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 (Photo: iStock)
(Photo: iStock)

How managers can boost a firm’s productivity

Skills, personality traits and practices of management may be the most important determinant of a firm’s productivity, suggests a new study

Mumbai: Skills, personality traits and practices of management may be the most important determinant of a firm’s productivity, suggests a new National Bureau of Economic Research study by Achyuta Adhvaryu of the Ross School of Business, and others.

The authors show, based on a study of production line supervisors in Indian ready-made garment factories, that managerial quality plays a key role in production efficiency and the growth of a firm.

They argue that it is the differences in the managerial practices of firms that explain a substantial portion of the large productivity gap between rich and poor countries.

The authors single out middle managers, such as line supervisors, as especially important for more efficient production.

They argue that in many low-income countries, the quality of these middle managers is particularly low.

The researchers match granular production data from several garment factories in India to results from a survey conducted on line supervisors employed in those factories to ascertain which managerial skills contribute the most to productivity.

They find that the tenure of the supervisor, their autonomy, who they controlled and the attention to their work had substantial effects on productivity.

However, as many of these skills are intangible and hard to gauge in a managerial candidate, the job market fails to reward these skills through higher wages and salaries. The authors find evidence that more easily observable characteristics, such as industry tenure, are better rewarded, while less observable characteristics, such as attention to work, are rewarded less commensurately, despite their importance in productivity. As a result, the authors argue that good managers typically tend to be underpaid.

Also Read: Managerial quality and productivity dynamics

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