Tuesday, 21 February 2012

Management practices

A quick Look at the paper "Recent Advances in the Empirics of Organizational Economics" by Nicholas Bloom, Raffaella Sadun and John Van Reenen, Annual Review of Economics (2010) 2: 105–37, shows up a few interesting results with regard to management practices and decentralisation of firms. In particular the paper suggest that (a) Competition seems to foster improved management and decentralisation; (b) larger firms, skill-intensive plants, and foreign multinationals appear better managed and are more decentralised; (c) firms that are both family owned and managed appear to have worse management and are more centralised; and (d) firms facing an environment of lighter labour market regulations and more human capital specialise relatively more in people management. Decentralisation here means the degree to which lower levels of the hierarchy have power relative to upper levels of the hierarchy (e.g., a higher degree of autonomy of junior managers from senior managers, a higher degree of autonomy of shopfloor workers from management)

The point about foreign firms being better managed is one that more than a few politicians, and others, in New Zealand would do well to take on board. Also the importance of competition to management practices needs to be kept in mind. This is just one advantage of increasing competition via a well implemented program of deregulation.

The paper also argues that there is evidence for complementarities between information and communication technology, decentralisation, and management, but the relationship is complex, and identification of the productivity effects of organisational practices remains to be fully investigated. But it does raise a possible reason for New Zealand's poor productivity performance. How well have we integrated ICTs into our businesses?

1 comment:

completebettyjo said...

Rand Corp's study on "Does Management matter." found that a strong civil court system was important in allowing professional management to take hold. Did this paper control for local conditions, such as strong civil courts?