Why Bad Managers Do Matter

Bad bosses get a lot of abuse from workers but not much attention from economists. Now, however, a new study by McKinsey & Co. and the Centre for Economic Performance in London says the quality of corporate management accounts for at least 20 percent of the difference between a highly productive national economy and a sluggish one. Even between countries with similar economic policies, like the United States and Britain, better management is responsible for 15 percent of America's 25 percent edge in hourly output.

After grading the operations and internal policies of more than 700 companies, McKinsey found that the best managers are concentrated in industries such as technology and finance, where intense competition weeds out the slackers. Better management often goes hand in hand with light labor regulation, but not always: German managers excelled in supervising day-to-day operations despite complex labor rules, while some managers in the hire-and-fire culture of Britain were the worst of the entire lot.