Management is a skill of its own, not an extension of being good at a particular job.  Just because a person is the senior member of a team does not mean he/she should be made manager of that team.  And just because a person does not have all the skills to perform a particular job does not mean he/she could not manage a person doing that job.

I have seen a number of situations where a senior developer was promoted to development manager, or a senior engineer was made the director of IT. Usually, not only was the person not well-suited for management, but they didn't enjoy it, either.  And to top it off, the organization had removed their most skilled person from the pool of resources doing the work.  It's a lose-lose situation.

Unnecessary Limitations

Much of this, in my opinion, has to do with career paths and "salary grades" that force people to either move into management, or limit their potential to earn more money.  Often, people who are put in those situations either try management (with limited success), or decide to leave for another organization with a different compensation structure.

Additionally, there is an unwritten rule about employees not making more money than their manager.  I can understand the potential for conflict if that rule were not followed, but it really is a shame that those types of artificial limits are put on people just because they are "not management material".  It seems like saying that a professional football player should never be allowed to make more than the coach.  The two are different jobs, and one is not always more valuable than the other.  In a free market, people should be independently compensated based on the value they provide, regardless of their position on the org. chart.

Management has Value

I do believe that good managers are hard to come by, and they should be valued.  The ability to lead and motivate people is a skill that is needed in nearly every organization.  Companies would do well to hire and promote people based on their management and leadership skills, not just their knowledge or experience at the job they will be managing.

Like any skill, good management can be taught and learned, if the teacher is good and the student has the desire to grow.  Smart organizations identify people with management potential, and do some form of mentoring before thrusting them into the position.  Investing in people is almost always a good idea, and management skills are no exception.  They should be fostered and valued just like any other skill within the organization.