Three prestigious schools and one consulting firm: Harvard Business School, London School of Economics, McKinsey & Company, and Stanford say, “Yes.” They spent ten years studying a range of management practices in 10,000 firms in 20 countries to generate an overall management score.
The authors of the study, who wrote an article for the Harvard Business Review, said, “First, not surprisingly, we find that organizations with better management massively outperform their disorganized competitors. They make more money, grow faster, have far higher stock market values, and survive for longer.”
Here’s how some countries ranked:
• Top: American firms primarily in manufacturing, retail, and health-care sectors. (Japanese, German, and Swedish firms follow closely behind.)
• Mid-tier: UK, France, Italy, and Australia.
• Bottom: Brazil, China, and India.
What is the secret sauce of management success?
The researchers said, “One of the biggest drivers of these differences is variation in people management. American firms are ruthless at rapidly rewarding and promoting good employees and retraining or firing bad employees. The reasons are threefold:
1. The U.S. has tougher levels of competition. Large and open U.S. markets generate the type of rapid management evolution that allows only the best-managed firms to survive.
2. Human capital is important. America traditionally gets far more of its population into college than other nations.
3. The U..S has more flexible labor markets. It is much easier to hire and fire employees.
However, the researchers say there is no room for complacency. Since 2006, China showed the biggest improvement in management practices.