How Much Does Management Matter?

How differences in management practice across organizations correlate to business success.
How Much Does Management Matter?

WHAT IS THE ROLE of management in an organization’s failure or success? How do management styles differ across facilities? The U.S. National Bureau of Economic Research (NBER) has explored how management practices compare across organizations through the administration of its Management and Organizational Practices Survey (MOPS). With funding from the U.S. National Science Foundation, the Kauffman Foundation, and the Sloan Foundation, MOPS was delivered to 32,000 U.S. manufacturing plants belonging to more than 10,000 firms, as a mandatory 16-question supplement to the U.S. Census Bureau’s Annual Survey of Manufacturers.

The authors of the report based on the survey found that management practices varied significantly not only among organizations, but also among manufacturing plants within the same organization. The larger the size of the firm, the greater the variation among its plants. In addition, individual plants that had adopted more structured management practices were more productive, profitable, and innovative—and experienced greater rates of growth—than plants with less organized practices.

Management practices “account for about a fifth of the cross-firm productivity spread, a fraction that is as large as or larger than technological factors such as R&D or IT,” the authors conclude. They emphasize four factors that contribute to an organization’s adoption of consistent structured management practices across all facilities: product market competition, the regulatory business environment, learning spillovers from larger and more productive plants, and education.

This government-sponsored survey’s “coverage of units within a firm, its links to other Census data, as well as its comprehensive coverage of industries and geographies,” write the report’s authors, “enables us to address some of the major gaps in the recent management literature.”

“What Drives Differences in Management Practices?” is forthcoming in the American Economic Review. Read the working paper.