Business management practice

Higher educational attainment is more likely to lead to management roles and greater strategic and environmental management by principal business managers

Download Benefits of Educational Attainment Business management practice

Introduction

Management practices play an integral part to the ongoing success and performance of businesses.[1] Businesses can implement different management practices; such as developing strategic business plans or setting up and monitoring key performance indicators (KPI). However, recent research found that 58 per cent of Australian businesses have either no strategic plan or no monitoring of KPIs. Only 6 per cent of Australian businesses produce a written strategic plan and monitor three or more KPIs across two or more areas.[2] Differences in management capability account for approximately 30 per cent of productivity differences between countries.[3]

In this factsheet, we show the linkage between the increase in educational attainment and likelihood of being a manager, and their implementation of strategic management and environmental management practices in the businesses they run.

Higher educational attainment leads to more manager jobs...

We found the likelihood of being employed as a manager increases with the highest level of educational attainment (Figure 1). This finding held after controlling for a variety of confounding factors such as age and industry.

Figure 1. Proportion of 30-64 year olds who worked in a manager occupation (ANZSCO Major Group 1).
Title: Proportion of 30-64 year olds who worked in a manager occupation (ANZSCO Major Group 1) - Description: Bar graph with error bars describing the proportion of 30-64 year olds who worked in a manager occupation by highest educational attainment in 2015-16. The X-axis shows the different educational attainments (Year 11 and below, Year 12, Certificates III and IV, Diplomas, Undergraduate or higher). Year 11 and below has 13%, year 12 has 20%, certificate III and IV has 14%, diplomas has 22%, and Undergraduate or higher has 23%.

Source: Multi-Agency Data Integration Project 2016

Notes: Data filtered by age (30-64), not studying, employed, who resided in Australia on Census night 2016 and had a known level of educational attainment. Post-matching logit likelihood ratio results show educational attainment is associated with being a manager (χ2 = 779 p <  0.001, N = 138,954). All groups were significantly different except Undergraduate or higher vs Diplomas, post-matching (Tukey-adjusted pairwise comparisons).

…with principal managers that are more strategic and productive…

US research also shows that businesses with higher levels of strategic management are associated with higher productivity, profitability and growth.[4]  We follow the classification of the level of the businesses’ strategic management outlined in Moran et al. (2018).2 Using a multinomial regression and controlling for a variety of factors, including business size, we found that higher levels of education of the principal manager (for example, Chief Executive Officers or Managing Directors) had a significant positive correlation with how strategic the management practice was in the business. Conversely, lower education of the principal manager had a significant positive correlation with Low Engagement strategic management in the business. Low Engagement level includes little to no strategic planning nor monitoring of KPIs (Figure 2).

Figure 2. Proportion of select strategic management classifications, by highest level of educational attainment of principal manager, 2015-16.
Title: Proportion of select strategic management classifications, by highest level of educational attainment of principal manager, 2016.  - Description: Bar graph with error bars describing the proportion of select strategic management classifications (low engagement and strategic), by highest level of educational attainment of principal manager. The X-axis shows the different educational attainments (Year 11 and below, Year 12, Certificates III and IV, Diplomas and Undergraduate or higher). There are two bars per educational attainment pertaining to low engagement management style, and strategic management style. The low engagement management style shows: year 11 and below has 71%, year 12 has 61%, certificate III and IV has 62%, diplomas has 53%, and undergraduate or higher has 49%. Strategic management style shows: year 11 and below has 1%, year 12 has 4%, certificate III and IV has 3%, diplomass have 9%, and undergraduate or higher has 10%.

Sources: Management and Organisational Capability Survey, 2015-16.

Note: The relationship between education levels and strategic management classifications was tested using a multinomial regression. Education at all levels was found to be associated with strategic management. The greatest education effect size was Undergraduate or higher on the Strategic level of management practices (β = 1.33, p < 0.001, N = 11,347). Pairwise comparisons found most education levels significantly different for management classifications (p < 0.001). Full regression and pairwise results not shown.

 …with a growing focus on environmental impacts

Business management is a fundamental driver of environmental impact around the world, and increasing focus on reducing pollution, waste, deforestation and biodiversity loss has become a global trend in many high performing organisations.[5] [6]  Past research in Queensland has not found a correlation between the principal manager’s educational attainment and the level of environmental awareness or environmental practices.[7] We use the environmental management capability (EMC) score outlined in Agarwal et al. (forthcoming) [8] to test the association between the educational attainment of the principal manager and the use of environmental management practices in the business. Even after controlling for other factors relating to the business and characteristics of the principal manager, we found a small but positive relationship between the EMC score and the educational attainment of the principal manager (Figure 3). However, educational attainment is of lesser importance than business size and industry sector.

Figure 3. Mean environmental management capability score, by highest level of educational attainment of principal manager, 2015-16.
Title: Mean environmental management capability score, by highest level of educational attainment of principal manager, 2015-16.   - Description: Bar graph with error bars describing the mean environmental management capability score of highest educational attainment of principal manager. The X-axis shows the different educational attainments (Year 11 and below, Year 12, Certificates III and IV, Diplomas, Undergraduate or higher). Year 11 and below has 0.06, year 12 has 0.06, certificate III and IV has 0.08, diplomas has 0.09, and Undergraduate or higher has 0.08.

Sources: Management and Organisational Capability Survey, 2015-16.

Note: The relationship between education levels and EMC was tested using an ordinal multinomial regression. Education of the principal manager was found to be positively associated with higher levels of categorical EMC (χ2= 47.78, p < 0.001, N = 11,397). This was confirmed in the post-hoc pairwise comparisons, which found significant differences between two groups of education levels, the first with Year 11 and below & Year 12, the second group with Certificate III & IV, Diplomas and Undergraduate or higher. There was no significant difference between the levels within the two groups.

Data and methodology

The ANZSCO occupation analysis in this paper used linked records from the MADIP Basic Longitudinal Extract 2011-2016 (2016 Cohort) (Cat. No. 1700.0, Microdata: Multi-Agency Data Integration Project, Australia) where persons were aged 30 to 64 years (inclusive), resided in Australia on Census night (excluding overseas visitors), were not currently studying, and were employed. To control for confounding factors, randomised control trials were simulated by finding groups of statistically identical people across the following covariates: personal income, equivalised household income, social-economic status (IRSAD), age group, gender, Indigenous status, remoteness by state/territory, English-speaking country of birth, marital status, family type (coupled or single person with or without dependent children), industry of employment. This method provides the strongest possible evidence of cause and effect in cross-sectional data.

The strategic and environmental management capability analysis in this paper used the Management and Organisational Capability Survey, 2015-16 (Cat. No. 8172.0.55.001, microdata). Strategic management classifications were derived from survey variables grouping number of key performance indicators and number of key performance indicator topics. A multinomial regression with significance was run on level of highest educational attainment, age, sex, years of experience, business operative years, foreign ownership, industry, and business size. Environmental management capability scores were calculated using survey variables based on environmental management practices. A multinomial regression model was run on highest educational attainment, age, sex, years of experience, business operative years, foreign ownership, industry, and business size, against categorised environmental management capability scores.

 


 

[1] Alfred Chandler suggests that professional managers with detailed knowledge of finance, strategy and other aspects of business are fundamental in the success of businesses in modern capitalism. See Chandler, A.  (1984) The emergence of managerial capitalism. Business History Review 58(4): 473-503.

[2] Moran I, Balaguer A, Majeed O, Agarwal R, Bajada C, Brown PJ. (2018). Strategic management in Australian businesses. Australian Government Department of Industry, Innovation and Science, Canberra, Australia

[3] Bloom, N., Lemos, R. & Sadun, R. (2013). Does Management Matter in Schools? Discussion Papers 13-032, Stanford Institute for Economic Policy Research.

[4] Buffington, C., Foster, L., Jarmin, R., & Ohlmacher, S. (2017). The management and organizational practices survey (MOPS): An overview 1. Journal of Economic and Social Measurement, 42(1), 1-26.

[5] Engel H., Enkvist P-A., Henderson K. (2015) How companies can adapt to climate change. McKinsey & Co.

[6] Lash J. and Wellington (2007) Competitive Advantage on a warming planet. Harvard Business Review. HBS: Cambridge, Massachusetts.

[7] Gadenne, D. L., Kennedy, J., & McKeiver, C. (2009). An empirical study of environmental awareness and practices in SMEs. Journal of Business Ethics, 84(1), 45-63.

[8] Agarwal, R., Bajada, C., Brown, P., Moran, I., Balaguer, A.(forthcoming). Development of Management Capability Scores. Australian Government Department of Industry, Innovation and Science, Canberra, Australia.