Management practices and productivity
As much as one third of total factor productivity differences across firms internationally is due to management. But until CEP's work on management practices there was little empirical evidence beyond case studies for the well-worn business school mantras proclaiming the importance of good management for productivity.
We discovered that these helped explain large and persistent differences in organisational performance which occur within detailed sectors. Our World Management Survey contains data covering 15 years of management practices conducted by teams of more than 300 interviewers in more than 20,000 firms in 35 countries. The survey measures modern management techniques such as setting goals, monitoring and rewarding performance and "lean" manufacturing operations. We found large cross-country differences in the adoption of management practices, with the US having the highest size-weighted average management score.
The impact of management practices goes beyond the individuals who work in the firm – they are embodied in the way these different people are knitted together within an effective organisation. For example, in a pioneering randomised control trial we found that free management consultancy offered to Indian textile firms could massively raise their managerial practices and increase profits.
If the solutions to better productivity are simple, why is there still such variation in performance? We found that incentives to promote better management practices were found in firms exposed to more product market competition, involved in exporting, and subsidiaries of multi-nationals which inherited superior management practice methods of corporate headquarters. Organisational form was also important in stimulating better management practices, with the CEO's of less hierarchical firms exercising greater trust in giving more autonomy to managers at local level for hiring, sales and people management.
We adapted our firm survey to investigate management practices in hospitals and schools and found that, for example, hospitals exposed to more competition adopt better management practices which have been linked to better clinical outcomes, including survival rates from heart attacks as well as considerably cheaper treatments than in less efficiently-run hospitals.
Featured Work
Management practices and productivity publications
Katarzyna Bilicka and Daniela Scur
4 September 2024
Sara Calligaris, Gabriele Ciminelli, Helia Costa, Chiara Criscuolo, Lilas Demmou, Isabelle Desnoyers-James, Guido Franco and Rudy Verlhac
9 March 2024
Mary Amiti, Cedric Duprez, Jozef Konings and John Van Reenen
20 February 2024
Nicholas Bloom, Philip Bunn, Paul Mizen, Krishan Shah, Gregory Thwaites and Ivan Yotzov
18 February 2024
Nicholas Bloom and Steven J. Davis
2 November 2023
Mary Amiti, Cedric Duprez, Jozef Konings and John Van Reenen
31 October 2023
Paul Brandily, Mimosa Distefano, Krishan Shah, Gregory Thwaites and Anna Valero
24 October 2023
Mary Amiti, Cedric Duprez, Jozef Konings and John Van Reenen
12 October 2023
Morten Bennedsen, Berthe Larsen, Ian M. Schmutte and Daniela Scur
5 September 2023
Ufuk Akcigit and John Van Reenen
22 August 2023
Felix Bracht, Jeroen Mahieu and Steven Vanhaverbeke
4 May 2023
Jonathan Colmer, Mary F. Evans and Jay Shimshack
18 April 2023
Jonathan Haskel and Josh Martin
13 March 2023
David E. Altig, Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, Brent Meyer and Nicholas Parker
1 November 2022
Nicholas Bloom, Leonardo Iacovone, Mariana Pereira-Lopez and John Van Reenen
20 October 2022
David E. Altig, Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, Brent Meyer and Emil Mihaylov
30 July 2022
Nicholas Bloom, Raffaella Sadun and John Van Reenen
20 May 2022
Ari Bronsoler, Joseph Doyle and John Van Reenen
4 April 2022
Jan De Loecker, Tim Obermeier and John Van Reenen
3 March 2022
Jesse Kozler, Juliana Oliveira-Cunha, Pablo Shah, Gregory Thwaites and Anna Valero
15 November 2021