MAKING OVER MIDDLE MANAGERS It's among the toughest and most important tasks facing companies trying to recast themselves as leaner, faster organizations. A few have managed it well.
(FORTUNE Magazine) – IT IS THE WORST OF TIMES for middle managers, that beleaguered band of demibosses currently blamed for most ills afflicting corporate America. Either their jobs are vanishing in mergers, takeovers, and restructurings, or management vogues are radically altering their traditional roles. The rules have changed so quickly that, for many, the game seems forever lost. Yet getting those middle managers to embrace a new corporate vision is the most important step and greatest challenge when a large company tries to reform itself, as so many are trying to do. Middle managers are often directly on the firing line when a company begins experimenting with a new management method. They are asked to learn entirely different ways of behaving, and their worth to the company can suddenly depend on their ability or willingness to do something adults generally hate to do: change. The pressures can be intense, leading at times to a kind of professional identity crisis. ''Do I pound the table now?'' asks Michael Smith, a production vice president at Xerox. ''Am I a coach or am I a player?'' Progressive top executives must be both sympathetic and insistent as they press for change. ''The most important thing to remember is that these people are going through an unbelievable culture shock,'' says Daniel J. Valentino, president of United Research, a New Jersey consulting firm that works on participatory management issues with large corporate clients. Companies can smooth the process by attending closely to a few basic principles:
-- Set examples at the top. Nothing can scuttle a big cultural shift faster, or dispirit middle managers more, than top management's indifference. The entire company, especially the front-line supervisor asked to live through the most wrenching aspects of the transition, will be taking cues from the brass. ''The middle manager watches the behavior of top managers and is not convinced they really believe in these changes,'' says Valentino. ''Result: He is very angry and confused.'' The executives who run America West Airlines, now America's 11th-largest carrier, with about $800 million in annual revenues, are exemplary exemplars. Edward Beauvais, the 53-year-old chairman of the airline, wanted unusually deep employee involvement when he founded his company in 1981. Workers would own up to 30% of the enterprise through munificent profit-sharing and stock option plans, and top management would try to foster an egalitarian spirit. Beauvais and his top lieutenants demonstrate through their own work habits how they wish middle managers to behave. At America West, midlevel supervisors are expected to lead with gentle persuasion punctuated by bountiful praise. They are supposed to ''empower'' lower-level employees, to nurture their talents and draw out their ideas, and to do it all without harsh criticism. Beauvais capsules his management philosophy thus: ''When things work right, they get the credit. When things don't work, you take the blame.'' Tough words to live by, but the carrier's top executives work hard at it. Beauvais and President Michael Conway, 43, maintain a sacred open-door policy for all employees, and each spends at least one-third of his time dealing directly with workers. They also devote considerable time to answering queries that come in from the field through an employee telephone hot line to top management. One day when Conway decided to lend a hand loading baggage at the Phoenix airport has entered company lore. It seems that a regular baggage handler took offense at the new man's technique and told him so. The fellow tried to apologize when he found he had dressed down the company president, but Conway wouldn't accept the apology and instead demanded a lesson in baggage handling. All this caring and sharing might seem a bit loopy in any business, but it is downright shocking in an industry where carriers are generally run with paramilitary tactics. Says Robert E. Covey, a passenger services manager who joined America West after several years at Eastern Air Lines: ''Oh, this is a different way of doing things. At Eastern you made your reputation by how tough you were.'' Along with other midlevel supervisors, Covey credits top management's obvious zeal for employee participation with easing his entry into America West's warm, fuzzy culture. Says George Byrd III, a customer service supervisor in Phoenix: ''You learn before very long that top management is always going to try to say yes.'' Getting rid of some middle managers gives those remaining a new freedom to do their jobs. Xerox decided a few years ago to cut back on headquarters staff who had been overseeing the work of district supervisors and to greatly increase the power of managers in the field. District managers suddenly had far more authority to adjust prices or to extend credit to valued customers. As long as the results are as expected, corporate-level managers stay away. ''You run Xerox business in Chicago or Cleveland or wherever,'' says Douglas R. Reid, a senior vice president. ''Your reward for doing well is that you don't have to see your boss.'' Many executives who have immersed themselves and their companies in these participatory experiments are quick to issue a strong caveat: Management must carefully preserve its right to manage. Michael Conway, America West's president, refers to a flap at his shop over flight attendants' uniforms. Some female attendants would like the option of wearing slacks on the job, but research has shown that fliers prefer to see them in skirts. So top management has vetoed slacks. Says Conway: ''Employees must understand there's a difference between needs and preferences.'' Top management, he says, should always try to respond to employees' genuine needs, but consider preferences only if they don't conflict with corporate goals. As Donna Rayne, a Du Pont manufacturing manager, puts it, ''New freedom means new responsibilities -- it doesn't mean giving away the store.''
-- The truth doesn't hurt. Top executives must arm middle managers with detailed information on their status and the company's prospects. Concealing the truth about coming changes only fuels anxiety, rumors, and resentment. Midlevel supervisors, if fully acquainted with details of changes in the works, can quell the discontent, and if they know where they fit into the new plan, they can also help persuade the rank and file to accept it. Candor can be especially crucial when a company faces tough times. Two years ago top managers at Sun Co.'s Dallas-based exploration and production division, reeling from low oil prices, needed a massive reorganization to clear out management layers and slice away bureaucracy. Under the program, which eventually reduced the number of middle managers from 650 to fewer than 400, top Sun officials called in all supervisors, sketched out the rough road ahead, analyzed each one's chances of survival, and offered a generous severance package to any who chose to leave under his or her own power. Some able managers took the package, but officials say the renewed commitment of the supervisors who remain far outweighs those losses. Says James E. McCormick, president of the division, which was spun off as a separate company (called Sun Exploration & Production) late last year: ''Every employee who is here knows we want them here, and we know they wanted to stay. That has made all the difference.'' Greater candor has begun to spread through the company. Supervisors now routinely tell employees the logic underlying management decisions, and they report gratifying results. Says geoscientist Sonia Swartz: ''People are a lot more willing to sign on if you tell them the business reason for doing something.'' Blue Cross & Blue Shield of Connecticut, which has also come through a reorganization recently, used a similar technique to foster middle-manager involvement. The company, which was losing market share to a growing roster of competitors, had been organized in large departments around major functions such as billing and claim processing. To get in closer touch with customers, top managers decided to reshape the company into smaller groups aimed at specific geographic or professional markets. They knew such a massive shift in outlook and priorities could easily unsettle the organization without strong backing from midlevel supervisors. To get that support, top management laid out its plans to all supervisors, citing the need for more customer contact, and then let each bid for the new unit he or she would like to join. Happily, upward of 90% got their first or second choice. Xerox has enthusiastically embraced the notion of letting supervisors know about outside threats. As part of its formal employee-involvement program, Xerox practices what it calls competitive benchmarking. The company studies competitors worldwide in areas such as productivity and marketing prowess, then promulgates the highest standards as a kind of dare to its own employees to match them. ''It used to be sort of mysterious around here, what other people were doing,'' says Xerox vice president Michael Smith. ''Now everyone knows right away when some son of a bitch out there is up to something.''
-- Gimme a T-E-A-M. Management experts often suggest placing midlevel supervisors in a series of groups or teams as a first step toward changing their outlook. In most cases the ideal team is composed of several managers whose jobs relate naturally. A product development team might comprise research, engineering, marketing, and financial managers. The key, says Douglas Reid of Xerox, is identifying and building ''the linkages between groups that don't normally work together.'' When the team approach works, top management often sees benefits on several levels. The process of setting up and conducting team meetings ensures that this management group feels genuinely involved in solving the company's problems. They can then carry the word back to their own departments. Soon after team meetings began at Sun, top management noticed that supervisors participating in the program were talking up the efficiencies they were discovering. ''Suddenly we had 200 evangelists,'' says Sun President McCormick. The team approach allows middle managers to see for themselves the horrors of unwieldy bureaucracy or overly autocratic supervision. Having painfully traced operational inefficiencies in daylong meetings with colleagues, these managers are certain to understand the utility of shaking up a hidebound organization. ''You've got to produce results,'' says Reid. ''You've got to make sure all these changes are perceived as means to an end.'' At Sun, managers at one team meeting were stunned to realize that records on ownership of various wells were being collected and maintained in 14 different departments. At Bethlehem Steel's huge plant in Burns Harbor, Indiana, top management was able to hammer out a gain-sharing agreement with its unions, unusual for the industry, after problem-solving teams identified ways to cut costs and boost productivity. Using methods developed by multidepartment groups, workers earn bonuses based on the company's financial performance. ''People used to be reluctant to volunteer information, even though they knew they were right,'' says Jack Richey, a general foreman at the Burns Harbor plant. These team sessions also enable midlevel supervisors to get experience working closely with colleagues. ''We are looking for facilitators, people who are flexible, rather than autocrats,'' says Gerald C. Marchand, a Bethlehem Steel superintendent. Sun President McCormick foresees a major change in the kind of person who will be selected for management jobs in the future. Says he: ''It used to be that the best engineer became head of engineering. Now that guy will probably be passed over if he lacks interpersonal skills.'' The importance of team play can be especially crucial when a company does away with a traditional, hierarchical management structure and breaks down its organization into smaller operating units. Blue Cross & Blue Shield of | Connecticut formed dozens of customer action teams to serve specific markets. These close-knit teams combine a variety of professional skills -- ''The claims processors literally sit right next to the customer service guy,'' says executive vice president Bud Torello -- and they depend heavily on managers' ability to mobilize the group to meet customers' needs. The teams that service school systems around the state, for example, have to be prepared for an onslaught of telephone calls each afternoon at about three, when schoolteachers turn their attention to things like medical claims. If there is a drawback to these team-style management techniques, it could be that they disperse skilled people throughout the company. With resources spread out, each team has only minimal bench strength. But Torello and other top managers believe the trade-off should be acceptable to any company that needs to reorient its outlook toward such vital issues as customer service. Says he: ''By segmenting your organization and giving each of these units the freedom to succeed, you get people thinking about what's really important.''
-- Set the right goals. Steven J. Heyer, senior vice president at the management consulting firm Booz Allen & Hamilton, says middle managers need goals that are focused enough so that each manager or work team can hope to make a discernible impact on a business unit. If, for example, a marketing work team has been trying to adjust pricing levels to meet competition, its performance might be rated according to relative market shares at year-end. A product development team might be measured by how fast and how cheaply it rolls out a new product. There is no point in whipping up the troops about grand strategies, such as boosting the corporation's return on equity, unless they can see and understand their specific roles. Failure to define just what you expect from people can produce enough resentment and confusion to immobilize the organization. Says Heyer: ''When you say do everything, you are in effect saying do nothing.'' After studying the problem of communicating with supervisors, Du Pont's top executives came up with a program they call Individual Career Management. The program, which goes well beyond a typical year-end evaluation, involves a series of discussions that set out just how well the manager fulfilled specific requirements during the previous year, what the person's new goals should be, and whether the individual has stretched the boundaries of his job. ( After these discussions talk turns to each supervisor's career path. Again top management and the individual work out specific goals, taking pains to set the goals as high as possible. ''There must be continued improvement,'' says John W. Himes, Du Pont's vice president for employee relations. ''With the kind of global competition we all face, you have to ask people to continue looking at their jobs in new ways.'' The most important time for top management to set realistic goals is during a major organizational change. If supervisors can focus on real-world targets, they will better handle the cultural shocks and their shifting roles in the company. Top managers at Connecticut's Blue Cross & Blue Shield, for example, paced their restructuring in part according to how fast claim backlogs were getting cleared up. At Xerox, where corporate staff costs have been cut more than 25% in the past decade, top executives pull out all stops when they suspect the company is showing the strain of constant cost cutting or is beginning to drift. This periodic communications assault employs typical outlets, such as company newsletters and videotapes from the chairman, as well as a range of round- table discussions and informal gatherings. ''There is a high payback,'' says Douglas Reid. ''If you keep people informed, it's amazing what they'll do for you.''
-- Shake 'em up. Middle managers need to be far more flexible than before, yet many companies make the mistake of pigeonholing supervisors according to their technical skills, failing to nurture their general management abilities. Often the result is a core group of supervisors far too narrowly focused on the details of their jobs. Marshall Meyer, a professor of management and sociology at the Wharton School, calls such narrow-minded managers conservers, and he predicts they will become less useful to their companies as markets change. ''Any person who lives with fixed routines will have trouble,'' says Meyer. ''You've got to train people to live with ambiguity.'' One sure-fire way to get supervisors thinking in broader terms: Make sure they are exposed to a variety of jobs. Moving people around all but forces them to develop new skills and recognize the linkages between seemingly disparate parts of the enterprise. The supervisor once involved solely in some aspect of production and now well acquainted with the budgetary process or marketing problems will likely be a far more valuable employee. ( He may also be a happier one. When top executives at Bethlehem Steel's Burns Harbor plant began plucking managers from one department and placing them in others, they found morale among supervisors overall improved markedly. Before, middle managers might have felt their progress was blocked in a particular department because of a difficult supervisor or a wealth of talent higher up the chain of command. Now more people feel they have a chance to succeed somewhere in management. Another unexpected benefit at Burns Harbor: the flowering of some managers who found their niche after switching to a new department. They showed surprising progress in new roles better suited to their skills and personalities. Even if a supervisor gains only a smattering of knowledge about how some other piece of the company lives, the corporation can benefit. When Blue Cross & Blue Shield of Connecticut broke up its structure into customer-oriented teams, top officials sent many supervisors accustomed to headquarters duty out into the field for a while. Managers who for 20 years or more had overseen squads of claims processors suddenly found themselves calling on customers face to face. The idea was not to fill out the sales force but rather to make sure these managers learned to look beyond the bureaucratic confines of the home office. America West Airlines carries cross-utilization to rare extremes. Most new employees go through training in various jobs -- taking phone reservations, working ticket counters, handling baggage and ramps, serving as flight attendants. Even after training, many continue to work several different jobs periodically. The process gives top management unusual operating flexibility, especially when it comes to moving around midlevel supervisors.
-- All these tactics require a fundamental shift in the way most corporations deal with middle managers, and some companies may well question whether it's worth the trouble. You bet it is, say the management experts. They contend that the trends that have shaken U.S. corporations will continue or accelerate in coming years. Global competition is certain to intensify, requiring fresh thinking about how to manage. Top managers attuned to the ranks below them already hold an advantage, having tapped a vital human resource. Other company leaders may not yet realize what they are losing by failing to bring more of their organizations under the strategic tent. As James McCormick of Sun puts it: ''If it is obvious what you have to do, you're not getting proper input.'' Chances are your company needs all the help it can get, from wherever it can get it.