Here is one reason why better managed firms succeed

A couple of months ago, management consulting firm McKinsey published a report where they took the management of UK businesses to task. They explicitly pointed out the lack of management quality in the UK vs the US and Germany as a structural driver of our lower productivity.

To quote from the blog post: “This article argues that one important difference between the United Kingdom and its higher-productivity peers is that, despite comparatively strong leadership practices, the United Kingdom has lower quality operational-management systems. These include performance metrics, planning processes, and formal improvement methodologies.”

I have long been extremely sceptical of the added-value companies like McKinsey provide, but academic research shows that at least in one of these areas, they may be on to something.

A new study from the LSE looked at the ability of UK companies to forecast their staff turnover and UK GDP. Obviously, these are key variables to manage costs and target investments and other resources.

And the results were pretty clear. Companies with better management tend to be better at forecasting both their employee turnover and GDP growth. Similarly, companies with higher productivity were better at forecasting employee turnover and GDP growth. What’s more, they seem to be aware that their forecasts are better than their peers and, as a result, have higher confidence in their forecasts than the average company and are more proactive in allocating resources.

The four figures below show the forecast errors for GDP (top line) and employee turnover (bottom line) as a function of management quality (left) and firm productivity (right).

Forecast error as a function of management quality (left) and productivity (right)

Source: Bloom et al. (2026)