Does Management Performance Increase Profits?

The correlation between management performance and organisational performance is taken as an article of faith in many quarters – not least in the training and development industry.

Management Pocketbooks has a vested interest here, too.  If Pocketbook readers did not believe that reading the books and learning about management would improve their management skills and that this would improve their organisation’s performance, then Pocketbooks would become redundant.

Investors in People

Another organisation with a vested interest is the UK Commission for Employment and Skills (UKCES).  This is a non-departmental public body (NDPB) that describes its mission as being to ‘raise skill levels and drive investment, enterprise, jobs and growth.’

One of the tools they have to achieve this is the Investors in People (IiP) standard.  This is designed to improve business performance – but does it?  Like most external standards, achieving IiP accreditation is a costly and time-consuming process.

Research Evidence

Prof Mike Bourne

Prof Mike Bourne (LinkedIn)

So IiP commissioned Cranfield University Researcher Professor Mike Bourne to discover whether IiP accreditation really does return a value to businesses that invest.

To do this, Professor Bourne and his team considered two questions:

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  1. The relationship between IiP accreditation and management performance
  2. The relationship between IiP accreditation and business performance

What the team found was this:

  1. IiP improves managerial performance
  2. IiP improves the financial performance of the sponsoring firm

You can review all of the evidence in the January 2010 paper, ‘Investors in People, Managerial Capabilities and Performance’ by Professor Mike Bourne and Dr Monica Franco-Santos.  Note that this academic paper is published by Cranfield University, and not in a peer-reviewed academic journal.  So too is an earlier – far more technical paper – ‘The Impact of Investors in People on People Management Practices and Firm Performance’ (2008).

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The figure illustrates the relationships that Professor Bourne’s team report.  Notice that their research seems to show that managerial capabilities and performance do indeed drive reported performance – as measured by profits recorded in Companies House data.

So here’s the deal

One must always be sceptical about research that supports the agenda of the sponsoring organisation (IiP in this case) and where the results are not published in peer reviewed journals.  And I have not taken the time to thoroughly assess the research methodology, nor review the extensive statistical analysis.  The researchers are clear in their reports that, while they assessed IiP, it is simply one example of a ‘commitment based HR policy’.

This is to say that their research evidence shows that systematically committing to your staff improves their capabilities and performance and that these lead to measurable financial improvements in performance.

Kirkpatrick Level 4

Last week’s Pocketblog talked about Kirkpatrick’s four levels of learning.  Trainers have become adept at measuring and demonstrating levels 1 and 2: How do participants react, and what do they learn?  However, the value of training is in levels 3 and 4: How does training affect behaviour and what results can the organisation measure?

Professor Bourne’s work has shown that the linkage from level 2 to level 3 to level 4 is a genuine one, which he and his team have validated statistically.

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This just leaves one problem:
Most trainers stop at Level 1: ‘Happy Sheets’.

Some Management Pocketbooks you might enjoy

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