First-borns make bad managers: US study

Indian management practices leave much to be desired – and family-run firms especially those run by the first-born children, tend to have poorer managerial practices.

This is the key finding of recent research by some US economists. Both India and China rank low on the list with scores below average.

In a paper titled ‘Management Practices Across Firms and Countries' ((http://www.nber.org/papers/w17850), Nicholas Bloom, Christos Genakos and others say that while India's managerial practices have been gaining global admirers, broader Indian managerial practices are not good.

The authors studied managers across 10,000 organisations in 20 countries. They were scored on three parameters: performance monitoring, target setting, and incentives/people management.

Effective management, say the authors, requires a combination of these. The parameters were defined using management consulting firm McKinsey's scoring grid.

By this methodology, the US ranks the highest in terms of management ‘practice', followed by Germany and Japan.

Indian and Chinese firms have higher than average preference to use incentives such as salaries, bonuses and perks rather than monitor and set targets to egg their managers on to get the job done.

The US has this tendency, too, but does well on the use of monitoring and target-setting. Japan, Sweden and Germany prefer using targets and continual monitoring than incentives.

The study also reveals that the quality of managerial practices at multinational firms far exceed those of their peers in domestic firms.

The paper also finds that 28 Indian textile firms were provided free management consulting and studied for changes in management practices. Over the course of several months, increasing adoption of better practices led to productivity rising by 18 per cent.

Indian firms were also the second youngest in the group clocking in an average age of 30.3 years. China tops the list with an average age of 18 years.

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