At first I thought the solution is that it needs to be a step down: becoming a manager entails taking a cut in pay, a lower nominal role, an increased vulnerability if the team needs to be cut. Make people pay a cost in order to switch to this role.

But a large part of me tells me this would just make things worse. The only people who would opt to transfer to the manager track would be those who are really career politicians, who can take credit for every success but blame every failure convincingly on someone else. Ideally with management thinking all the time that this guy is a loyal contributor and not a politician. This is what seems to happen in practice.

So what can you do? Hire only people who are strong engineers and who don't have any ambitions to management? Hire excellent engineers and mediocre management? This last seems to be the approach of many tech companies. Frustrating though it is for the engineers, this explains one reason companies may go for this approach.