How to Build a More Productive Workforce
Study examines the relationship between organizational structure and finding outstanding workers
By Paula Klein
Business productivity often seems like a very elusive goal, with few constants. Not only do worker criteria vary widely industry to industry and company to company, corporate structures run the gamut of structured and unstructured models. What’s an executive to do?
These were some of the larger management issues that MIT IDE Postdoctoral Fellow, Daniela Scur, and project co-authors, Christopher Cornwell and Ian Schmutte from the University of Georgia, set out to examine in a new research paper, “Building a Productive Workforce: The role of structured management practices.” They sought to build on existing metrics to define specific relationships between how organizations are structured and how they attract and retain the best and most productive workers.
For example, economic metrics, such as Total Factor Productivity (TFP), measure how efficiently and intensively the inputs to production (like capital and labor) are used, while technology affects how these inputs are assembled — either as tangible (new, better machines or cloud computing), and intangible — such as managerial practices and production processes.
Earlier research also shows that more structured management practices lead to higher productivity, and that hiring higher quality workers is correlated with higher productivity. But, specifically, the researchers ask, “How is this all happening? What levers are firms pulling to get this optimal mix of workers in their firm?” In the new research paper, the team digs deeper to show how firms with structured management are better at hiring, firing, and retaining workers.
Using three comprehensive dataset sources from Brazil, the team examined worker occupational and career patterns compared with employer practices and organizational structure. Managers were also distinguished from workers. Four key findings emerged:
- Firms with structured management practices do a better job at hiring the “best” people.
- Firms with structured management are also better able to retain these workers over time.
- Structured management firms have lower levels of firing.
- People practices are correlated with better production workers at a firm, but operations practices are correlated with better managers at the firm.
The paper concludes that “more structured managerial practices have a strong effect on firm productivity, though we are still unpacking the black box of why that relationship exists. We see this set of stylized facts as the first step in an exciting research agenda exploring the labor aspect of this relationship.”