Article | Harvard Business Review | November 2012

Does Management Really Work?

by Nicholas Bloom, Raffaella Sadun and John Van Reenen

Abstract

HBR's 90th anniversary is a sensible time to revisit a basic question: Are organizations more likely to succeed if they adopt good management practices? The answer may seem obvious to most HBR readers, but these three economists cast their net much wider than that. In a decade-long study of thousands of organizations in 20 countries, they and their interview team assessed how well manufacturers, schools, and hospitals adhere to three management basics: targets, incentives, and monitoring. They found that huge numbers of companies follow none of those fundamentals, that adopting the basics yields big improvements in outcomes such as productivity and longevity, and that good nuts-and-bolts management at individual firms shapes national performance. At 14 textile manufacturers in India, for example, an intervention—involving free, high-quality advice from a consultant who was on-site half-time for five months—cut defects by half, reduced inventory by 20%, and raised output by 10%. A control group saw no such gains. The authors' global data set suggests that implementing good management at schools and hospitals yields change more slowly than at manufacturers—but it does come eventually. And the macroeconomic potential—for incomes, productivity, and delivery of critically needed services—is huge. A call for "better management" may sound prosaic, but given the global payoffs, it's actually quite radical.

Keywords: BEST practices; CONSULTING firms; CORPORATIONS; COST control; employee training; EXECUTIVE ability (Management); executives—training of; hospitals—administration; industrial management—research; productiviy incentives; SCHOOL management teams; work environment; Management; Research;

Citation:

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. "Does Management Really Work?" Harvard Business Review 90, no. 11 (November 2012).