A new international study published in The Quarterly Journal of Economics suggests that a good manager can be just as important to a company’s performance as the combined productive capacity of its employees. The research also found that those most eager to become managers are not always the best suited for the role.

Previous studies have shown that effective leadership can improve organisational performance by motivating employees, monitoring work, and allocating tasks efficiently. However, measuring a manager’s true impact has been challenging because managers are rarely assigned to teams at random in real-world settings.

To address this issue, researchers developed an innovative method to isolate the manager’s contribution to team performance. In an international laboratory experiment, managers were randomly assigned to multiple teams while researchers controlled for the skill levels of team members.

This approach allowed the researchers to separate leadership ability from both the manager’s own productivity and the abilities of the employees. Teams completed a range of problem-solving tasks under different managers, providing a clearer picture of leadership effectiveness.

The findings revealed that a manager’s overall leadership ability was roughly as important to team performance as the total productive capacity of the employees. The study also found that managerial success was more strongly linked to job-related decision-making skills than to personality traits such as charisma or self-confidence.

A related field study conducted at a large retail chain produced similar results. When manager quality improved from average to good, annual sales increased by 25 per cent, highlighting the significant impact that effective leadership can have on organisational outcomes.

The researchers also found that individuals who expressed the strongest interest in becoming managers did not necessarily perform best in the role. In addition, women were less likely than men to seek managerial positions, despite performing equally well when randomly assigned to them. The findings support the use of more structured, competency-based approaches to selecting and promoting managers.

More information: Ben Weidmann et al, How Do You Identify a Good Manager? The Quarterly Journal of Economics. DOI: 10.1093/qje/qjag004

Journal information: The Quarterly Journal of Economics Provided by University of Gothenburg