It is a culmination of work by Harvard Business School, the London School of Economics, McKinsey & Company, and Stanford that systematically surveyed global management. The research team claims to have surveyed over 10,000 firms in 20 countries, and developed an assessment methodology that allows a comparison of effectiveness.
Why does management matter?
First well-managed firms tend to destroy their weaker and slower competitors. (It stands to reason, I suppose).
While they concluded that American firms tended to outperform their global counterparts, the team also found examples of world-class behaviors in virtually all countries they surveyed. Japanese, German and Swedish firms came in a close second.
While Chinese and Indian firms seemed to bring up the rear, the Chinese seemed to demonstrate the fastest rate of improvement anywhere on the planet.
Can you guess the main causal factors behind the performance of American firms?
It seems to have to do with how we manage people, for one. American enterprise is seen as far more ruthless in dealing with underperforming employees, and faster at promoting and rewarding top performers.
In addition the study team concluded there were three other main factors:
1. The U.S. has tougher levels of competition. Our large and open markets invite the best and brightest on the plant to invade America shores — making N. America a place where only the fittest can survive.
2. Human capital is also important. America still has a higher percentage of its population that attends college when compared with other nations. There are other studies suggesting that while immense progress is being made across the globe, many still view American higher education to be doing more cutting-edge research and attracting the best minds out there. (Some question, however the sustainability of this factor given how US middle and secondary school performance seems to lag many other nations (particularly in mathematics and science).
3. The U.S. has more flexible labor markets. It is much easier to hire and fire employees
It seems to me that the US human capital practices, while they arguably support “better” business performance, could also be challenged on the basis of their social impact and on moral grounds.