Making the Invisible Hand Visible: Managers and the Allocation of Workers to Jobs
Prof. Virginia Minni
Assistant Professor of Economics
The University of Chicago Booth School of Business
Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers200,000 white-collar workers and 30,000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and lever-age exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through latera land vertical transfers. This leads to large and persistent gains in workers’ career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase out put per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers’ specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers’ time at the firm.
