Understanding and Explaining Management Practices to Promote Higher Productivity in UK Businesses

Lead Research Organisation: National Institute of Economic & Soc Res
Department Name: National Institute of Economic & Soc Res

Abstract

Our Management and Expectations Survey (MES), cited in the ESRC call, arose from a partnership between the ONS and ESCoE: it is the largest ever survey of UK management capabilities, executed on a population of 25,000 firms across industries, regions, firm sizes and ages documenting the variable quality of management practices across UK businesses. Our analysis found a significant relationship between management practices and labour productivity amongst UK firms, and examined whether certain types of firms have poor management practices and stagnant productivity, drawing conclusions about the links between them, ONS (2018). This team, with two seminal contributors to management practice and performance (Bloom, Stanford, and Van Reenen, MIT) who initiated the World Management Survey, partners from the ONS (Awano, Dolby, Vyas, Wales), and the Director and Fellows of the ESCoE (Riley, Mizen, Senga, Sleeman) at the NIESR, will investigate five issues:
1. Longitudinal changes in management practices and performance
The initial MES offers a cross section of variation in management practices and expectations between firms, but it does not explore variations within businesses through time due to the missing longitudinal dimension to the data. A second wave of the MES will expand our scope of analysis so that we can interpret how management practices in the UK have varied over time. This extension addresses the 'broad consensus' from the recent ESRC-ONS workshop that 'there is not enough longitudinal data around productivity that allows for consistent, ongoing analysis, and in particular data that enables researchers to identify, isolate and accurately measure changes over time.'
2. International comparisons
Drawing on our links through Bloom and Van Reenen with the US Management and Organizational Practices Survey (MOPS) at the US Census Bureau will enable us to i) test identical hypotheses using their methods and variables to draw research insights that help identify causal drivers of productivity at the firm level, and compare and contrast the UK and US data; ii) draw together a unique joint ONS-Census Bureau methodological forum for collecting the most useful micro-data for measuring management, investment and hiring intentions for UK and US firms. Similar data collection exercises have been taking place across other countries. We have established links with German and Japanese teams and we intend to discuss key differences, e.g. between the US and European business environments, and similarities, e.g. the Japanese experience of low productivity.
3. Analysis of linked business surveys and administrative data
Partnership between academic researchers and ONS facilitates the matching of data from other sources to answer key questions around: a) management and firms' ability to cope with uncertainty by linking MES responses to trade data, administrative data on VAT, R&D expenditure, and patenting data, and exploiting variation across firms in exposure to EU markets through supply chains and export destination of goods; b) evidence of superior innovation, R&D and export performance from evidence of how business innovation and exporting varies across firms and over time in response to management practices and cultures. This will directly inform practical lessons for UK businesses.
4. Experimental analysis using big data
We will use natural language processing and machine learning to investigate big data from job-search companies to objectively identify the factors that affect staff satisfaction and performance in the UK. Matching to the MES and other micro datasets we will examine links between mental health and management practices.
5. Randomised control trials
Nearly 9,000 responding businesses in the MES sought 'feedback' on their management score. By varying feedback to respondents we will observe in collaboration with BIT (the 'Nudge Unit') and CMI the impact on firm's subsequent adaptation and performance.

Planned Impact

We will take a number of steps to ensure effective impact.

Government:

1. Informing, implementing, and evaluating The UK's Industrial Strategy
The key structure of our pathways is the collaboration that we have developed between ESCoE and ONS, and the links we have built with HM Treasury and BEIS that allow us to work towards shaping the UK's Industrial Strategy. During our initial design of the 2017 MES survey we worked collaboratively at the pilot and implementation stages, we published the results of the survey as joint working papers, and engaged in conference and dissemination activities together (Royal Economic Society Conference 2018; ESCoE Economic Measurement Conference 2018; ONS website posts). We intend to continue this established pattern of collaboration at all stages of this project. We will provide policymakers with timely basic information on firm responses and data analysis using state-of-the-art methods to produce results suitable for policy advice.

2. Providing inputs to the HM Treasury-BEIS Business Productivity Review
Recently, the results of the MES survey were cited in the Call for Evidence in the HM Treasury-BEIS Business Productivity Review. We submitted evidence and were encouraged to develop further our evidence base by extending the MES. Our second wave of the MES will provide vital information to improve understanding of the links between performance and management practices. Upon the upcoming release of the government's modern Industrial Strategy in Autumn 2018, we will resume our meetings with BEIS to fashion our second wave MES survey and link to appropriate micro-datasets to ensure we answer key questions.

3. We will engage with the Bank of England Agents' Network (12 Agents operate across the country) through Rosie Smith (East Midlands Agent based on University of Nottingham campus) to share best management practice and explore the possibility of an Agents' survey on business' views on the effects of management practice on productivity.

Business:

1. ONS direct business engagement - survey feedback to businesses
Making use of the feedback option for MES respondents we will conduct an RCT in collaboration with the Behavioural Insights Team (Nudge Unit), observing the impact of feedback on management and performance versus a control group in the second wave of the MES survey. The results will provide insights on the effectiveness of support, advice and knowledge exchange to businesses and the adoption of best practice.

2. BEIS - regional Local Enterprise Partnerships (LEPs)
The UK business community is divided by BEIS into 38 regional LEPs but data is not routinely collected or analysed on performance and practice. As we discover the practices that are associated with better performance and productivity by using our survey responses and links to other micro datasets we will engage with businesses through the Local Enterprise Partnerships (LEPs) networks to communicate interventions that work well. We will create a Business Engagement Usergroup to advise us on how best to communicate our findings to business comprising members from McKinsey, CBI, CMI, BEIS, LEPs, Be the Business.

Academics:

1. Conferences
a) three annual one-day conferences in June organised by NIESR, QMUL and Nottingham, combining academics, media, policy makers, interested members of the public and our international network of 75 ESCoE researchers and fellows.
b) three annual SITE uncertainty conferences (Stanford) and Empirical Management Conferences (Harvard, MIT and Stanford) organised by Bloom/Van Reenen.

2. External-facing workshops organised by ONS and ESCoE. We will also communicate findings to policymakers via the ESCoE Advisory Board.

3. We will engage with the ESRC Coordination and Evidence Hub, sharing our findings and inviting other participants to our events.

Publications

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