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Management practices across firms and nations

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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|.

Ends

John Cheetham, Press Office Manager, McKinsey & Company on 020 7961 5294 or email: john_cheetham@mckinsey.com| 

Notes:

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/|

Press cuttings

Newsweek
Why bad managers do matter (31 Oct 05)
Bad bosses get a lot of abuse from workers but not much attention from economists. Now, however, a new study by McKinsey & Co. and the Centre for Economic Performance, LSE, says the quality of corporate management accounts for at least 20 percent of the difference between a highly productive national economy and a sluggish one. 

Independent
UK tax system turns off investors, report says (17 Oct 05)
Last month the World Economic Forum said UK had slid in a global league table of competitiveness, while a LSE report found British managers came fourth in a survey of 730 manufacturers in the UK, US, France and Germany.
http://news.independent.co.uk/business/news/article320181.ece
| 

Personnel Today
UK is in no position to preach competitiveness (27 Sep 05)
Reference to research by McKinsey & Co and LSE on management and productivity. 

AMR Research
Innovative IT and The New Economy (27 Sep 05)
Reference to survey by McKinsey Global Institute and LSE analysing 100 companies in France, Germany, UK, and the United States showing that improving management practices and of IT deployment increases a company's productivity.
http://www.amrresearch.com/Content/View.asp?pmillid=18729| 

Financial Times
Time to pay attention to management succession (15 Sept 05)
Reference to research conducted jointly by LSE's Centre for Economic Performance and McKinsey, looking at 730 manufacturing companies in France, Germany, the UK and the US, shows just how broadly management practices vary.
http://news.ft.com/cms/s/5fe1d056-2587-11da-98dc-00000e2511c8.html| 

Observer
The age of the Euro-customer (26 June 05)
Europe cannot compete on cost, writes Simon Caulkin. But there is another way. It seems pretty obvious, but management matters. That's both the name and the conclusion of a study by McKinsey and the London School of Economics' Centre for Economic Performance, which shows that good management pays off in terms of better corporate performance. 

Financial Times
Rhetoric against UK's 'Anglo-Saxon model' belied by the facts (23 June 05)
The UK's welfare state and labour market, and its perceived similarity to that of the US, appear to have helped scare French and Dutch voters off the European constitution. John Hills, director of the Centre for the Analysis of Social Exclusion at LSE, says that "while much of the rhetoric and jargon match that of the United States, many of the reforms have involved much more carrot and much less stick than in the US, and in some cases have produced as good, if not better, results".
http://news.ft.com/cms/s/1df95e5c-e383-11d9-b6f0-00000e2511c8.html| 

Times 
Good Week... (23 June 05)
Research by LSE suggests that US firms are on average the world's best managed while the UK's are the worst. 

Birmingham Post
Manufacturing: UK bosses are worst in Europe says study (17 June 05)
In a survey of management practices in more than 700 manufacturing firms in France, Germany, the UK and the US, the Centre for Economic Performance at LSE found British firms are the worst managed. Comments from Prof John Van Reenen, LSE.

FinFacts, Ireland
How Western manufacturers can better compete with China, India and low cost countries (12 June 05)
Government intervention to protect manufacturers against competition might not be the remedy for Western economies losing industries and jobs to China, India and other low-cost countries. Corporate performance in manufacturing is strongly linked to the quality of management techniques - and competitive intensity is needed to stimulate the spread of best practice, according to new research from McKinsey and the Centre for Economic Performance at LSE.
http://www.finfacts.com/irelandbusinessnews/publish/article_10002187.shtml| 

Economist
A question of management (10 June 05)
Productivity. John Van Reenen and Nick Bloom, CEP, with McKinsey & Co, on research looking at management practices in firms and nations.
www.economist.com|

10 June 2005

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