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Management Is Key to Productivity Boost

A recent study conducted by the McKinsey Global Institute found that “well-managed firms have higher productivity, market value, and growth, as well as a greater ability to survive adverse conditions, such as global financial recession.”

Spanning more than 14,000 global organizations and 30 countries, the study also found great potential for management-led productivity improvements in almost every country. In every region, there was a large “tail” of businesses that were ripe for management-led productivity enhancements.


For investors and management teams who improve business through hands-on management techniques and activist ownership models, this study comes as a strong vindication of the importance of management skill and operational expertise in creating outperformance.

The study also found that a number of businesses suffering from poor productivity due to weak management varied widely from region to region. The number of businesses ripe for improvement was much higher in India, than say in the United States. Investors have often lamented the difficulty experienced in trying to bring management best practices to regions with businesses that, for various reasons, have been resistant to outside management change. Often these regions have a high percentage of family business ownership and taking control positions is often difficult. Nevertheless, the study indicates future opportunity for investors businesses to stimulate productivity through management-led operational transformation.

The study also found that virtually across the board, management effectiveness in multinationals operating in a given region were more advanced than domestic companies in the same region, pointing to the importance of multinationals in dispersing management best practices throughout the globe. “There’s an almost complete lack of self-awareness among managers about the productivity or management effectiveness of their own companies.”