Thoughts on business school, economics, NC State, and everyday life from an economist at NC State's business school
Saturday, August 18, 2012
Building better bosses
Three years ago Google started taking an analytical approach to human resource issues, including the age-old question of why do some bosses perform better than others. After grinding gigs of data, Google found that there were eight key factors that determined which bosses were most effective. Of those eight, the least important was technical expertise.
Most important? According to NYT, "even-keeled bosses who made time for one-on-one meetings, who helped people puzzle through problems by asking questions, not dictating answers, and who took an interest in employees’ lives and careers."
Three economists at the Stanford Business School have done a field study of boss effectiveness in a large services company. Their key findings are
1. Bosses are important and vary in productivity. Replacing a boss who is in the lower 10% of boss quality with one who is in the upper 10% of boss quality increases a team’s total output by about the same amount as would adding one worker to a nine member team.
2. Bosses primarily teach; motivating workers is less important.
3. The worst bosses are unlikely to be retained. Over a given 1 year period, bosses in the lowest 10% of the quality distribution are 64% more likely to leave the firm than other bosses.
4. The difference between the effect of good and bad bosses on high quality workers is greater than that on lower quality workers, which suggests that good bosses should be allocated to the higher quality workers. Comparative advantage is key. Allocating bosses appropriately can raise firm productivity.
The bottom line on boss management seems to be shape up or ship out.
Source: Kathryn Shaw's address to Society of Labor Economists.
Steve Allen is Associate Dean for Graduate Programs and Research in the College of Management at NC State University. He has appointments in the Department of Economics as well as the Department of Management, Innovation, and Entrepreneurship. Steve also is a Research Associate of the National Bureau of Economic Research, a non-profit research organization located in Cambridge, Mass.