Making the invisible hand visible: managers and the allocation of workers to jobs

Minni, Virginia Magda Luisa (2023) Making the invisible hand visible: managers and the allocation of workers to jobs. CEP Discussion Papers (CEPDP1948). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers 200,000 white-collar workers and 30,000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and leverage exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through lateral and vertical transfers. This leads to large and persistent gains in workers' career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase output per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers' specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers' time at the firm.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2023 The Author(s)
Divisions:	STICERD
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
JEL classification:	J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity M - Business Administration and Business Economics; Marketing; Accounting > M5 - Personnel Economics
Date Deposited:	24 Jan 2024 14:24
Last Modified:	14 Sep 2024 04:41
URI:	http://eprints.lse.ac.uk/id/eprint/121315

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