Do Management Interventions Last? Evidence from India

Indian weaving firms are visited again nine years after a randomized experiment that changed their management practices. While about half of the practices adopted in the original experimental plants had been dropped, there was still a large and significant gap in practices between the treatment and control plants, suggesting lasting impacts of effective management interventions. Few practices had spread across the firms in the study, but many had spread within firms. Managerial turnover and the lack of director time were two of the most cited reasons for the drop in management practices, highlighting the importance of key employees.

Policy implications

Intensive management consulting can have lasting effects on firms’ management practices and productivity, with effects on productivity. Small improvements in management triggered by a diagnostic may be less stable than large improvements introduced through intensive support to implement the recommendations. Spillovers within and across firms are important in improving management practices.

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Hypotheses/research question

What is the long-run performance impact of the original management interventions?

Between November 2011 and January 2012 an in-person survey was run of textile firms around Mumbai with 100 to 1,000 employees, using the Ministry of Commercial Affairs registry of firms plus a combination of industry lists, internet searches, and referrals as a sample frame. The main purpose of this survey was to benchmark the management practices of the experimental sample against the industry as a whole.

Cost benefit ratio

The improvements to the management practices were estimated to have increased profits per plant by about $325,000 per year. It was estimated that this represented, on average, a 130 percent one-year return on the market cost of the consulting services.

Baseline data collection and method

The intervention focused on a set of 38 management practices that are standard in American, European, and Japanese manufacturing firms and that can be grouped into five broad areas: factory operations, quality control, inventory control, human resources management, and sales and orders management. Each practice was measured as a binary indicator of the adoption or nonadoption of the practice. A general pattern at baseline was that plants recorded a variety of information (often on paper sheets) but had no systems in place to monitor these records or use them in decisions.

Data collection method and data collected

In January 2017, working with the same consulting firm, the 17 textile firms from the original study were recontacted. The interview followed a relatively standardized script, asking background questions about the firm (age, ownership, family involvement, markets, etc.), followed by questions about plant size (employees, output, plant numbers, production quantity), management practices, organizational structure, computerization, prior consulting. The data collected in this survey was combined with data on the firms' characteristics: the annual physical output of the firm, the number of employees (permanent plus contract), and the number of looms in the firm, between 2008–2011.

Unit of analysis

Plants

Reference

Bloom, N., Mahajan, A., McKenzie, D., & Roberts, J., 2020. Do management interventions last? evidence from India. American Economic Journal: Applied Economics, 12(2), 198-219.

Do Management Interventions Last? Evidence from India

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