Why Are There So Many Bad Bosses? (Ep. 495 Replay) | Freakonomics

Intro

In this episode of the Freakonomics podcast, titled “Why Are There So Many Bad Bosses? (Ep. 495 Replay),” host Stephen J. Dubner explores the phenomenon of bad bosses and the impact they have on employees and organizations. The episode delves into the reasons why people aspire to become bosses, the consequences of promoting individuals to management positions without the necessary skills, and the validity of the Peter Principle. Dubner also discusses the importance of compassion and the challenges of measuring it empirically. Through interviews and research studies, the episode sheds light on the complex dynamics between bosses and their subordinates.

Main Takeaways

Aspiring to Become a Boss

• Many people aspire to become bosses for various reasons, including having more autonomy and impact at work, as well as the perception that being more senior means being more successful.
• Becoming a boss often comes with more money, prestige, and leverage to set the agenda, but also more meetings and less time for individual work.

The Impact of Bad Bosses

• About 50% of American employees have left a job because of a bad boss.
• Horrible bosses are a familiar caricature in film and occasionally turn up in real life.
• Even in Hollywood, grotesque abuses are harder to get away with.
• More attention needs to be paid to the more common type of bad boss who is simply incompetent or miserable being the boss.

The Peter Principle

• The Peter Principle states that in any hierarchy, an employee tends to rise to his level of incompetence.
• Firms tend to promote people based on their performance so far, which can lead to promoting someone to a position where they are a bad match for the job role.
• The Peter Principle is real and causes a decline in team sales performance when top salespeople are promoted to management.

Measuring Boss Behavior

• The impact of bosses on outcomes is an eternal question in personnel economics, but the academic literature on it is not particularly advanced.
• Survey data on bosses can be unreliable due to the gap between what people say and how they behave.
• Economists believe in a revealed preference approach, where how people behave is more telling than what they say about themselves.

Choosing Technical Specialization Over Management

• Some firms offer a dual career track for skilled engineers to advance in their field without becoming managers.
• Technical specialists can be rewarded and paid well without becoming managers, but they may still be excluded from high-level conversations.
• Choosing to go backwards in the career hierarchy can be a reflection of what we value in a career.

Summary

The Impact of Bad Bosses

Many employees are promoted to management positions without the skills to be good bosses. This leads to a significant number of bad bosses who are either incompetent or miserable being in charge. About 50% of American employees have left a job because of a bad boss, highlighting the negative consequences of such leadership. While horrible bosses are often depicted in films, real-life instances of grotesque abuses are harder to get away with. It is crucial to address the more common type of bad boss who may not engage in extreme behavior but still fails to effectively lead and manage their teams.

The Peter Principle

The Peter Principle, which suggests that employees tend to be promoted to their level of incompetence, has significant implications for organizational performance. Firms often promote individuals based on their past performance, leading to situations where top performers in their previous roles are promoted to management positions where they are ill-suited. This phenomenon has been validated by research, showing a decline in team sales performance when top salespeople are promoted to management. Despite its satirical origins, the Peter Principle holds true in many organizations and highlights the need for more thoughtful promotion practices.

Measuring Boss Behavior

Understanding the impact of bosses on employee outcomes is a complex challenge. The academic literature on boss behavior is relatively limited, and survey data on bosses can be unreliable due to the discrepancy between what people say and how they behave. Economists advocate for a revealed preference approach, focusing on actual behavior rather than self-reported assessments. This approach provides valuable insights into the effectiveness of bosses and helps identify the characteristics that contribute to positive outcomes, such as reduced employee attrition.

Choosing Technical Specialization Over Management

Recognizing that not everyone is suited for a managerial role, some firms offer alternative career tracks for skilled professionals who prefer to focus on technical specialization. This allows individuals to advance in their field without the added responsibilities of management. While technical specialists can be rewarded and paid well, they may still face challenges, such as exclusion from high-level conversations. Choosing technical specialization over management can be a deliberate decision based on personal values and preferences in a career.

Conclusion

Bad bosses have a significant impact on employee satisfaction, retention, and overall organizational performance. Promoting individuals to management positions without the necessary skills and considering past performance as the sole criterion for promotion can lead to the Peter Principle becoming a reality. Understanding and measuring boss behavior is crucial for improving leadership practices and creating a positive work environment. Additionally, recognizing and providing alternative career paths for individuals who excel in technical roles can help retain valuable talent and ensure a well-rounded workforce.