Previously (part 1, part 2) we have discussed that the amount of money professionals make has to do with the value associated with the task they are assigned to complete. The greater the value and the more of that task the person is responsible for, the more that person will make.  The easiest way to increase your value, therefore, is to increase your skill set such that you can accomplish those tasks more quickly and take responsibility for greater parts of it. 

If it takes 5 people to accomplish a given task and you are one of those 5 people, your salary is going to be split amongst those people. If you can learn skills that allow you to take responsibility for 2 of the 5 parts of the task, your value increases accordingly which will, in time, be returned in the form of higher salaries and bonuses (and if not, you should find a better company to work at).

Entrepreneurs are often people who can accomplish a valuable task largely on their own. The small businesses they create tend to stay that way because taking it to the next step requires a very different set of skills -- the art of managing people.  The reason to hire more people is so that more valuable tasks can be accomplished or that tasks can be accomplished more quickly.  The catch is that the capability of individuals varies by up to a factor of 100. That variance is largely due to poor work habits (poor time management, disorganized, or laziness).  As a result, the fledgling manager may hire 4 people only to discover that not only are they not accomplishing more tasks, they aren't accomplishing the previous tasks as quickly as the fledgling manager used to be able to do on their own. It is at this point that poor managers and good managers are separated from one another.

Good managers focus on accomplishing tasks and recognize that their team exists solely to accomplish that task. And different members of that team will contribute to the completion of a given task at different rates based on their capability.

Scenario 1: Fledgling manager

You've just become a manager. And you've got 4 people working under you to accomplish task A. Turns out though, that those 4 people have very different capabilities. Sally has good capability but poor time management skills -- she chit chats a lot and as a result isn't as effective as she could be.  Ted is a super worker. Heck, he could practically do the whole project himself. You can "fire and forget" with him. Bill, meanwhile, is incompetent. He just doesn't know what he's doing and won't venture outside his limited skill area. And Jon is just lazy. He'll do a little work, then spend his time on instant messaging or surfing the net.

The net result is that task A actually only gets done as quickly as you could have done it on your own. And the only reason it's only doing as well as it did is that you lucked out and got Ted who is not only doing all he has to do but is picking up the slack left by his friend Bill.

A bad manager might just be tempted to throw more and more on Ted. It's the easiest thing to do -- just assign Ted to almost everything and have Sally, Bill, and Jon do marginal pieces.  Besides being unfair, it's economically infeasible. Because if Ted is responsible for 70% of the work and Sally, Bill, and Jon are picking up the remaining 30%, is Ted being paid 7 times as much as Bill and Jon? Probably not. Eventually, Ted is going to find a new job (or be promoted elsewhere).

So what should the manager do in the above scenario? In my experience, the first step is to identify whether Sally, Bill, and Jon are salvageable. Odds are, at least 2 of the 3 of them are with the right manager.  But the manager has to decide whether his time is best used increasing the capability of his team or doing some of it himself.

Scenario 2: Experienced Manager

Now you've had some time to look at your team and realize that the task is not getting done as quickly or well as it should be.  Sally's slow because she wastes time on other tasks (socializing, or worrying about minutia). Her issue is one of motivation and inspiration. Good managers know how to motivate people and inspire them to focus on what needs to get done. So you talk to her about the tasks at hand and how she can better use her time to help move things forward not just for the sake of the project but to help herself as well. Result - she improves.

Bill's still incompetent but he's at least trying harder now and you've spent some time training him to increase his productivity. Unfortunately, you still have to check Bill's work because it's spotty. Sometimes he gets it right, sometimes he doesn't and it's seemingly at random. You'll have to evaluate whether Bill is worth keeping -- the time you're spending on training him is time you could be using to improve others who are much more productive (a 10% increase in the mega guy is worth more than a 50% improvement than someone who's barely functional).  But into that evaluation you'll have to include morale overall of firing people and the fact that Ted, your best worker, is good friends with Bill.

And Jon is just lazy and you decide to fire him. And to improve the performance of your team, you spend some of your time on the project directly.  Net result, task A is now completed 2.5X as fast as you could have done it alone. Of course, it now takes 4 people to do that task.  Is it worth it? Depends on how much your team costs.  That's another factor that many workers don't realize -- the more you're paid, the more you have to produce. Bill's survival on the team will likely depend on how much he's making.

Master Manager

Eventually you'll get a feel for when you need to do a given task (or sub-task) yourself and when to assign a subordinate. And you'll get a feel for when it makes sense to improve one of your workers versus when it makes sense to terminate them outright. But it takes time and experience. There is really no substitute for experience. It's an intelligence multiplied by time kind of thing.  Even Bill Gates learned, the hard way, that you can't just take productive workers and turn them into managers. It takes a real skill to it and few people are truly good at it which is why they tend to make more money.

Managers don't necessarily make more than workers though.  Some managers resent this but only because they either forgot or don't understand that it's about getting the task done.  In the above example, imagine if you terminated Jon but lacked the skills necessary to work on the task yourself but instead had to rely more on your super-guy Ted. Well guess what? Ted is eventually going to make more money than you because his contribution to the completion of task A will be greater than yours.  Managers have an inherent advantage in contributing the most to the completion of a task because they make the assignments, but that doesn't guarantee that the manager is going to be the one who actually contributes the most to the completion of a task.

Next we'll take it to the next logical progression -- the management of managers!