Work Life Balance, Management
Practices and Productivity
Nick Bloom (Stanford and CEP)
Toby Kretschmer (IIM and CEP)
John Van Reenen (LSE and CEP)
January 2006
Anglo-German Foundation, ESRC and AIM supported
1
Background to the research
• Issues of quality of jobs has moved up the political agenda
– Unemployment historically low & female participation high
– How to improve work-life balance (WLB)?
• Battle of ideas over European reform
– Chirac: “neo-libéralisme sauvage” - competition increases
productivity at the expense of making workers miserable at work
– Blair – WLB increases productivity by better morale, recruiting
talented staff (women managers). Markets can foster this
• CEP Research Program examining the causes (e.g. competition)
and consequences (e.g. productivity) of management practices
• New survey of over 700 firms in UK,US, France and Germany,
developed with McKinsey, on management, WLB & productivity
2
Summary of results
• “Well managed” firms typically have better work-life balance (WLB)
• Tougher competition fosters better management, but does not seem to
harm work-life balance
• Improved work-life balance has no significant association with
productivity (after we control for management quality)
– Reject “Chirac” theory that WLB deteriorates under globalisation
– Reject overly optimistic “Win-Win” view that WLB raises productivity
– Support “Hybrid” view that WLB a choice for firms, and can be
combined with low or high productivity
3
“Models” of Work-life Balance
Correlation of
WLB with:
Chirac
Theory
Win-Win
Theory
Evidence
Management
Negative
Positive
?
Competition
Negative
Ambiguous
?
Productivity
Negative
Positive
?
4
Data Collected (1)
• 1 hour telephone interview with factory and HR managers about 750
firms (about 300 in US and about 150 in UK, France and Germany)
• Work Life Balance (WLB) summary measure
– “Relative to other companies in your industry how much does
your company emphasise work life balance”?
– 5 points scoring scale: (1) “much less”, (2) “slightly less”, (3) “the
same”, (4) “slightly more” and (5) “much more”
• Significant correlation of this WLB question (see Table 2) with a
wide range of objective WLB measures:
– Hours of work (-), holidays (+), working from home allowed (+),
job switching allowed (+), childcare flexibility (+), childcare
subsidy (+) and proportion of female managers (+)
5
Data Collected (2)
• Management practice survey
– Developed with McKinsey
– “Double Blind” technique
• Scores 18 key management practices, in summary:
– Operations (3 questions) – problem fixing, standard Lean
manufacturing
– Monitoring (5) - tracking, review & evaluation, follow-up etc.
– Targets (5) - transparent, stretching, inter-connected, time
horizon, etc
– Incentives (5) - promotions, rewards, fix/fire, retention etc.
• One strong factor of “good management”: average of all
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Data Collected (3)
• Matched to company accounts on employment, capital, sales, etc
– measure productivity (output per unit of input)
• Matched to data from HR Survey on work force characteristics
– Skills, female proportion, hours, number of competitors etc.
• Matched to industry level data from OECD
– Competition, trade
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Results I: WLB & Management
• WLB strongly correlated with good management (see table 3)
• WLB also positively correlated with
– Size – employees happier in larger firms, who are typically
more globalized
– Skills (% with a college degree)
– Female proportion
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Good management practices are associated with better WLB
Management Quality
3.6
3.5
3.4
3.3
3.2
3.1
3
2.9
Very Low
Low
Average
High
Very High
Work-Life Balance in Firm
Source: Firm survey, raw data, 525 Firms
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Results II: WLB &Competition
• Tougher competition increases management scores (table 4)
• ….but has no effect on WLB
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COMPETITION IS STRONGLY AND ROBUSTLY ASSOCIATED
WITH BETTER MANAGEMENT PRACTICE
Significance
> 1%
> 5%
> 10%
Significance of competition, t-stat*
3.22
2.4
2.01
•Import
penetration,
1995–1999
•Number of
competitors
* T-stat of management practice – competition regressions
** Lerner index of a company = 1-profit/sales for all companies in the same
industry and country, excluding the company itself
•Competition Index*,
•1995–1999
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COMPETITION IS NOT ASSOCIATED WITH WORSE WORKLIFE BALANCE
Significance of competition, t-stat*
Significance
> 1%
> 5%
> 10%
1.3
1.05
•Import
penetration,
1995–1999
•Number of
competitors
* T-stat of management practice – competition regressions
** Lerner index of a company = 1-profit/sales for all companies in the same
industry and country, excluding the company itself
•Competition Index*,
•1995–1999
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Results III: Productivity and WLB
(Table 5 in paper)
(1)
(2)
(3)
Work-life balance
0.031**
(0.015)
0.021
(0.015)
0.015
(0.015)
0.053**
(0.021)
Management z-score
Basic controls
Yes
Yes
Yes
Full controls
No
Yes
Yes
Firms
491
491
491
**=significant at the 5% level; Basic controls = labour, capital, materials, country dummies, firm size and
age, listing status, consolidation; full=basic controls and %skills, %female, multinational dummies.
• WLB has a significant positive correlation with productivity, but...
•Coefficient halves after including other factors and management quality
•Coefficient no longer significant
•So no association of WLB and productivity with full controls
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“Models” of Work-life Balance
Correlation of
WLB with:
Chirac
Theory
Win-Win
Theory
Evidence
Management
Negative
Positive
Positive
Competition
Negative
Ambiguous
Zero
Productivity
Negative
Positive
Zero
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Conclusions
• No support for the “Chirac” view that WLB are eroded by competition,
Anglo-Saxon management practices, or high productivity
• “Win-Win” model also receives little support. WLB do not seem to be
associated with higher productivity
• More of a “hybrid” view – WLB a choice. Can be combined with high or
low productivity
• Policy response
– WLB may be desirable in themselves but do not boost productivity
– Likely to be costs on firms of government imposed WLB, especially
when imposed in a blanket fashion (lower profits and possible exit).
– More competition good for productivity and not harmful for WLB
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