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Work Life Balance, Management Practices And Productivity

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Information about Work Life Balance, Management Practices And Productivity

Published on October 19, 2008

Author: guest3bd2a12

Source: slideshare.net

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Work Life Balance, Management Practices and Productivity Nick Bloom (Stanford and CEP) Toby Kretschmer (IIM and CEP) John Van Reenen (LSE and CEP) January 2006 Anglo-German Foundation , ESRC and AIM supported

Background to the research Issues of quality of jobs has moved up the political agenda Unemployment historically low & female participation high How to improve work-life balance (WLB)? Battle of ideas over European reform Chirac: “neo-libéralisme sauvage” - competition increases productivity at the expense of making workers miserable at work Blair – WLB increases productivity by better morale, recruiting talented staff (women managers). Markets can foster this CEP Research Program examining the causes (e.g. competition) and consequences (e.g. productivity) of management practices New survey of over 700 firms in UK,US, France and Germany, developed with McKinsey, on management, WLB & productivity

Issues of quality of jobs has moved up the political agenda

Unemployment historically low & female participation high

How to improve work-life balance (WLB)?

Battle of ideas over European reform

Chirac: “neo-libéralisme sauvage” - competition increases productivity at the expense of making workers miserable at work

Blair – WLB increases productivity by better morale, recruiting talented staff (women managers). Markets can foster this

CEP Research Program examining the causes (e.g. competition) and consequences (e.g. productivity) of management practices

New survey of over 700 firms in UK,US, France and Germany, developed with McKinsey, on management, WLB & productivity

Summary of results “ Well managed” firms typically have better work-life balance (WLB) Tougher competition fosters better management, but does not seem to harm work-life balance Improved work-life balance has no significant association with productivity (after we control for management quality) Reject “Chirac” theory that WLB deteriorates under globalisation Reject overly optimistic “Win-Win” view that WLB raises productivity Support “Hybrid” view that WLB a choice for firms, and can be combined with low or high productivity

“ Well managed” firms typically have better work-life balance (WLB)

Tougher competition fosters better management, but does not seem to harm work-life balance

Improved work-life balance has no significant association with productivity (after we control for management quality)

Reject “Chirac” theory that WLB deteriorates under globalisation

Reject overly optimistic “Win-Win” view that WLB raises productivity

Support “Hybrid” view that WLB a choice for firms, and can be combined with low or high productivity

“Models” of Work-life Balance ? Positive Negative Productivity ? Ambiguous Negative Competition ? Positive Negative Management Evidence Win-Win Theory Chirac Theory Correlation of WLB with:

Data Collected (1) 1 hour telephone interview with factory and HR managers about 750 firms (about 300 in US and about 150 in UK, France and Germany) Work Life Balance (WLB) summary measure “ Relative to other companies in your industry how much does your company emphasise work life balance ”? 5 points scoring scale: (1) “ much less ”, (2) “ slightly less”, (3) “the same”, (4) “slightly more” and (5) “ much more ” Significant correlation of this WLB question (see Table 2) with a wide range of objective WLB measures: Hours of work (-), holidays (+), working from home allowed (+), job switching allowed (+), childcare flexibility (+), childcare subsidy (+) and proportion of female managers (+)

1 hour telephone interview with factory and HR managers about 750 firms (about 300 in US and about 150 in UK, France and Germany)

Work Life Balance (WLB) summary measure

“ Relative to other companies in your industry how much does your company emphasise work life balance ”?

5 points scoring scale: (1) “ much less ”, (2) “ slightly less”, (3) “the same”, (4) “slightly more” and (5) “ much more ”

Significant correlation of this WLB question (see Table 2) with a wide range of objective WLB measures:

Hours of work (-), holidays (+), working from home allowed (+), job switching allowed (+), childcare flexibility (+), childcare subsidy (+) and proportion of female managers (+)

Data Collected (2) Management practice survey Developed with McKinsey “ Double Blind” technique Scores 18 key management practices , in summary: Operations (3 questions) – problem fixing, standard Lean manufacturing Monitoring (5) - tracking, review & evaluation, follow-up etc. Targets (5) - transparent, stretching, inter-connected, time horizon, etc Incentives (5) - promotions, rewards, fix/fire, retention etc. One strong factor of “good management”: average of all

Management practice survey

Developed with McKinsey

“ Double Blind” technique

Scores 18 key management practices , in summary:

Operations (3 questions) – problem fixing, standard Lean manufacturing

Monitoring (5) - tracking, review & evaluation, follow-up etc.

Targets (5) - transparent, stretching, inter-connected, time horizon, etc

Incentives (5) - promotions, rewards, fix/fire, retention etc.

One strong factor of “good management”: average of all

Data Collected (3) Matched to company accounts on employment, capital, sales, etc measure productivity (output per unit of input) Matched to data from HR Survey on work force characteristics Skills, female proportion, hours, number of competitors etc. Matched to industry level data from OECD Competition, trade

Matched to company accounts on employment, capital, sales, etc

measure productivity (output per unit of input)

Matched to data from HR Survey on work force characteristics

Skills, female proportion, hours, number of competitors etc.

Matched to industry level data from OECD

Competition, trade

Results I: WLB & Management WLB strongly correlated with good management (see table 3) WLB also positively correlated with Size – employees happier in larger firms, who are typically more globalized Skills (% with a college degree) Female proportion

WLB strongly correlated with good management (see table 3)

WLB also positively correlated with

Size – employees happier in larger firms, who are typically more globalized

Skills (% with a college degree)

Female proportion

Good management practices are associated with better WLB Source: Firm survey, raw data, 525 Firms

Results II: WLB &Competition Tougher competition increases management scores (table 4) … .but has no effect on WLB

Tougher competition increases management scores (table 4)

… .but has no effect on WLB

COMPETITION IS STRONGLY AND ROBUSTLY ASSOCIATED WITH BETTER MANAGEMENT PRACTICE * T-stat of management practice – competition regressions ** Lerner index of a company = 1-profit/sales for all companies in the same industry and country, excluding the company itself Competition Index*, 1995–1999 Import penetration, 1995–1999 > 1% > 5% > 10% Number of competitors Significance of competition, t-stat* Significance

Competition Index*,

1995–1999

Import penetration, 1995–1999

Number of competitors

COMPETITION IS NOT ASSOCIATED WITH WORSE WORK-LIFE BALANCE > 1% > 5% > 10% Significance Significance of competition, t-stat* * T-stat of management practice – competition regressions ** Lerner index of a company = 1-profit/sales for all companies in the same industry and country, excluding the company itself Competition Index*, 1995–1999 Import penetration, 1995–1999 Number of competitors

Competition Index*,

1995–1999

Import penetration, 1995–1999

Number of competitors

Results III: Productivity and WLB WLB has a significant positive correlation with productivity, but... Coefficient halves after including other factors and management quality Coefficient no longer significant So no association of WLB and productivity with full controls **=significant at the 5% level; Basic controls = labour, capital, materials, country dummies, firm size and age, listing status, consolidation; full=basic controls and %skills, %female, multinational dummies. 491 491 491 Firms Yes Yes No Full controls Yes Yes Yes Basic controls 0.053** (0.021) Management z-score 0.015 (0.015) 0.021 (0.015) 0.031** (0.015) Work-life balance (3) (2) (1) (Table 5 in paper)

WLB has a significant positive correlation with productivity, but...

Coefficient halves after including other factors and management quality

Coefficient no longer significant

So no association of WLB and productivity with full controls

“Models” of Work-life Balance Zero Positive Negative Productivity Zero Ambiguous Negative Competition Positive Positive Negative Management Evidence Win-Win Theory Chirac Theory Correlation of WLB with:

Conclusions No support for the “Chirac” view that WLB are eroded by competition, Anglo-Saxon management practices, or high productivity “ Win-Win” model also receives little support . WLB do not seem to be associated with higher productivity More of a “hybrid” view – WLB a choice. Can be combined with high or low productivity Policy response WLB may be desirable in themselves but do not boost productivity Likely to be costs on firms of government imposed WLB, especially when imposed in a blanket fashion (lower profits and possible exit). More competition good for productivity and not harmful for WLB

No support for the “Chirac” view that WLB are eroded by competition, Anglo-Saxon management practices, or high productivity

“ Win-Win” model also receives little support . WLB do not seem to be associated with higher productivity

More of a “hybrid” view – WLB a choice. Can be combined with high or low productivity

Policy response

WLB may be desirable in themselves but do not boost productivity

Likely to be costs on firms of government imposed WLB, especially when imposed in a blanket fashion (lower profits and possible exit).

More competition good for productivity and not harmful for WLB

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