New research from the Centre for Economic Performance, LSE, and McKinsey & Company uses an innovative new approach to survey management practices in over 700 firms in the France, Germany, the UK and the US.
The research finds that:
Management practices across countries:
US firms are on average the best managed, with the Germans second, the French third and the UK worst
US multinational subsidiaries based in the UK, France and Germany are also better managed than either domestic firms or other non-US multinational subsidiaries
Superior US management performance seems to be driven by more product market competition, higher levels of worker and management skills, and lower levels of labour regulation
The differences in management practices between the UK and the United States can explain 10-15 per cent of the productivity gap between the two countries
Countries have distinct management cultures - with German firms excelling at shopfloor management and US firms excelling at people management.
Management practices across firms:
There is a huge spread of management practices across firms in every country. Some UK firms use world-class management practices, while others are among the worst in the whole sample
Well-managed firms do perform significantly better, with higher levels of productivity, profitability, growth rates and market values
Competition appears to be a primary driver of good management practices. It seems to act by driving badly managed firms out of the market, but it does not appear to make managers work harder
A firm's age also seems to matter with very old firms having the lowest average scores for quality of management practices, particularly those in uncompetitive industries where competition does not weed out underperformers.
Authors of the report, Management Practices Across Firms and Nations, from the Centre for Economic Performance are Nick Bloom and John Van Reenen.
John Cheetham, Press Office Manager, McKinsey & Company on 020 7961 5294 or email: firstname.lastname@example.org
Management Practices across Firms & Nations is by Nick Bloom, Stephen Dorgan, John Dowdy, Tom Rippin and John Van Reenen
CEP is an interdisciplinary research centre at the LSE Research Laboratory. It was established by the Economic and Social Research Council (ESRC) in 1990 and is now one of the leading economic research groups in Europe. It is led by its director Professor John Van Reenen and research director Professor Stephen Machin. See http://cep.lse.ac.uk/
For an overview on productivity, see the LSE Magazine, summer 2005, The knowns and unknowns of productivity (PDF)
McKinsey & Company - link to http://www.mckinsey.com/
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