A worker's manager is another Worker instance. Lookup Related Value follows that single relationship and returns a field from the related instance. Choose the business object where the answer belongs, the lookup field that reaches the related object, and the return value on that object. You can then reuse the result in reports and other calculations.
A missing relationship returns an empty value. It doesn't prove that the worker is a manager or that the person should inherit the organization's manager. Keep those meanings separate. A collection such as direct reports can't be used as a single lookup instance; first choose one related instance or count the collection. Check the returned values on workers with managers and on the two records with blank manager references.