Management Practices in Europe, the US and Emerging Markets

1. Management Practices in Europe, the US and Emerging Markets Nick Bloom (Stanford Economics and GSB) John Van Reenen (LSE and Stanford GSB) Lecture 4: Management and firm Performance

2. Lincoln & influences on incentives management Incentives/People Management practices Targets Management

3. Multinationals Appear to Achieve Good Management Practices Wherever They Locate Domestic firms Foreign multinationals United States Sweden Germany Japan Italy France UK Canada US Australia Poland Mexico China New Zealand Portugal India Chile Brazil Argentina Republic of Ireland Greece 2.4 2.6 2.8 3 3.2 3.4 3.6 Management score Sample of 7,262 manufacturing and 661 retail firms, of which 5,441 are purely domestic and 2,482 are foreign multinationals. Domestic multinationals are excluded – that is the domestic subsidiaries of multinational firms (like a Toyota subsidiary in Japan).

4. Labor Market Regulation Inhibit good Incentives Management 3.2 US 3 Germany Incentives Management (management sample) Canada Japan UK Great Britain 2.8 Poland Sweden Republic of Ireland Italy Australia France Mexico China Chile 2.6 India New Zealand Portugal Greece Argentina Brazil 0 10 20 30 40 50 60 World Bank Rigidity of employment index (0-100) Note: Averaged across all manufacturing firms within each country (9079 observations). We did not include other sectors as we do not have the same international coverage. Incentives management defined as management practices around hiring, firing, pay and promotions. The index is from the Doing Business database http://www.doingbusiness.org/ExploreTopics/EmployingWorkers/

5. SUMMARY OF SOME DETERMINANTS OF MANAGEMENT (& PRODUCTIVITY) • Product market competition • Meritocratic CEO selection • Human Capital • Ownership • public sector • Multinationals • private equity • Labor market regulations

6. Wrap up on Lincoln & “drivers” of good management Incentives/People Management practices Targets Management

7. Incentives (people) management Today we will run through 6 dimensions on incentives management (part of HR and talent management) The concept is around the management and motivation of people As before, while the data is mainly for manufacturing, these questions have been used in retail, hospitals, schools, healthcare clinics, tax collection agencies, charities, PPPs and law firms 7

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9. (16) Promoting high performers

10. (16) Promoting high performers

11. The survey scores to question (16), promoting high performers – all countries, manufacturing Average 3.02 All countries, manufacturing firms (100 to 5000 employees), 9820 observations

12. The survey scores to question (16), promoting high performers: developed countries, hospitals Average 2.44 Hospitals, Canada, France, Germany, Italy, Sweden, UK, US, 1183 observations

13. The survey scores to question (16), promoting high performers : developed countries, schools Average 2.41 Schools in Canada, Germany, Sweden, UK, US777 observations

14. (14) Rewarding high performance

15. The survey scores to question (14), rewarding high performance – all countries, manufacturing Average 2.61 All countries, manufacturing firms (100 to 5000 employees), 9820 observations

16. The survey scores to question (14), rewarding high performance: developed countries, hospitals Average 2.31 Hospitals, Canada, France, Germany, Italy, Sweden, UK, US, 1183 observations

17. The survey scores to question (14), rewarding high performance: developed countries, schools Average 2.18 Schools in Canada, Germany, Sweden, UK, US777 observations

18. (15) Removing poor performers

19. (15) Removing poor performers

20. The survey scores to question (15), removing poor performers – all countries, manufacturing Average 3.11 All countries, manufacturing firms (100 to 5000 employees), 9820 observations

21. The survey scores to question (15), removing poor performers – USA, manufacturing Average 3.73 Manufacturing firms (100 to 5000 employees), 1291 observations

22. The survey scores to question (15), removing poor performers – Japan, manufacturing Average 2.78 Manufacturing firms (100 to 5000 employees), 176 observations

23. The survey scores to question (15), removing poor performers – France, manufacturing Average 2.90 Manufacturing firms (100 to 5000 employees), 605 observations

24. The survey scores to question (15), removing poor performers – India, manufacturing Average 2.81 Manufacturing firms (100 to 5000 employees), 1135 observations

25. The survey scores to question (15), removing poor performers – US, Canada and UK, retail Average 3.03 All countries, retail firms (100 to 5000 employees)660 observations

26. The survey scores to question (15), removing poor performers: developed countries, hospitals Average 2.56 Hospitals, Canada, France, Germany, Italy, Sweden, UK, US, 1183 observations

27. (17) Attracting human capital

28. (17) Attracting human capital

29. The survey scores to question (17), attracting human capital – all countries, manufacturing Average 3.06 All countries, manufacturing firms (100 to 5000 employees), 9739 observations

30. (18) Retaining human capital

31. (18) Retaining human capital

32. The survey scores to question (18), retaining human capital – all countries, manufacturing Average 2.55 All countries, manufacturing firms (100 to 5000 employees), 9782 observations

33. Some “drivers” of good management Incentives/People Management practices Targets Management

34. Targets management Run through 5 dimensions on targets management (questions 8 to 12 on the grid) The concept is around the setting of stretching targets As before, while the data is mainly for manufacturing, these questions have been used in retail, hospitals, schools, healthcare clinics, tax collection agencies, charities, PPPs and law firms 34

35. (8) Target balance

36. (8) Target balance

37. The survey scores to question (8), target balance – all countries, manufacturing Average 2.89 All countries, manufacturing firms (100 to 5000 employees), 9824 observations

38. The survey scores to question (8), target balance – India, manufacturing Average 2.44 India, manufacturing firms (100 to 5000 employees),1136 observations

39. The survey scores to question (8), target balance – US, Canada and UK, retail Average 2.74 All countries, retail firms (100 to 5000 employees)661 observations

40. The survey scores to question (8), target balance: developed countries, hospitals Average 2.73 Hospitals, Canada, France, Germany, Italy, Sweden, UK, US, 1183 observations

41. The survey scores to question (8), target balance: developed countries, schools Average 2.70 Schools in Canada, Germany, Sweden, UK, US777 observations

42. (9) Target interconnection

43. (9) Target interconnection

44. Target interconnection (9):all countries, manufacturing Average 3.01 All countries, manufacturing firms (100 to 5000 employees), 9813 observations

45. (10) Target time horizon

46. (10) Target time horizon

47. Target time horizon (10):all countries, manufacturing Average 2.99 All countries, manufacturing firms (100 to 5000 employees), 9814 observations

48. (11) Targets are stretching

49. (11) Targets are stretching

50. Targets are stretching (11):all countries, manufacturing Average 3.00 All countries, manufacturing firms (100 to 5000 employees), 9819 observations