Who Makes A Good Manager On The Shop Floor?

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 style 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.

1. First, we estimate our learning parameters- initial productivity, rate of learning, contribution of previous learning, and rate of forgetting previous learning- of a learning curve for each production line.
2. Second, we estimate a nonlinear latent factor measurement system using the data from our managerial survey.
3. Finally, in the third stage, we estimate how different skills, traits, and practices of managers contribute to observed productivity dynamics.

Our work reveals a crucial role for managerial quality in determining firm productivity, and shows that intervening to improve management practices can generate meaningful impacts. We study the way in which managerial quality interacts with the learning by doing process in the case of ready-made garments production in India.

• Productivity increases on average 50% over roughly 16 days of producing the same style.
• The most productive skills, traits and practices of managers for productivity are tenure, cognitive skills, internal locus of control, autonomy, and attention.
• However, dimensions of managerial quality have differing impacts on dynamics (initial level of productivity, rate of learning, retention, forgetting). Control affects initial level of productivity very strongly, while tenure and cognition affect retention and forgetting the most, and attention and autonomy affect learning the most.
• The most productive skills, traits, and practices of managers are not proportionately rewarded in pay, creating opportunity for firms to improve managerial quality and, in turn, productivity at low cost.

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, in that it informs the design and targeting of skill development programs, as well as helps to create more effective screening and hiring policies.

Moreover, assessing the extent to which the dimensions of managerial quality that matter most in the workplace are appropriately priced into their pay generates crucial insights into the functioning of labor markets, specifically with regard to information frictions.

We suggest that screening on personality traits via psychometric measurement would 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 tech to hire and promote managers at the firm.

Image credits: Nayantara Parikh