TRANSITION REPORT 2014 Innovation in Transition

BOX 2.2. Management practices in the transition region

BEEPS V and MENA ES included a section on management practices in the areas of operations, monitoring, targets and incentives. The operations question focused on how the firm handled a process-related problem, such as machinery breaking down. The monitoring question covered the collection of information on production indicators. The questions on targets focused on the timescale for production targets, as well as their difficulty and the awareness of them. Lastly, the incentives questions covered criteria governing promotion, practices for addressing poor performance by employees and the basis on which the achievement of production targets was rewarded. These questions were answered by all manufacturing firms with at least 20 employees (at least 50 employees in the case of Russia). The median number of completed interviews with sufficiently high response rates was just below 55 per country, with totals ranging from 15 in Montenegro to 626 in Turkey.36

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The scores for individual management practices (in other words, for individual questions) were converted into z-scores by normalising each practice so that the mean was 0 and the standard deviation was 1. To avoid putting too much emphasis on targets or incentives, unweighted averages were first calculated using the z-scores of individual areas of the four management practices. An unweighted average was then taken across the z-scores for the four practices. Lastly, a z-score of the measure obtained was calculated. This means that the average management score across all firms in all countries in the sample is equal to zero, with the management practices of individual firms deviating either left or right from zero, with the former denoting bad practices and the latter indicating good practices.

There is a significant positive correlation between average labour productivity and the average quality of management practices (see Chart 2.2.1). As with labour productivity, there are firms with good and bad management practices in all countries. However, countries where the average quality of management is lower have a smaller percentage of firms with good management practices than countries where the quality of management tends to be higher.

CHART 2.2.1

Source: BEEPS V, MENA ES and authors’ calculations.