Work Life Balance, Management Practices And Productivity

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

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

“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 (+)

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

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

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

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

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 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

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)

“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