Managerial quality plays a key role in firm productivity and growth. Differences in firms’ managerial practices explain a substantial portion of the yawning productivity gap across rich and poor countries. Who is a good manager?
In this project, our challenge is to ascertain which managerial skills, traits, and practices matter most for productivity. How does the observability of these features affect how appropriately they are priced into wages?
We match the granular administrative data on productivity and the style of the garment produced to the survey data on managerial characteristics and practices at the supervisor level to answer the basic question: which managerial skills, traits, and practices best predict higher productivity?
Our empirical strategy consists of three steps:
^In the interim, we estimate a nonlinear latent factor measurement system using the data from our managerial survey.
Our work reveals a crucial role for managerial quality in determining firm productivity, and shows that intervening to improve management practices can generate meaningful impact. We study the way in which managerial quality interacts with the learning by following this process in the case of ready-made garments production in India.
Which practices, skills, and personality traits combine to make a “good” manager? The answer to this question is critical for firms and public policymakers alike. It informs the design and targeting of skill development programs, as well as helps to create more effective screening and hiring policies.
We assess the extent to which the dimensions of managerial quality that matter most in the workplace are appropriately priced into their pay. This generates crucial insights into the functioning of labor markets, specifically with regard to information frictions, or the energy required to gain certain knowledge.
We suggest that screening for personality traits via psychometric measurement could improve the quality of new hires, and training on poorly observed (and unrewarded) but valuable practices like managerial attention could substantially raise firm productivity at low cost. The insights gleaned here have motivated the design and ongoing implementation of a technology to hire and promote managers at the firm.
Image credits: Nayantara Parikh
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