Management Matters

Too often viable companies fail due to bad management even when the fundamental idea behind the business is sound. A body of academic research that finds good management is a better predictor of a firm’s success than R&D spending, IT spending or how skilled their workforce is.

Whether or not firms consistently monitor and improve their processes, set and revise targets, and incentivise employees through merit-based hiring, firing and promotion procedures explains almost a third of the differences in productivity between and within countries.

Report author Sam Dumitriu recommends practical reforms including tax breaks for self-funded work-related training to encourage greater investment in management capability to reduce the rate of unnecessary business failure. Put simply, when businesses are well-managed they create more jobs, pay higher wages, and sell better (and cheaper) products. Better managed workers aren’t just more productive and better paid, they’re happier too.