- Companies that have structured management practices are more productive.
- That’s according to new research from Cornell University and the University of Georgia.
- Structured management includes standard protocols for things like measuring employee performance and tracking the organization’s progress toward goals.
- But many companies aren’t even aware that they should have greater management structure.
Plans and processes aren’t the sexiest parts of leadership. Remember “move fast and break things?”
But formal systems may be more important than many executives today believe.
A discussion paper (which means it hasn’t yet been reviewed by other scientists) from Cornell University and the University of Georgia suggests that organizations with systems — for things like tracking progress and helping struggling employees — are better at hiring and retaining top talent.
The academic term for these systems is “structured management practices,” and the researchers found that companies who use them are more productive.
Cornell assistant professor Daniela Scur told Business Insider she was “shocked” to learn just how many organizations the team surveyed didn’t have structured management practices. That generally wasn’t because these companies actively avoided formal protocols, said Scur, who was a postdoctoral research fellow at the Massachusetts Institute of Technology when she led the research.
Instead, it was because the organizations hadn’t ever considered using them.
In other words, plenty of business leaders assume they can more or less wing it when it comes to people management. In reality though, a more systematized approach is linked to stronger performance. The researchers write in the paper: “A firm’s management practices can be viewed as a type of technology that can influence its productivity.”
As important (and trendy) as it is to invest in new products and digital technologies, investing in people development may be just as crucial.
Companies with structured management practices hire better performers
For the study, the researchers combined three sets of data on Brazilian firms with between 50 and 5,000 employees. Ultimately they included observations of 961 companies between 2008 and 2013.
Analysts worked the phones, cold-calling the senior manager at a specific site and rating that manager’s answers to 18 questions.
The questions aren’t designed to cover every single aspect of management. They address topics including key performance indicators (KPIs) and how they’re tracked, whether the company’s progress is disclosed to employees, how struggling employees are supported and how high performers are groomed for promotion, and what the firm does to attract top talent.
Results of the analysis showed that organizations with structured management practices were more likely to hire top talent, more likely to keep those top performers, and less likely to fire people, suggesting that they did a better job of motivating employees or just hired stronger employees in the first place.
This particular survey didn’t track firms’ productivity levels, but researchers relied on data that another survey had gathered on the same group of companies.
The researchers can’t say for sure that structured management practices lead directly to organizational success. Yet a 2012 paper published in the Journal of Quarterly Economics provides some evidence that the relationship does work that way. Those researchers found that management training at Indian textile firms boosted productivity by 17% in the first year, compared to similar firms that didn’t receive the training.
In fact, when those researchers followed up with the Indian textile companies a decade later, they found that firms that had received training still performed higher than similar firms that hadn’t. (Productivity was measured by how many looms each employee was able to weave.)
Meanwhile, a 2019 Harvard Business Review article describes research that found companies that have more structured management practices pay their employees more equally.
Some managers aren’t even aware that greater structure is an option
Scur was surprised when she saw the data that analysts had gathered.
“How can it be that firms are operating and not doing these really basic things?” she said. Some managers interviewed were intrigued by the possibility that they could adopt structured management practices.
“They would say, ‘Oh, that’s interesting. I never thought of that, but maybe I should,'” Scur said.
A 2000 paper published in the journal Management Science outlines some key reasons why organizations don’t have structured management practices, including the fact that a CEO may not even realize the company is poorly run and that even if the CEO does realize, they may not know how to effect change.
Scur cited Toyota as a prime example of how structured management works. In particular, she mentioned Toyota’s commitment to continuous improvement. For example, if any worker on the production floor sees an issue, they can press a button to stop the entire production line. That way, problems are spotted and addressed immediately.
Leaders curious about their own company’s management practices can take the 18-question self-assessment on the World Management Survey website. (There are four different assessments for manufacturing firms, retail outlets, hospitals, and schools.)
For example, managers at a manufacturing organization would respond to questions like, “How do problems typically get exposed and fixed?” and “What is the motivation behind your goals and how are they cascaded down to the individual workers?”
Once you complete the assessment, you’ll receive a brief report that compares your company’s score to the global database.
“After an honest assessment,” Scur wrote in a follow-up email to Business Insider, “the next step is to determine which area of improvement they think is the most feasible, and start there.” That could mean, for example, developing a set of metrics that reflect the health of your business.
Scur said it was clear which companies had structured management nailed. “It was eye-opening that you could really quickly tell who the well managed firms were. They anticipated your questions; they would explain things,” she said. “Because they just had it all worked out.”