside a Genentech as one of America’s best place to work, the monotonous rhythms of a hum-drum job can’t be the whole story.

The real damper on employee engagement is the soggy, cold blanket of centralized authority. In most companies, power cascades downwards from the CEO. Not only are employees disenfranchised from most policy decisions, they lack even the power to rebel against egocentric and tyrannical supervisors. When bedeviled by a boss who thwarts initiative, smothers creativity and extinguishes passion, most employees have but two options: suffer in silence or quit.

In a well-functioning democracy, citizens have the option of voting their political masters out of office. Not so in most companies. Nevertheless, organizations here and there have taken steps to make leaders more accountable to the led. HCL Technologies, a progressive Indian IT services company, encourages employees to rate their bosses, and then puts those ratings up online for all to see. Bullies and bunglers have no place to hide. And W.L. Gore, the Delaware-based maker of Gore-Tex and 1,000 other products, lets its highly decentralized teams appoint their own leaders. These are interesting aberrations from the norm, but in most organizations, power is still allocated top-down.

Dispirited and poorly led employees are only one of the baleful side-effects of Politburo power structures. Here are a few others:

When big leaders appoint little leaders, they often do so in their own image. This reduces intellectual diversity and promotes sycophancy. The danger: a collective myopia that desensitizes organizations to orthogonal threats and blinds them to new opportunities.

When authority is vested from above, the only way for a manager to retain her privileges and prerogatives is to please her political patrons. Consequently, mid-level bureaucrats often spend a disproportionate amount of time managing upwards—working slavishly to burnish the egos and divine the intentions of those they work for. In most cases, this energy would be better spent attending to the needs of those on the frontlines—the folks who actually create value for the firm’s customers.

In traditional power settings, key decisions have to be approved by one’s superiors, but merely explained to one’s subordinates. This reality often tempts managers to ignore the disquieting views of direct reports, and to content themselves with compliance when they should be seeking genuine commitment. The result: employees who can no longer be bothered to bring troublesome truths to light and are unlikely to go the extra mile.

In an ideal world, an individual’s institutional power would be correlated perfectly with his or her value-added. In practice, this is seldom the case. Given the reputational costs incurred when a senior executive is forced to remove a hand-picked associate from a key job, corporate leaders are often slow to reassign power, even in the face of widespread doubt about an individual’s competence. As a result, there is often a significant lag between declining managerial effectiveness and the reallocation of positional power. These lags are most likely to occur in the upper reaches of management—where the political stakes are highest, and it is here where they exert the greatest drag on organizational performance.

Too little diversity and too much sucking up. Not enough commitment and too many misalignments between power and capability. In highlighting these defects of top-down power structures, my aim is not to challenge the notion of hierarchy, but rather to question the usual means by which power is allocated within hierarchies.

Readers, what do you think of the trickle-down power structures found in most organizations today? Are they a problem? If so, why?

And can you imagine any alternatives to this taken-for-granted feature of organizational life? What’s your work-around?

Note: This post was originally published as a Management 2.0 column in The Wall Street Journal in April 2009.