E-MAIL FROM THE VALLEY: Innovation depends on brilliant but often flaky individuals, who need to be stroked but kept well away from wider responsibility

E-MAIL FROM THE VALLEY: Innovation depends on brilliant but often flaky individuals, who need to be stroked but kept well away from wider responsibility - The Peter principle has always bemused me. Employees will advance to their highest level of competen

by NICK DENTON, founder and chairman, Moreover Technologies;e-mail: nick@moreover.com
Last Updated: 31 Aug 2010

The Peter principle has always bemused me. Employees will advance to their highest level of competence and then be promoted beyond it, according to Laurence Peter, the author of the concept.

As an observation, it is valid. A colleague's glossy reputation tarnished by a disappointing entry into management - that is a commonplace. All the harder, then, to understand why employers promote staff who are doing fine where they are.

Talent and managerial ability rarely go hand in hand. That is particularly evident in talent-intensive sectors such as investment banking, software and the media. The best news reporters love nothing more than to embarrass authority; the most brilliant developers are attracted to software because it minimises interaction with others; and the biggest revenue generators at investment banks are rapacious individualists.

Contrast these characteristics with those of an effective manager: attention to process, communication within the department and with other groups, and an ability to command and build loyalty.

Yet companies continue to convert exceptional performers into mediocre managers. An acquaintance at an investment bank has a new boss, a brilliant and aggressive revenue-generator who tries to muscle in on his team members' deals. He has a poisonous effect on every group he manages, but his individual results win further promotion. 'No-one does anything about it,' says the trader. 'It's the way the world works.'

Worse, the problem is nigh-on impossible to correct. Given management responsibility, one finds it too humiliating to confess that one prefers a more solitary existence.

I blame policies on pay and status. Employers give salary increases and title promotions with the assumption of more responsibility, usually management responsibility. As a rule, managers expect to be earning more than their staff. Management is the only path of advancement.

In mature industries, in which profitability can best be improved by optimisation of process, depth of management may determine success. But in the creative and knowledge industries - which represent an ever larger share of output - innovation is at a premium. And innovation depends on brilliant but often flaky individuals, who need to be stroked but kept well away from wider responsibility.

The creative industries have indeed moved away from rigidly hierarchical structures. At investment banks, for instance, individual performers - traders, analysts or acquisition advisers, for instance - can achieve higher compensation and external profile than their manager. In the technology industry of the late 1990s, an exceptional salesperson could earn more than a vice-president of sales. In the movie industry, the star is wealthier and more celebrated than the director.

And some sectors, such as advertising and design, have institutionalised the partnership between creative and organisational. Nissan Design International, the car design company, divides its 50 professionals into 25 pairs. It balances flair with experience and attention to detail.

Other companies follow the same policy less explicitly. At Moreover Technologies, we got the most out of a talented but erratic web marketing expert by teaming him up with one of the most relentlessly efficient people in the company. He was nominally managing her; the everyday reality was inverted. It is a common pattern.

But fewer than one in 10 groups breach the hierarchy rules. It's easier to reward talent in a loose industry such as Hollywood, where sole agents and studios coalesce around a project and then disperse; but that structure makes consistent teamwork almost impossible.

The pairing of creative and organisational personality types has its drawbacks. At Nissan Design, Jerry Hirshberg admits that relationships in his teams can be abrasive. And it makes reorganisation awkward if people have to move around as though shackled to each other in a three-legged race.

There has to be a better way. I am coming round to the notion of a bifurcated promotion track, in which employees choose either a management or a creative career path. Managers gain promotion as they take on more people and greater responsibility; but creatives gain in status and pay as they demonstrate brilliance, or gain in experience.

Microsoft has created a separate status scale for its software engineers. The objective is managers who can manage and developers who can develop. It sounds simple enough, but most companies ignore the lesson.

There is no panacea. Much as my investment banking acquaintance hates his new boss, he does not believe a good people manager would succeed in the job. A manager needs to win the respect of staff. And that is often earned by the brilliance of the individual's record. Managerial ability and brilliance rarely go together.

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