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Management Quality Matters: Measuring and Benchmarking the Quality of Firms' Management in Turkey

Ximena Del Carpio's picture


This is an edited excerpt from a chapter, “Quality of Firm Management in Turkey,” from the upcoming report, “Creating Good Jobs in Turkey.”

 
How well firms are managed, and whether their management quality (or lack thereof) affects firm performance, are questions that policymakers and researchers everywhere – especially in emerging economies – are very interested in answering.
 
This area of inquiry is important because much of the evidence shows that the quality of management techniques that are used to run a firm – how it manages its capital and human resources, and how it monitors inventory, among other important areas in the production process – affect firm productivity, adaptability to change, and potential for growth. These factors are especially important in competitive and challenging environments. 
 
Despite the potential effect of management practices on firm performance, it is a relatively understudied area in the economics literature. Survey-data limitations have made it difficult for economists to analyze the relationship between firm management practices and firm performance.
 
But that pattern is changing: The World Management Survey (WMS) team designed a new interview-based evaluation tool to quantify the quality of management practices in firms across countries and sectors, and across 18 basic practices in four categories: operations, target-setting, performance monitoring, and talent or human-resource management. (The WMS was started by researchers at the London School of Economics and Stanford University, and it has been conducting management surveys worldwide for more than 10 years.)
 
In the last decade, many countries interested in benchmarking their firms’ performance have participated in the surveys. Turkey joined this effort in 2014. The new data allows us to measure how Turkish firms perform across the four benchmark dimensions of management. and it allows us to measure how they compare with competing firms across the globe. The results help the private sector and the public sector offer suitable support to improve firm performance and productivity as a whole.
 
In this analysis, we’ll share some of the early results from Tukey’s first quality-of-management survey, including how Turkey compares to other countries; we'll highlight the importance of measurement; and we'll try to motivate Turkish researchers and policymakers to use the results to help firms in Turkey.  
 
Average scores for firms in Turkey are low relative to the country’s development level (Figure 1). Firms in comparator countries like Mexico and Poland have higher absolute scores, and relatively higher scores for their development level. (The average scores combine sub-scores for each of the four categories: operations, targeting, monitoring and human resources.)

Figure 1: Per Capita Income and Average Management Score



Note: On this chart, Turkey's position is just above the position of Malaysia.
Source: World Management Survey and authors’ calculations.


Relatively poor performance in Turkey, and key comparator countries, is mostly driven by a large “left tail” of poorly managed firms – a factor that is not uncommon across developing countries (Figure 2). In particular, the fraction of firms performing below the lowest quartile of U.S. firms ranges between 55 percent and 70 percent in such countries as Turkey, Brazil, Poland, Chile, but also China and India. Although there is a large variation in management scores across firms, the distribution of scores in these countries, compared to the distribution in the United States, is either narrow or flat, bimodal and/or nonsymmetrical.

Figure 2: Smooth distribution of total management scores


Note: The vertical red dashed line represents the lowest quartile of the US distribution.
Source: World Management Survey and authors’ calculations.

Hawthorne effects: Past and future

Heather Lanthorn's picture

Maseru Shining Centuary TextilesI have two main points in this blog. The first is a public service announcement in the guise of history. Not so long ago, I heard someone credit the Hawthorne effect to an elusive, eponymous Dr. Hawthorne, of which, in this case, there is not one directly tied to these studies. The second is a call to expand our conception of Hawthorne effects – or really, observer or evaluator effects – in the practice of social science monitoring and evaluation.
 
Hawthorne history

The Hawthorne effect earned its name from the factory in which the study was sited: the Western Electric Company’s Hawthorne plant, near Chicago. These mid-1920s studies, carried out by MIT, Harvard, and the US National Research Council researchers were predicated on in-vogue ideas related to scientific management. Specifically, the researchers examined the effect of artificial illumination on worker productivity, raising and lowering the artificial light available to the women assembling electric relays (winding coils of wire) in a factory until the artificial light available was equivalent to moonlight.
 
The finding that made social science history (first in the nascent fields of industrial and organizational psychology and slowly trickling out from there) was that worker productivity increased when the amount of light was changed, and productivity decreased when the study ended. It was then suggested that the workers’ productivity increased because of the attention paid to them via the study, not because the light was altered.

Thus, the “Hawthorne effect” was named and acknowledged: the change in an outcome that can be attributed to behavioral responses among subjects/respondents/beneficiaries simply by virtue of being observed as part of an experiment or evaluation.

Quote of the Week: Peter Drucker

Sina Odugbemi's picture

"People who don't take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year."

- Peter Drucker, university professor, writer and business guru. He has written numerous books on management and business and is considered to be the "father of modern management". 
 

Reaping the fruit of determination

Guang Z. CHEN's picture


The highlands of Ethiopia, especially Tigray, were notorious for their severely degraded land. High population density, unchanged agricultural practices, climate change, the steep topography and intermittent and extreme rainfalls are the main causes of land degradation in the area.

The Best Gift You Can Give

Mauricio Ríos's picture

As I was glancing through my twitter feed the other day I run into a Ted Talk on “Why work doesn't happen at work.”  Sort of intriguing, I thought, and probably full of good tips for most of us at the Bank Group.  

Jason Fried, the talk protagonist, does a lot of thinking about collaboration, productivity and the nature of work. He's the co-founder of 37signals, and co-author of the New York Times-best seller "Rework."

A software entrepreneur, Jason offers some practical suggestions on how we could turn the office into a more productive place.  After all, increasing productivity seems crucial to meet the twin goals of reducing poverty and boosting shared prosperity.  

So, where do you really go when you need to get work done?  That’s the question that Jason has been asking people for about 10 years. 
 

Quote of the Week: Andrew Smithers

Sina Odugbemi's picture

"Management is not an intellectually satisfying occupation. It consists of telling people things that you’re not sure about and they don’t want to hear.”

- Andrew Smithers, Chairman and Founder of Smithers & Co., a leading advisor to investment managers on international asset allocation. He has contributed regularly to London Evening Standard, Sentaku Magazine and Nikkei Veritas, and he is the author of several books concerning investment, including his most recent, The Road to Recovery: How and Why Economic Policy Must Change (2013).

Redefining the Roles of NGOs

Suvojit Chattopadhyay's picture

NGOs must strive for scale if they want to fulfil their roles as enablers and incubators in striving for development

As small but key players in the social development space, non-governmental organizations (NGOs) often worry about scaling up. If you have worked in this space, you’d surely agree that models of development interventions promoted by NGOs often remain small islands of success (if at all they do succeed). NGOs themselves are aware of the limited traction they achieve with policymakers due to their inability to influence or demonstrate change at a larger scale. Also, often organizations that are effective at a certain scale falter as they attempt to grow bigger in size. In this column, I restrict myself to service-delivery organizations—those that work in the areas of livelihoods, basic services, etc.—and not those that are involved in activism or rights-based social mobilization.
 
One view is that the very nature of a development NGO sometimes limits its ability to grow. The objective of an NGO should be to demonstrate: (1) proof of concept of their model; and (2) that implementing this through a government agency is indeed feasible. The latter is especially important, given that key stakeholders in the sector have by now realized and acknowledged that the state/government is at the forefront of the development battle. Scale is crucial in a country like India—it is expected of organizations that they will demonstrate consistent results over a long period of time, and at the same time, reach out to large numbers of people.

Setting the Stage for Making Public Money Count

Rubaba Anwar's picture

Sitting out in the sun, in the middle of a public school premises, I intently looked at a woman clad in a patchy orange saree carrying a lean child on her lap. It was hard not to wonder whether her bare five years of primary school education really helped her understand public financial management! Indeed I was wrong. It was the sheer urge of entertainment and not curiosity about public financial management that drew her, and many more like her, to the premises of a government owned school in Hazaribaag, near the Beribaad, Mirpur area of Dhaka.

Is Sustainable Urbanization Possible in Sri Lanka?

Dilinika Peiris's picture

With urbanization in Sri Lanka expected to increase from 20% in 2000 to 60% in 2030, perpetual gridlock, polluted waterways, and smoggy skies could all be potential side effects. However, Managing Cities for Sri Lanka Green Growth, organized by the Urban Development Authority and attended by representatives from all major cities taught me some ways we may mitigate some of the negative effects and create a sustainable urban development through innovative locally driven initiatives.

The workshop introduced the Eco2Cities approach to urban development which looks at helping developing countries achieve ecological and economic sustainability in urban areas. Although all Sri Lankan cities currently face challenges related to poor urban planning, it was enriching to hear some successful and innovative initiatives carried out by certain communities that can be used as examples for others.


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