Selection and Allocation of Managers:
The Function of the Managerial Labour Market in Sweden
Organisation theorists (e.g., Williamson) have mainly focused corporate governance as an academic subject on the stock markets by researchers in the field of economics (e.g., Jensen), on boards of directors by management theorists (e.g., Pettigrew) and on the organisational form. This project is based on the belief that research in the field of corporate governance has overlooked one important corporate governance mechanism, that of the managerial labour market. It was proposed by Fama in 1980 to be a mechanism of importance in aligning the preferences of managers towards the shareholder efficiency of the corporation, but has not yet received sufficient attention. The project focus on the managerial labour market in Sweden and will try to reveal its function as an mechanism of selection and allocation of one of the important productive assets of a country, the managers.
The project was financed by The Bank of Sweden Tercentenary Foundation. A doctoral student, Anna Stafsudd, have been full time employed in the project, and she made her doctoral thesis in the frame of the project. It has been published and the title is: Measuring the unobservable: Selecting which managers for higher hierarchical levels.
Research on the managerial labour market from a corporate governance perspective focus on the selection, training and allocation of managerial labour in order to find to what extent these different practices supplement (or perhaps compete with) the other corporate governance mechanisms, such as the stock market, the capital structure, the board of directors, the organisation and the product market. A focus on the managerial labour market offers one unique advantage compared to any other corporate governance subject, that of doing research directly on the very creation and development of management itself.
Such research is, however, not only of academic importance, but also of vital importance from a practical point of view. In general, all firms experience the problem of selecting and allocating the most competent workers to different positions. But when it deals with managers, and especially top managers, the problems are elevated since top management labour are hard to evaluate, both ex ante and ex post, but they influence the firm immense. Thus, a successful selection and allocation could in fact create what most firms are looking for, a hard-to-imitate resource creating a comparative advantage. From a societal point of view, managers represent an important resource since they manage the other economic resources. Thus, the selection and allocation of this human resource should be of vital political importance.
Several papers have been presented in the project.
"What makes the difference at the top? A Management Selection Model tested on Top Swedish Managers", in which Anna and I predict a persons position at the top of the corporate hierarchy using factors of ability, organisational structure signals and social structure signals. With an R-square of 15, there is enough variance left to motivate a continuation of the efforts!
"Enclosure of Managers: The Internal Labour Market for Top Managers", in which a theory of Internal Labour Markets (ILM) is presented, one that treats ILM as a strategy of enclosing labour, and involves three enclosure mechanisms, 1. long-term contracts, 2. financial incentives, and 3. symbolic incentives, the presence of these being based on four factors of enclosure: labour shortage, firm-specific skills, control and custom.
"Corporate Governance through the Creation of a Managerial Class". The aim of the paper is to broaden the field of corporate governance from the behaviour of managers and structures influencing the behaviour, to the creation of the managerial class. This is accomplished through the use of theories from the organisational level, explaining selection of managers, and including the macro level concept of hegemony, supporting the enforcement of preference similarity within the class of managers.
"Recruitment policy vs. Recruitment process: Espoused theory and theory-in-use". Oppositions could appear between the stated recruitment policy and the policy that actually are implemented. One reason for this discrepancy is that the control system influence the recruitment process.
"Executive Recruitment Firms: Their Production, Function and Industry". The paper presents a case study we performed during the spring 1999. We investigated the recruitment firms that are engaged in selecting managers. Since they appear to do a good deal of the selection of managers, no selection projects can be completed without an understanding of how this intermediary in the market for managerial labour function.
"Strategic implications for Managerial recruitment: One Case study seen in three different perspectives". In this single authored paper, Anna shows that different predictions about recruitment can be gained when applying three different strategy perspectives on recruitment. These predictions are applied on one case study.
The project is resting, awaiting publications. Anna Stafsudd will, however, continue in the field of selection.
If you have any comments, please send them to us: Sven-Olof.Collin@e.hkr.se or Anna.Stafsudd@fek.lu.se