1. Management Practices in Europe, the US and Emerging Markets
Nick Bloom (Stanford Economics)
John Van Reenen (Stanford GSB/LSE)
Lecture 6 1

2. Take away summary points from last week
Many firms often are not adopting basic management practices, in large part due to a lack of awareness
Changing practices is very slow – takes several years:
Takes time for employees to buy into change
Changes are complementary – e.g. monitoring & pay
Change may not be permanent – need to change processes, incentives and often people to avoid backsliding

3. WE FIND FIVE FACTORS ARE ASSOCIATED WITH DIFFERENCES IN MANAGEMENT PRACTICES
Competition
Governance - Family firms & Private Equity
Multinationals
Labor market regulations
Education

4. COMPETITION IS ASSOCIATED WITH BETTER MANAGEMENT PRACTICES
Assessed management practice score
Correlation of 0.854
Reported number of competitors
LOX-AAA

5. WE FIND FIVE FACTORS ARE ASSOCIATED WITH DIFFERENCES IN MANAGEMENT PRACTICES
Competition
Ownership
Multinationals
Labor market regulations
Education

6. FIRMS WITH PROFESSIONAL CEOS ARE TYPICALLY WELL RUN
FIRMS WITH PROFESSIONAL CEOS ARE TYPICALLY WELL RUN. GOVERNMENT, FOUNDER, FAMILY MANAGED FIRMS ARE NOT
Distribution of firm management scores by ownership. Overlaid dashed line is approximate density for dispersed shareholders, the most common US and Canadian ownership type
Average Management Score

7. ONWERSHIP PATTERNS OF THESE “POOR MANAGEMENT” GROUPS VARY SUBSTANTIALLY
share family CEO
share founder CEO (1st generation)
share government owned
share of ownership (for types associated with low management scores)

8. WE FIND FIVE FACTORS ARE ASSOCIATED WITH DIFFERENCES IN MANAGEMENT PRACTICES
Competition
Ownership
Multinationals
Labor market regulations
Education

9. MULTINATIONALS APPEAR ABLE TO TRANSPORT GOOD MANAGEMENT AROUND THE WORLD
Foreign multinationals
Domestic firms
Average Management Score

10. MULTINATIONAL OWNERSHIP VARIES SUBSTANTIALLY ACROSS COUNTRIES
Foreign multinationals
Domestic multinationals
Share of multinationals

11. WE FIND FIVE FACTORS ARE ASSOCIATED WITH DIFFERENCES IN MANAGEMENT PRACTICES
Competition
Governance - Family firms & Private Equity
Multinationals
Labor market regulations
Education

12. LIGHT LABOR MARKET REGULATIONS ALSO FACILITIATE GOOD PEOPLE MANAGEMENT
Average people management (hiring, firing, pay and promotions)
World Bank Employment Rigidity Index

13. WE FIND FIVE FACTORS ARE ASSOCIATED WITH DIFFERENCES IN MANAGEMENT PRACTICES
Competition
Governance - Family firms & Private Equity
Multinationals
Labor market regulations
Education

14. EDUCATION IS ALSO STRONGLY LINKED WITH BETTER MANAGEMENT PRACTICES
Non-managers
Managers
Percent with a degree
Management score (rounded to nearest 0.5)

15. Take away summary points
Family, founder and government firms, in uncompetitive markets are likely candidates for bad management
Detached external owners (private equity and dispersed shareholders) are associated with the best management
Practices can be improved in every country – multinationals seem to be well managed everywhere

16. MY FAVOURITE QUOTES:
The difficulties of defining ownership in Europe
Production Manager: “We’re owned by the Mafia”
Interviewer: “I think that’s the “Other” category……..although I guess I could put you down as an “Italian multinational” ?”
Americans on geography
Interviewer: “How many production sites do you have abroad?
Manager in Indiana, US: “Well…we have one in Texas…”