The United States is enjoying a golden age of management.
American manufacturing firms, retailers, and hospitals are currently the best managed in the world, according to a comprehensive
by a group of economists that was recently highlighted in The Economist. That’s great news for the U.S., as good management practices are strongly linked to increased productivity, profitability, and growth.
The four economists behind the study — Nicholas Bloom of Stanford, Christos Genakos of the Athens University of Economics and Business, Raffaella Sadun of Harvard Business School, and John Van Reenen of the London School of Economics — have spent a decade and counting on the project, surveying more than 10,000 organisations across 20 countries. They’ve focused on three key management practices:
1. Monitoring. The researchers examined how firms monitor what actually happens inside the company each day and how they use that information to make improvements.
2. Targets. Companies were assessed on how well they set goals, tracked outcomes, and responded when goals and outcomes didn’t align.
3. Incentives. Organisations were judged on their systems of promotions and rewards, hiring approach, and ability to retain top talent.
Companies in the U.S. scored the highest in both “overall management” and in “incentives management.” Japan, which had the best score in “targets management,” and Germany tied for the second-best overall management practices. Brazil and China scored the worst.
Here are the rankins for manufacturing companies:
And a more detailed breakdown:
What pushed the U.S. ahead of other nations? The researchers suggest one of the main reasons is the free market competition made possible by America’s lighter labour market regulations.
“Better managed firms [in the U.S.] appear to be rewarded more quickly with greater market share and the worse managed forced to rapidly shrink and exit,” they write. “This appears to have led American firms to rapidly copy management best practices from around the world.”
Here’s a chart showing that relationship in more detail:
America’s CEOs may also contribute to the nation’s effective management practices. The researchers note that companies owned and run by the founder tend to be the worst managed, followed by family-owned, family-run companies. On the other hand, dispersed shareholders are most effective at managing firms. In theory, the U.S. may have fewer family-run-and-owned companies than other countries.
The researchers also looked at U.S. Census data to get a more detailed picture of the country’s management practices. They found that firms in the South and Midwest were managed better than ones in the Northeast and West, but did not speculate on why.
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