Whenever I am in conversations with intrapreneurs about their struggles in large enterprises they blame middle managers. To their minds, these up and coming leaders with MBAs are the real problem in getting an innovation culture embedded within the company. Middle managers are on a specific career trajectory and will not do anything to upset the apple cart. Intrapreneurs who report into these managers find their jobs really frustrating.
Middle managers have been referred to as permafrost; the place where all good ideas go to die. In most companies it often feels as if the top executives get it. These executive always place innovation as a top priority in all their strategic goals and communications. The product teams at the bottom also seem to get it. They have attended lean startup, design thinking and business model design workshops. They are keen to work on some disruptive new products.
But in between these two parts of the company lies the permafrost. The managers who are tasked with delivering the top executives’ goals by managing the product teams. In The Innovator’s Dilemma, Clayton Christensen points out that top executives often think that they determine what happens in their companies. But the truth is that their companies are really run by the middle management. It is the middle management that can stifle an innovation project before it even gets the attention of top executives.
But how fair is this characterization of middle managers? Is it really true that they don’t want to work on exciting new products? In my experience, middle managers are being used as punching bags for top executives. The truth is that most top executives simply talk about how innovation is important for their company. Their private actions on the other hand communicate a different message.
Most middle managers are incentivized by their top executives to reach specific revenue and profit numbers. Their ability to deliver on these goals is the only conversation that happens at the annual review. Their bonuses and promotions depend only on their ability to execute and deliver on the core products, not on bringing new innovative products into the pipeline. I have met very few middle managers that have innovation as one of the annual measures of success.
A lot of top executives talk through both sides of their mouth. On the one hand they are saying the company needs more innovation, but on the other hand they are only going to reward great execution and revenues on the core products. Most leaders forget that the culture in their companies is determined by what they reward and celebrate. So they can talk about innovation all they want, but unless they start incentivizing their middle managers to do so, the culture in their companies won’t change.
It Is Unfair
So as a middle manager what am I supposed to do when an intrapreneur comes to me with a new disruptive product idea? Given how I am being managed from the top, my first question will be how much revenue the idea will generate for the business this year. This question means that most innovative ideas are dead on arrival. The intrapreneur will walk away from the conversation frustrated and mumbling insults under their breath.
But what are we really asking here? We are asking the middle managers to take money from their budget and invest in products that will not provide guaranteed revenue. This means that during their annual review with the top executives they are now having to explain why there is a hole in the budgets and revenues. This is completely unfair. If corporate leaders are serious about building innovation capabilities within their companies, they have to change how they reward and incentivize their middle management. This layer of permafrost will only thaw if their incentives are aligned with the top executive’s goals for innovation.