Does management training and consulting services improve working conditions, worker skills and productivity, and firm performance in SMEs? Evidence from the construction industry in Mozambique

This scoping exercise assessed the feasibility of running a randomised experiment to examine management practices in Mozambican construction firms. It (1) identified the potential sample of firms which would take part in the experiment, (2) engaged with potential partners, met other local management consultants to discuss in more detail the provision of consultancy services to these firms and performance data collection, and (3) developed a realistic project budget.

In recent years, economists have started to pay attention to management practices and have found that certain practices are also strongly associated with differences in performance (Bertrand and Schoar, 2003; Black and Lynch, 2001; Bloom and Van Reenen, 2007; Bloom et al., 2014; Ichniowski et al., 1997). Searching for a causal link between management and performance, Bloom et al., (2012) provide estimates of the impact of management practices on firm performance through randomised field experiments with multi-plant Indian textile firms. The treatment intervention introduced basic modern management practices for factory operations, inventory control, quality control, human resources, and planning and sales. They find that even in the short term the intervention led to significant improvements in quality and lower inventory levels, which they estimate to have increased productivity by over 10% and profitability by $330,000 per year.

The next step in this research agenda is two-fold: (1) to understand the causal link between management and several other firm-related outcomes such as working conditions, worker skills, worker productivity as well as firm performance, and to (2) understand whether management interventions in small- and medium-sized firms can be replicated at a larger-scale with lower costs.

Thus, we propose to address the following questions:

  1. What are the short- and medium-run effects of a management intervention on working conditions, worker skills and productivity, and firm performance?
  2. Which management practices have the highest and longest lasting impact on working conditions, worker skills and productivity, and firm performance?
  3. How effective are management consultancy services from local versus international organisations? How do these compare to in-classroom management training?

The research design for this project proposes to utilise a randomised experiment using 100 to 150 mid-sized firms in the construction industry located in Maputo, Mozambique. We plan to work in collaboration with partners from local and international organisations, who will be providing management training and consultancy services to three different treatment arms: (i) a group receiving in-classroom management training, (ii) a group receiving on-site management consultancy from a local consultancy company, (iii) a group receiving on-site management consultancy from an international, well-know consultancy company.

At a high level, the treated firms for the different arms will go through a (1) Diagnostic Phase (3 months), an Implementation Phase (1 year), and Monitoring Phase (1 year). Control group firms proceed directly from the Diagnostic Phase to the Monitoring Phase without the Implementation Phase. The randomised phased intervention will allow estimation of the causal impact of management practices on working conditions, worker skills and productivity and firm performance across the three different treatment groups, testing the effectiveness of these different management interventions.

The Ministry of Public Works, Habitation and Hydric Resources is re-formulating government policies to focus on the development of a competitive construction sector. This project which proposes to look at managerial constraints and opportunities for improvement in the construction sector is therefore very well-timed. To the extent that we can identify opportunities for improvement in the next two years, this project can provide research-based evidence to inform the current public policy debate in this area.