A good (or bad) manager can make (or break) a business. What makes a good manager? Company policies, or individual traits? Identifying the channels by which management impacts business performance is important for designing strategies to improve performance, as well as for determining the appropriate pay for good managers, and estimating how much improving management might bolster productivity on a national scale. Past efforts to study this issue have been hindered by empirical challenges; identifying manager effects has typically required observing performance across several different businesses, making it difficult to isolate the role of managers separate from other dynamics that vary across firms. In this paper, the authors study manager moves across different retail storefronts that share mutual ownership to clearly identify how managers drive performance.
The authors use data on store-level operations for two large retail companies that each run many locations. Noting that retail managers tend to change jobs relatively frequently, the authors track manager moves across stores and study how productivity changes as managers come and go. They find the following:
The upshot is that managers have an impact on productivity that is distinct, quick, and separate from company-level management practices. These results point to the crucial role of managers and suggest possible avenues for unlocking substantial productivity increases through, for example, better allocation of managers across stores.