"Management Matters"
John Dowdy, Stephen Dorgan, Tom Rippin
McKinsey and the Centre for Economic Performance at the London School
of Economics, October 2005
Best-practice management increases productivity, sales, and company growth rates, a recent study by McKinsey and the Centre for Economic Performance at the London School of Economics finds. The study examined management styles in 700 medium-sized manufacturing companies in the United States, France, the United Kingdom and Germany and found that companies with higher scores on a management practice assessment scale were significantly more successful. Researchers studied medium-sized companies because they tend to be national as opposed to the multi-national nature of larger businesses.
Researchers interviewed one or two senior plant managers to assess management practices and determined scores for three categories: the quality of shop floor operations, goal-setting and performance management; and talent managing. They then measured company performance by examining sales per employee, sales growth, return on capital employed (ROCE), market share growth, and capital market valuation. The best managed companies had the highest scores in each category. Two other notable factors determined company performance: competition and age of the firm. Competition rewarded best-practice companies while the poorly managed suffered. Older firms were often the lowest scored in management quality, but remained in business due to lack of competition.
Researchers also ranked overall management nationally from highest to lowest
by average score with the United States. coming in first followed by Germany,
France and the United Kingdom. The study found that the differences in management
practices between the United Kingdom and the United States can explain 10-15
per cent of the productivity gap between the two countries, suggesting that
quality management is a key part of a healthy national economy.
