Drops from the Fire Hose – October 18, 2012

The Value of Bosses — National Bureau of Economic Research

Do supervisors enhance productivity? Arguably, the most important relationship in the firm is between worker and supervisor. The supervisor may hire, fire, assign work, instruct, motivate and reward workers. Models of incentives and productivity build at least some subset of these functions in explicitly, but because of lack of data, little work exists that demonstrates the importance of bosses and the channels through which their productivity enhancing effects operate. As more data become available, it is possible to examine the effects of people and practices on productivity. Using a company-based data set on the productivity of technology-based services workers, supervisor effects are estimated and found to be large. Three findings stand out. First, the choice of boss matters. There is substantial variation in boss quality as measured by the effect on worker 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. Using a normalization, this implies that the average boss is about 1.75 times as productive as the average worker. Second, boss’s primary activity is teaching skills that persist. Third, efficient assignment allocates the better bosses to the better workers because good bosses increase the productivity of high quality workers by more than that of low quality workers.

The Benefits of Combining Data With Empathy — MIT Sloan Management Review

AS BUSINESS ENVIRONMENTS become increasingly tumultuous and volatile, building a strategy entirely around business process optimization is often too rigid and inflexible. We have seen many established Western companies, including Wal-Mart, sometimes struggle to apply their optimized models in unfamiliar markets.10 We have also seen examples of younger companies (including startups and franchises) falling short in their efforts to scale into large, multisite corporations. We believe that in most unpredictable business environments, successful growth will hinge on the combination of optimization, emotion and empathic use of data.

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