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Thursday, 14 May 2015

18 #management practices to measure good management & 10 conclusions on the #data gathered on such across firms and countries

The points I make below are summarised out of this paper - Why Do Management Practices Differ across Firms and Countries? - by Nicholas Bloom and John Van Reenen (there is more detail on the authors towards the end of this post) 

The paper was published in the Journal of Economic Perspectives—Volume 24, Number 1—Winter 2010—Pages 203–224

At the foot of this page are links to other posts you maybe interested in

The methodology they used to measure management was to use an interview-based evaluation tool to score firms (1 = worst practice to 5 = best practice) against 18 basic management practices (listed below).  The main measure of management practices was taken as simply the average of the 18 scores against these practices.  The 18 practices cover 3 broad areas:

1) monitoring- what goes on inside a firm and how this is used for continuous improvement; 

2) targets- right targets set? right outcomes tracked? & action taken if the 2 are inconsistent;

3) incentives - promotion/reward based on performance plus firms hire and keep best staff

The 18 management practices

1) Introduction of modern manufacturing techniques - e.g. just-in-time delivery,  from suppliers, intelligent automation, flexible manpower, support systems, attitudes & behaviour

2) Rationale for introduction of modern manufacturing techniques - e.g. adopted just because others have or because linked to meeting business objectives?

3) Process problem documentation - e.g improvements only made when problems arise or actively and continuously sought as a normal part of business?

4) Performance tracking  - e.g. ad hoc/incomplete or continually tracked and communicated to staff?

5) Performance review  - e.g. infrequent & on a success/failure scale or continual with an expectation of continuous improvement?

6) Performance dialogue - e.g. is the purpose, data, agenda, and follow-up steps clear to all parties?

7) Consequence management - does failure to achieve agreed objectives carry consequences? 

8) Target balance - e.g. are goals exclusively financial or is there a balance with non-financial targets?

9) Target interconnection - e.g are goals based on accounting value or on shareholder value in a way that works through business units and connects to individual performance expectations?

10) Target time horizon - e.g. does top management focus mainly on the short term or see short term targets as a “staircase” toward long-term goals?

11) Targets are stretching  - e.g. are goals too easy/demanding and are they attainable for all parts of the firm?

12) Performance clarity  - e.g. are measures ill-defined, poorly understood and private or are they well-defined, clearly communicated, and made public?

13) Managing human capital - e.g. to what extent are senior managers evaluated and held
accountable for attracting, retaining, and developing talent throughout the organization?

14) Rewarding high performance - e.g. to what extent are people rewarded equally irrespective of performance level, or are rewards related to performance and effort?

15) Removing poor performers  - e.g. are poor performers rarely removed, or are they retrained and/or moved into different roles or out as soon as the weakness is identified?

16) Promoting high performers - e.g. are people promoted mainly on the basis of tenure or does the firm actively identify, develop, and promote its top performers?

17) Attracting human capital  - e.g. do competitors offer stronger reasons for talented people to join them or does the firm provide a wide range of reasons to encourage talented people to join?

18) Retaining human capital  - e.g. Does the firm do little to retain top talent or do whatever it takes to retain top talent when they look likely to leave?

and the 10 conclusions reached on management practices based on the data they gathered against the 18 management practices are:

1) firms with better practices tend to have better performance on a wide range of dimensions

2) practices vary tremendously across firms and countries with much of the difference between countries due to the size of the “long tail” of very badly managed firms. 

3) countries and firms specialize in different styles of management (e.g. USA firms score much higher than Swedish firms in incentives but are worse than Swedish firms in monitoring)

4) strong product market competition appears to boost average practices (through a combination of eliminating the tail of badly managed firms and pushing incumbents to improve their practices)

5) multinationals are generally well managed in every country (they also transplant their management styles abroad)

6) firms that export (but do not produce) overseas are better-managed than domestic non-exporters, but are worse-managed than multinationals. 

7) inherited family-owned firms who appoint a family member (especially the eldest son) as chief executive officer are very badly managed on average. 

8) government-owned firms are typically managed extremely badly. Firms with publicly quoted share prices or owned by private-equity firms are typically well managed. 

9) firms that more intensively use human capital (as measured by more educated workers) tend to have much better practices

10) at a country level, a relatively light touch in labour market regulation is associated with better use of incentives by management.

More detail on the authors

Nicholas Bloom ( email ) is an Associate Professor of Economics, Stanford University, Stanford, California, an International Research Fellow

John Van Reenen (email )is a Professor of Economics, London School of Economics, London, United Kingdom, Director of the Centre for Economic Performance, London School of Economics, London, United Kingdom and Research Fellow in the Centre for Economic Policy, London, United Kingdom. 

Both authors are also Faculty Research Fellows, National Bureau of Economic Research, Cambridge, Massachusetts. 

other posts on RSA, TED, other lectures, conferences, others blog posts


algorithmically enhanced confirmation bias - 6 uncomfortable facts about how facebook affects what we see - from a post by @nathanjurgenson

10 thoughts on some possible insights (& questions) from the UK Election results
11 headlines on why we use facebook & social media - summarised out of a very rich buffer post by Courtney Seiteron  
18 top tips and thoughts about using #social media to enable #community source = an article by  Anatoliy Gruzd PhD & Caroline Haythornthwaite PhD 

Data Protection & Privacy - 8 issues from an International Conference
escape your social horizon limit & understand more - source = a blog post summarising the work of  Jeffrey A. Smith, Miller McPherson & Lynn Smith-Lovin
social media & death - 10 things you may not have thought about - #DORS conference

the development of the U2 spyplane - source = CIA historians Gregory Pedlow & Donald Welzenbach
considering culture and business process improvement  - source = an article by Schmiedel, Theresa, vom Brocke, Jan, & Recker 
ideas that may help you attract older volunteers - source = a paper by Brayley, Nadine, Obst, Patricia L., White, Katherine M., Lewis, Ioni M.,Warburton, Jeni, & Spencer, Nancy
physical factors which help people get better quicker - source = a paper by Salonen, Heidi & Morawska, Lidia 
a new approach to school and education - by Geetha Narayanan 
guiding principles on designing construction kits - by Mitchel Resnick & Brian Silverman
signs of overparenting - source = an article by Locke, Judith, Campbell, Marilyn A., & Kavanagh, David J
making ideas happen - source = a 99U conference

how to spot a liar - by pamela myer 
measuring happiness - source = talk by jim clifton, jim harter, ben leedle

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