Unseen but vital. Be careful not to junk strategically important people, writes David Gilroy.
Can it be that the dumbest person in the organisation is the Chief Executive? I am referring to cost cutting. As the October 2024 budget decisions kick in there is a relentless focus on productivity improvements. The most expedient way to improve efficiency is to reduce staffing levels. It shouldn’t be, but it is. I watch and read about firms laying off hundreds of employees at speed and wonder about the damage caused by high-handed actions. This is where the Chief Executive acts smart or dumb.
The film “Margin Call” is a tightly focused drama that unfolds over a tense 24-hour period inside a large Wall Street investment bank at the onset of the 2008 financial crisis. The story begins when a round of layoffs hits the firm’s risk management division, leaving junior analyst Peter Sullivan in possession of a flash drive handed to him by his departing boss, Eric Dale. Working late into the night, Peter discovers a catastrophic flaw in the firm’s trading model: the company is overleveraged with mortgage-backed securities whose risk exposure is so great that even minor market fluctuations could wipe out the firm entirely. Eric tended to work mostly alone in a small pokey office. The big hitters several levels above him were blissfully unaware of the importance of his work and decided that he could be sacrificed. It was only later when Peter discovered the enormity of the situation and escalated it up the chain of command that the significance of Eric’s role became clear. By then they were desperate to get Eric back and were ready to offer him a serious package to return. Eric was unseen but strategically important. When it comes to “letting people go” American firms are brutal. Another film, “Up in the Air” depicts the ruthlessness of staff layoffs showing them being escorted out of the premises, each with their box of personal belongings and each on the minimum compensation package possible. We witnessed this on a grand scale when Elon Musk took his chainsaw to manpower numbers in Washington during the department of government efficiency (DOGE) phase. It later transpired that some very key people in the nuclear division had been exited and that urgent remedial action was required.
I have been involved in a few cost cutting exercises over the years and found that they must be carefully crafted for the sake of the business. On one occasion we laid off a person in the IT department – let’s call him John Roberts. He was a loner, quiet and unassuming. His boss didn’t consider him particularly critical. It turned out that he was the only person who really understood the operating system and its recovery procedures.
He would often work late at night to stabilise the platform. He was strategically important. I came across another example of strategic importance in a call centre setting. The company retailed gifts by post and had managed to reduce its returns and refund costs to a tiny fraction – way better than the industry benchmark. Top management had assumed this was down to the quality of the product despatched. The reality was somewhat different. The frontline team had devised a data cleansing routine that ensured that all mailings were being sent to accurate relevant addresses. They had managed to eliminate vast amounts of “goneaways” which are a surge to direct to consumer retailers. This small team was saving the company a fortune and yet was pencilled in for serious culling until their strategic significance became properly understood.
In discussions of organisational strategy, the spotlight typically falls on CEOs, executives, and boards. Yet, a growing body of academic literature underscores that those below the top echelon, particularly middle managers and frontline personnel are often the linchpins of strategic success. Their relationships, insights, and day-to-day actions translate high-level vision into tangible performance. Middle managers serve as translators, turning abstract directives into real, operational tasks. They frequently initiate change in ways that resonate with employees’ experiences. Research from Rotterdam School of Management (RSM) shows that change initiated and executed by middle managers garnered significantly stronger employee support than when the initiative came solely from the top. A study from LSE Business Review reveals how middle managers make strategy “real” by creating material tools, physical and written artifacts like dashboards, reports, and templates. These tools embed strategy into the workflow and align local practices with global goals.
New research emphasises the leadership and coordination role of middle managers. Their transformational leadership (inspiring, motivating) and instrumental leadership (task-focused execution) positively influence how effectively teams implement strategy. Coordination amplifies these effects. In digital strategy, middle managers are essential enablers. They help ensure successful digital transformation by translating strategy, coordinating teams, and preventing disengagement. Arguably, middle managers account for up to 70% of the variance in employee engagement, which directly affects productivity and retention. Yet many organisations don’t invest in their development—reportedly only 28% actively support middle managers’ development. Studies on shared leadership show that distributing leadership across levels often leads to higher team performance, greater cohesion, trust, and engagement often outperforming traditional, vertical authority structures. The evidence in academic literature highlights that lower-level roles, particularly middle managers are not merely executors of strategy but key co-creators, interpreters, and champions of organisational intent. They translate strategy into practice. Often by translating and executing change. Middle management become the de facto leaders by inspiring and coordinating teams, enhancing innovation and adaptability and by driving cultural engagement and retention.
There are strategically important people all around the business. They possess the knowledge to get things done and the collective memory relating to how and why systems and processes have evolved. They often (but not exclusively) reside in the middle tiers. In the rush to cut costs take time to carefully figure out what happens when they are taken out of the equation. Babies and bathwater come to mind. Best not to be dumb.
David Gilroy, Store Excel
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