The simple tools that helped companies resist the crisis

Managers are often derided as martinets, bunglers or bureaucrats. Chief executives are applauded when they promise to “sweep out layers of management”, like so much clutter. As a discipline, management has accreted so much waffle and nonsense over the years that its essential core of usefulness is often obscured.

It was always possible, therefore, that faced with unexpected global chaos, vast waves of human anxiety, and unpredictable disruption, managers and management would be found wanting. Well, data are now trickling back from the front line of the Covid-19 pandemic, and for fans of good practice such as me, the news is heartening. Put simply, companies that were already better managed before coronavirus managed better in the crisis.

The newest report comes from the UK’s Office for National Statistics which has found that well-managed businesses found it easier to adapt to the sudden switch to remote working in 2020 and the need to sell more products and services online.

As in any emergency, these signals are full of noise. Since 2002, the World Management Survey has applied a checklist of “structured management practices” to more than 13,000 companies in at least 35 countries. It has established a strong link between better management and improved productivity, profit, and even research and development expenditure. The ONS ranks companies according to their adoption of techniques of good management, such as target-setting, performance reviews, and training programmes.

It was not a given that such tools would work in an acute crisis, especially one that transformed many valuable face-to-face managerial relationships into bloodless virtual encounters. Structural methods could have proved to be inflexible just at the point where managers needed to bend them to cope with the unprecedented pressure of lockdowns and supply chain disruption.

There are also other reasons why better-managed companies could be more resilient. They could be bigger, or more modern; they could benefit from specific ownership structures; or, says Jakob Schneebacher of the ONS, “maybe homeworking rates were just different across better-managed firms before the pandemic”.

Yet after controlling for these variables, the ONS still found that last year, a UK company with a one percentage point higher management score on average had a 10 percentage point higher rate of homeworking than its peers. The productivity advantage that better managed companies enjoy has also held good through the turbulence.

A World Bank working paper published in January laid out a similar case for good management as a useful treatment for some of the worst consequences of the pandemic.

Arti Grover, senior economist at the bank, and Valerie Karplus of Carnegie Mellon University found better-managed manufacturers experienced smaller falls in sales in 2020, and well-run service companies seemed better placed to stave off permanent closure. Based on their sample of businesses in 16 countries, the better managed a company, the more easily it pivoted to online work and altered and adapted its mix of products.

Good human resource practices, notably incentives, seemed to be the most effective tool, according to the World Bank study, perhaps because well-established bonus and promotion schemes “reassure [staff] during a crisis that leaders will continue to reward high performance, and that they will not lay off workers”.

Nicholas Bloom of Stanford University, who helped initiate the WMS, points out that the crisis has punished poorly managed companies. Those that had relied on crude “input monitoring” — “I see you’re here, so you must be working” — had to fall back on “spooky surveillance software” to replicate presenteeism when staff were forced to work from home.

What is unclear as yet is how the managers who design and use those tools affected the outcome. In a February paper reviewing lessons from the WMS, Bloom and others noted they had deliberately focused their survey on the “technology” of management, “absent the manager”. Yet “the manager is often the implementing party” and his or her role is changing fast.

Business leaders need not wait, however, to apply the lessons of this work. For all the mountains of conflicting advice about how to manage, the keys to good management practice, as tested in these studies, are surprisingly simple and accessible.

Good management may not be a miracle cure. Bad managers, like incompetent doctors, are still capable of fouling up the way they administer the medicine to their teams. But it has proved, so far, a pretty reliable therapy against the worst symptoms of the crisis.

andrew.hill@ft.com

Twitter: @andrewtghill