Publication: Improving Management in Colombian Firms Through Individual and Group Consulting
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Date
2019-06
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2019-06
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The latest note tests two different approaches to improving management, and finds a novel group-based approach to be more cost-effective than the standard approach of providing consulting to individual firms.
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“Iacovone, Leonardo; Maloney, William; McKenzie, David. 2019. Improving Management in Colombian Firms Through Individual and Group Consulting. Finance and PSD Impact;No. 53. © World Bank. http://hdl.handle.net/10986/31843 License: CC BY 3.0 IGO.”
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To investigate this, the authors ran a management field experiment on large Indian textile firms, providing free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. They find that adopting these management practices had three main effects. First, it raised average productivity by 11 percent through improved quality and efficiency and reduced inventory. Second, it increased decentralization of decision making, as better information flow enabled owners to delegate more decisions to middle managers. Third, it increased the use of computers, necessitated by the data collection and analysis involved in modern management. Since these practices were profitable this raises the question of why firms had not adopted these before. Their results suggest that informational barriers were a primary factor in explaining this lack of adoption. 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Consistent with the model, the finding show that there is sorting of firms across management modes, in which smaller firms and those in regions with worse contracting environments are more likely to be family managed. These firms are on average 25 percent less productive than professionally managed firms, and moving from the country with the least reliable contracting environment to the most increases total factor productivity by 21.6 percent. Family management rather than ownership drives these results.Publication Teaching Personal Initiative Beats Traditional Training in Boosting Small Business in West Africa(American Association for the Advancement of Science, 2017-09-22)Standard business training programs aim to boost the incomes of the millions of self-employed business owners in developing countries by teaching basic financial and marketing practices, yet the impacts of such programs are mixed. 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