Lucia Foster, Chief, Center for Economic Studies
Ron Jarmin, Assistant Director for Research and Methodology
How much does management matter for the success of a business? Some light can be shed on this much debated topic using results from the Census Bureau’s first-ever business management survey, the Management and Organizational Practices Survey (MOPS). This supplement to the 2010 Annual Survey of Manufactures (ASM) collected data from more than 30,000 of the approximately 50,000 manufacturing plants surveyed in the ASM. With the addition of the MOPS, the Census Bureau now provides information on manufacturing plants’ inputs, outputs, and management and organizational practices. The MOPS will be an important tool in assessing plant performance, worker productivity, and the ability of plants to succeed in a highly competitive global economy.
The MOPS represents a collaboration between Census Bureau staff and researchers from Stanford University (Nick Bloom and Itay Saporta-Eksten), the Massachusetts Institute of Technology (Erik Brynjolfsson) and the London School of Economics (John Van Reenen). The National Science Foundation also contributed to the collaboration via a grant to the academic research team.
Preliminary results from the first research paper using the MOPS, Management in America, were presented at the annual American Economic Association meetings in early January. This first paper focuses on the management component of the MOPS and provides summary statistics from the new survey and empirical exercises intended to provide validation of the survey results. The authors constructed a management score that summarizes plants’ intensity of use of structured management practices based upon the responses to the 16 management questions. Structured management practices are those that are more specific, formal, frequent or explicit.
The authors found that use of structured management practices varies across U.S. manufacturing establishments: 18 percent of establishments adopt at least 75 percent of structured management practices related to performance monitoring, targets and incentives, while 27 percent of establishments adopt less than 50 percent of these practices.
The authors also linked the survey results to other Census Bureau (and outside) data sources in order to focus on how differences in management practices are related to variations in plant performance. Plant performance metrics include productivity, profits, output growth, and exports and measures of innovation (research and development expenditures and patents, both per employee, calculated from the Business R&D and Innovation Survey).
The figure below shows the correlations between these measures of plant performance and structured management practices. For each panel, the establishments are grouped into deciles according to their management index scores (where 1 is the decile with the lowest scores and 10 is the decile with the highest scores). The performance measures are on the vertical axis and are the median value for each management index decile. The figures show that all of the performance measures are rising across the deciles.
Plant Performance Measures and Structured Management Practices
This analysis is refined in a regression framework controlling for firm and establishment characteristics (such as capital intensity, size, education of workforce, and industry). This basic positive correlation persists even with these controls. The results provide support that the MOPS is systematically capturing meaningful content about management practices rather than just statistical noise. Future research will address causality, thus shedding light on how much management matters.
Users will be able to access MOPS results from a website that will host summary tables, a benchmarking tool where businesses can compare themselves to their peers and public-use version of the data (subject to Census Bureau approval). In addition, the full data set will be available to qualified researchers on approved projects via the Census Bureau’s secure Research Data Centers.
More on the Management and Organizational Practices Survey is available at <www.census.gov/mcd/mops>.
Management in America by Bloom, Brynjolfsson, Foster, Jarmin, Saporta-Eksten, and Van Reenen is available at <http://www2.census.gov/ces/wp/2013/CES-WP-13-01.pdf>.