Better managers make companies more productive

Industrial companies with a higher quality of management perform better - they have higher productivity and more international activities than companies with lower quality management, according to a study done by the University of Groningen and Statistics Netherlands at the request of the Ministry of Economic Affairs and Climate.

The University of Groningen and Rabobank measured the quality of management of around 450 larger industrial companies by interviewing their senior management last year. They looked at four areas - the organization of work processes and operations, long-term goals and their translation into achievable short term goals, how the achievement of set goals was analyzed and monitored, and personnel management. Statistics Netherlands then combined the survey results with business economic data of the companies concerned, and information about the companies' CEOs.

"The results show a clear positive correlation between the overall quality of management and the average labor productivity", Statistics Netherlands said. "In other words, better managed companies are on average more productive than less well run companies." This conclusion is unchanged when account is taken of the size of the company and the sector in which it operates, among other things.

The study also showed that higher paid CEOs perform better up to a certain point. This positive relationship stagnates at salaries above 600 thousand euros. The quality of management at companies with a CEO paid more than 600 thousand euros does not differ significantly from that at companies with a CEO that earns between 400 thousand and 600 thousand euros.

The quality of management also seems to be dependent on the number of years that the CEO has been leading the company. The longest-serving CEOs work at companies with the lowest management quality. Long-serving CEOs score especially badly in the field of personnel management. CEOs who are new to a company achieve the best scores.