Samarth Gupta NCAER

Managers differ in productivity but what do good managers do? In this paper, I find substantial performance differences across manager-led teams in an insurance firm India from 2012-15, even after controlling for tenure, team size, gender, and location of the manager. To find what good managers do, I regress outcomes of managerial tasks in 2013-15 on team output per worker in 2012. I find that the output of new recruits of a manager and the output per worker in 2012 of the manager's team are positively correlated. When agents move across teams, quasi-randomly, I find no change in the output of these workers. Thus, skill differential among managers appears to be the selection of agents. To explore implications of differences in selection, I develop a model where managers are heterogeneous in assessing a candidate's productivity for the job as an agent. The model provides the implications on variation in exit propensity, team size evolution, and team output evolution. Empirical results confirm all the implications. The paper demonstrates how skill differential across managers, apart from differences in management practice and incentives, may drive productivity variation.