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Work Life Balance, Management Practices And Productivity

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  • 1. 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
  • 2. 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
  • 3. 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
  • 4. “Models” of Work-life Balance ? Positive Negative Productivity ? Ambiguous Negative Competition ? Positive Negative Management Evidence Win-Win Theory Chirac Theory Correlation of WLB with:
  • 5. 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 (+)
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. Good management practices are associated with better WLB Source: Firm survey, raw data, 525 Firms
  • 10. Results II: WLB &Competition
    • Tougher competition increases management scores (table 4)
    • … .but has no effect on WLB
  • 11. 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
  • 12. 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
  • 13. 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)
  • 14. “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:
  • 15. 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