The Irish Management Institute report Closing the Gap published at the end of 2010 found that a “long tail” of companies with poor management practices is damaging Ireland’s competitiveness.
Research carried out internationally and in Ireland in 2009 by the management consultants McKinsey & Co. and the London School of Economics has identified day-to-day management practices that are associated with better firm profitability and performance.
They have found, perhaps unsurprisingly, that the standard of management varies between companies and indeed between countries.
Their ongoing study employs a 5 point scale to benchmark management practices in an organisation. The average of all organisations studied in a country provides an overall management score for that country.
Ireland’s score of 2.77 shows that there is a considerable gap between overall management practices here – a score of 3 represents having good practice processes and practices in place in each area and a score of 5 represents having best practice processes in place which are constantly monitored and evolving. Our score sees us rank behind Germany, the UK, Italy and Poland, but ahead of India and China in terms. The US tops the table, with a rating of 3.30.
What is troubling for Ireland is that there is a concentration of low scores; 19% of businesses have an overall rating of less than two meaning that very few profitable practices are in place. Firms in this tail of low scores are generally indigenous small and medium sized enterprises (SMEs).
Maintaining and improving competitiveness in Ireland relies on improvements to profitability and performance at the firm level which the evidence suggests can be achieved through better management. There is good news here too; Ireland has an advantage in the quality of our workforce and in the comparative size of the 25-40 age cohort. There is an opportunity to improve management skills in this area of the population, particularly within small to medium sized firms, can and will create jobs and will drive productivity growth.