Policy recommendations

Research has shown that effective management practices can have long-term benefits for firm productivity and growth and employment, which are key drivers of economic growth in developing countries. However, more evidence is needed to understand why firms do not invest in improving management and what policies could change this. Both the private sector and policymakers can take steps to support the role of management in improving firm performance.

  1. Firms should invest in management practices and governments should consider supporting this. It is cost-effective for firms to invest in management practices; evidence shows that firms can recover the consulting costs within a year and see persisting benefits. Governments should consider measures to incentivise firms to enhance management practices given the large, long-term spillover effects of the adopted practices. Options include using quality consultancy interventions (as in Bloom et al, 2013) or training that demonstrates the benefits to firms of adopting management practices.
  2. Governments and firms should invest in human capital.Firms with better-educated managers tend to be better managed. Basic operations and high-impact skills training programmes are efficient and cost-effective options.
  3. Firms should promote information sharing.Making managers aware of best practices and helping them evaluate their own approach can be beneficial. This can be achieved through regular management meetings across firms (Cai et al., 2016) or easy-to-read, hands-on publications.
  4. Firms should retain effective managers.Supporting professional development and incentives to retain key staff and implementing meaningful handover processes for new managers helps to ensure that effective practices persist.
  5. Governments should encourage competition.Manufacturing plants that face higher competition tend to be better managed as they may otherwise be forced out of the market. This suggests that economic policies supporting greater competition can drive increases in productivity through better management practices.

Supervisor in Indian factory. Photo: Chandhan Khanna | Getty.