PRODUCTIVITY
Management a key performance driver, studies show
‘Managerial capacity could be the secret sauce for company success and macroeconomic development,’ writes John van Reenen
When people discuss what drives long-run productivity, they usually focus on technical change. But productivity is about more than robots, new drugs and self-driving vehicles. After breaking down the sources of productivity across nations and companies, there is a large residual left over, rather inelegantly named "total factor productivity". Observable measures of technology can only account for a small fraction of this dark matter. Many statistical analyses and case studies of the effect of new technologies on firm performance have shown there is a large variation in its effect. What is much more important than the amount spent on fancy tech is the way managerial practices are used in the companies that implement the changes. Although there is a tradition in economics starting with the 19th-century American economist Francis Walker on the importance of management for productivity, it has been largely subterranean. Management is very hard to measure robustly, so economists have bee...
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