(Mis)allocation of Managerial Training Within the Firm; Achyuta Adhvaryu (University of Michigan)

Abstract

We study the allocation and productivity consequences of managerial training within the firm via a randomized controlled trial among production line supervisors in an Indian ready-made garment firm. We designed a training program using best practices identified in previous work in a similar setting (Adhvaryu et al. 2021). We asked factory and floor managers (FFMs), who are directly above supervisors in the hierarchy, to identify which supervisors should be prioritized for training, and then randomized access to the program within these rankings. Productivity on lines managed by treated supervisors increased by 7.3% during training relative to control, and remained 5.8% higher relative to control six months after program completion. These gains exhibit substantial heterogeneity across FFM rankings: lines managed by highly recommended supervisors showed nearly zero impact on productivity, while lines managed by supervisors with low recommendation rankings showed impacts of more than 11%. We show that this was not due to a lack of information about baseline skills, or about who would likely gain the most. It also does not appear to be due to discrimination or favoritism along observable dimensions. Instead, consistent with the fact that attrition has large personal costs for FFMs in terms of recruitment and onboarding, FFMs prioritized the impacts of training on supervisor retention. Indeed, we find that treated supervisors were 15% less likely to quit than controls during the study period, and that this gain was most pronounced for highly recommended supervisors. Marginal treatment effect analysis demonstrates that much of the determinants of FFM rankings is unobserved i.e., that FFMs leveraged private information in making their recommendations and that these unobserved factors negatively predict productivity effects while positively predicting retention effects. We use this analysis to evaluate the effects of several counterfactual allocation rules. In sum, we show that heterogeneous returns and the inability to effectively target costly training help explain the persistently low managerial quality and small impacts of training observed within many firms in low-income countries.

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