Middle managers are key for lean change in financial services

02 July 2020 Consultancy.eu 6 min. read

Despite growing claims that the role of middle management is losing relevance against the backdrop of self-organising teams and agile working, a new dissertation from a consultant in the Netherlands has shown that the contrary is true. Without middle management buy-in, change is doomed to underperform. 

Debate on the role and impact of middle managers – leaders typically two levels below the CEO and one level above line managers – has been ever present, both in literature in practice. Some believe that they are becoming increasingly obsolete, or even “costly dinosaurs” in today’s market as they don’t really add value, due to changing ways of working in organisations, increased automation of various work processes and higher levels of employee autonomy. 

Others however laud the role of middle managers, describing them as essential for the mechanics of an organisation as they occupy a unique position tasked with bridging the gap between strategy and execution. And with organisations becoming more globalised and delayered, the management role of connecting and linking layers and different groups to the benefit of an overarching common goal is more than ever needed. 

In the context of lean change in the financial services industry, Freek Hermkens – a consultant at MLC and a now PhD holder from Eindhoven University of Technology – set out to debunk the myths. Following an in-depth theoretical and empirical study, he outlined his take on how important middle management can be for the organisation-wide implementation and adoption of continuous improvement and in particular lean.

Middle managers play a key role in driving change

Continuous improvement can be summarised as a culture of sustained improvement of products, services or processes, aimed at eliminating/reducing waste in all organisational systems and processes, which requires employee involvement and teamwork. Lean is one of the most widely adopted continuous improvement approaches, aimed at creating customer value and eliminating waste in operational and other processes.

International studies have demonstrated that by implementing lean, financial services institutions can build an operating model that is more efficient, effective and sustainable, thereby offering the potential of greater flexibility and profitability moving forward, said Hermkens. 

However, a considerable number of lean projects don’t deliver what they have planned for, and as with all cases of change, fingers tend to point to middle management as one key reason why. Indeed, Hermkens’ dissertation shows no different, but instead, he turns the equation around. He argues that middle managers can be the key to success, if they do a number of right things and are provided the right infrastructure to flourish. 

Implementing change

First, middle managers are deemed crucial for the implementation of lean initiatives. Sitting in between top management and employees, they bridge the gap between strategy and the operational level, leading change as well as day-to-day activities on the work floor. “From their position as a connecting link, middle managers can play an important role in the success of the implementation,” explained Hermkens.

Alongside connecting, middle managers contribute to safeguarding coordination, helping employees prioritize projects, disseminating knowledge, facilitating collaboration and ensuring that everyone is heard within an organisation – a driver of empowerment and stakeholder commitment. 

Embedding change

Second, middle managers play a role in making change stick. Change is notorious for its fledgy character, and if attention is not provided to embedding change, professionals can revert to legacy ways of working. Middle managers act as gatekeepers here, making sure that employees are provided with what is needed to embrace new ways of working. 

In order to sustain changes, middle managers have to re-model their own mindset and behaviour (e.g. experimenting; evaluating; coaching; building trust) and lead by example. To this end, a more servant style of leadership may be required, one in which the middle manager shows that the result of the change is more important than his or her own position.

“Middle managers play an important role in the success of an implementation and in embedding change within the organisation.”
–  Freek Hermkens

A task at hand

Building on a range of statistics, evidence points out that the task at hand for middle managers is not an easy one. There are a number of reasons for this. Obviously, they need to be skilled enough to translate management strategy into operational activities, and be adept in methodologies that complement lean such as agile. 

“If a middle manager wants to be able to contribute to the change, it also involves reviewing his or her own behaviour and adjusting it. Having access to sufficient development and training opportunities is important here,” said Hermkens. 

Then comes the fact that they can’t do it alone. For one, they are dependent on the endeavours of top managers. Hermkens’ dissertation found that the effectiveness of middle managers is correlated with the extent to which they understand the purpose of the change, with cooperation among management ranks, and with consistency in messages and deeds. 

“If top management says one thing but does the other, middle management may fear and eventually resist the change; this in turn confirms the idea that middle managers are no longer needed or have insufficient skills to support the change,” remarked Hermkens.

On top of this, a clear link has been found with the approach used to roll-out lean. If top management conceives continuous improvement with a birds-eye view, multidisciplinary across facets, this has “a positive effect on middle management’s expectation that lean can be incorporated into the organizational culture in a sustained manner.”

Such an approach should be built on the pillars of a more holistic strategy and roadmap, which ensures that an organisation doesn’t end up with “just another tool, with a rather short time horizon” but instead with “substantial changes in behaviour and culture toward continuous improvement.”