Good management drives profitability
No business can succeed without good people, and managers are
an especially important part of this equation. But just how far
does good management impact on business success? And can the link
between strong managerial capabilities and business profitability
really be proven?
Last year, Investors in People commissioned Cranfield School of
Management to look at the link between managerial performance and
business success. The nine-month study was conducted in the midst
of arguably the worst recession since the Second World War. With
such powerful external factors in force, a key challenge was to
discern the precise impact of management capabilities on business
performance. Yet, in spite of the challenging economic context, the
study identified clear evidence of the impact of investment in
management capabilities on business profitability.
Managers are the bridge between senior leaders and the workforce
and therefore play a vital role in bringing an organisation's
vision and mission into practice. Management has a responsibility
for delivering company performance in terms of improvements in
quality, service and customer satisfaction. All of these factors
lead to higher levels of profitability. As a result, the study
found that investing in management capabilities at all levels has
an impact on business success.
In terms of what good management looks like, the research
highlighted a number of examples of 'best practice'. Key amongst
these were organisations that develop a strong learning culture,
reflected in values around learning, development, innovation and
risk taking. Another 'exemplar' behaviour related to effective
managerial development practices that, for instance, increase job
satisfaction and motivation; reduce employee turnover; reduce
employees' stress levels; and improve succession planning.
High-performance managerial contexts were also important. These
were characterised by factors such as clarity of role and
performance expectations, periodic performance feedback and
availability of appropriate resources.
A final, important factor was the strength of managerial
discretion or autonomy - for example organisations that provide
managers with the freedom and opportunities to use and develop
their own judgement.
When looking at these drivers of management performance, the
research found that working with Investors in People has a strong
and positive impact in businesses of all sizes and sectors.
Critically, Investors in People increases profitability by
enhancing managerial skills, knowledge and experience, improving
the effectiveness of management development practices and
increasing the performance of managers.
The link then is clear. Working with Investors in People is the
foundation of effective management practice. And investing in
management skills is a clear route to success.
The research focused on a range of qualitative and
quantitative data, including business case studies, a survey of
over 400 employers and analysis of financial performance
information from Companies House.
For more information, visit the Cranfield School of
Management website.