Beyond COVID-19: How the manufacturing industry should prepare

Who Makes A Good Manager On The Shop Floor?

FOCUS AREA

Closing The Skill Gap

LOCATION

Karnataka

REACH

150 supervisors

PARTNERS

University of Michigan

STAGE

DESIGN

EVALUATE

ANALYZE

DISSEMINATE

SCALE-UP

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?

Challenge

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?

Design

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:

  1. First, we estimate our 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. Finally, we estimate how the different skills, traits, and practices of managers contribute to observed productivity dynamics.

^In the interim, we estimate a nonlinear latent factor measurement system using the data from our managerial survey.

Findings

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.

  • Productivity increases on average 50% over roughly 16 days of producing the same style.
  • The most important 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 the 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, achieve greater productivity at low cost.

Scale up

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



Ann Arbor
701 Tappan Ave,
Ann Arbor, Michigan 48109, United States
Bengaluru Corporate Office
Bellandur Gate, Sarjapur Main Road
Bengaluru, Karnataka 560102,
India
Delhi NCR Corporate Office
F-88, Okhla Industrial Area Phase-1
New Delhi, Delhi 110023,
India
Medellin
University EAFIT
Medellin, Colombia