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Do middle managers really matter?

Marketplace Staff Nov 9, 2010
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Do middle managers really matter?

Marketplace Staff Nov 9, 2010
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KAI RYSSDAL: There is, perhaps, no group in corporate America as beleaguered as middle managers. So easy to make fun of — think Steve Carrell as Michael Scott in “The Office” on television — and so easily dismissed as ineffective — think of how often middle managers take the hit around your office, you’ll know what I mean. But this is one of those times when the conventional wisdom is just wrong. Stanford University economist Nicholas Bloom can prove it. Nick, it’s good to have you with us.

NICK BLOOM: Hi there.

RYSSDAL: Seems a fairly straightforward question: Does middle management matter? I suppose anybody who has worked in an office has their own opinion. But how do you go figuring it out quantitatively?

BLOOM: It is a great question. Middle managers have long been derided as… paper pushers. So we took up the challenge by actually going out to India, where management practices, as you can probably guess, are not fantastic. And running an experiment with a large number of Indian firms. What we did is we randomly selected the firms — for some of them, got a lot of free consulting to improve their management practices and left the other as they were. And stunningly we find massive amounts of improvements in performance in the ones that had empowered middle managers.

RYSSDAL: So you found these factories in various states of managerial disarray. What was going on on the ground?

BLOOM: When you turn up, the place is in chaos. I mean, there’s yarn lying around all over the place, machines left broken. One of the times that I was there, I discovered there was a machine that when it was producing the fabric was making holes in it by mistake. And you’d be taken through into a room next door and you’d discover a guy fixing all the holes. And of course, the obvious question is: Why didn’t they fix the machine? The guy fixing the holes doesn’t want to do anything about it because his job is to fix holes and the factory manager doesn’t have the power to change things. So it was just some kind of depressing world of mistakes would happen time after time and they’d never get fixed.

RYSSDAL: So I imagine you went in with it with a checklist of managerial things, like maintenance and regular production meetings and that kind of thing. I mean, how did it work?

BLOOM: The way it worked is we went in trying to get them to adopt the management practices that are now very common in the U.S., Europe and Japan. And interestingly, those practices are focused very much on getting inventory down, so there’s no point in holding lots of stock because it’s expensive to have it. And also focusing on quality. For example, if you find a defect in your product — so they make fabric, so that would be stains — to try and work out immediately why it is and make sure it doesn’t happen again.

RYSSDAL: And so what happened at the end of your experiment? You gave them these consulting tips and you gave them training. What did it look like six months later?

BLOOM: We took a bunch of before and after photos. Those ones you see in the magazines for hair loss or weight loss. And they’re very powerful. You look beforehand and the place is in chaos, garbage everywhere. A complete mess. And the after looks like a standard, humming factory. And, of course, the performance and the profitability of these firms went up immensely.

RYSSDAL: You being an academic, I imagine you have some sympathy for this argument, that really what we need is more business schools to teach middle managers how to do this stuff?

BLOOM: I teach in Stanford business school, so putting my colors on the line. I’m fully prejudiced. What I think they need out in India is less, though, the kind of elite two-year Stanford or Harvard or whatever MBA. They need much more of three-month training.

RYSSDAL: Is there hope? I mean, will this ethos of middle management take over in developing economies, do you think?

BLOOM: The future for India, it’s definitely going to be better middle management, better management practices because as wages go up, they need to be more productive to survive. If you’re paying someone $5 a day, as they are in India now, you don’t have to be well managed. But if you’re paying them $50 a day, you really better be damn good and so that’s what’s driving improvements in management practices is the need to compete.

RYSSDAL: Nicholas Bloom, he’s a professor of economics at Stanford University. The author of a recent study with the World Bank of the efficiencies and importance — and it turns out they are important — of middle managers. Nick, thanks a lot.

BLOOM: Thank you very much.

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