What Do Managers Do? Exploring Persistent Performance Differences among Seemingly Similar Enterprises
- Persistent performance differences among seemingly similar enterprises exist and are economically significant.
- Relational contracts are a key way that managers get organizations to get things done.
- Many competitively significant management practices rely on relational contracts that themselves are hard to build and change, leading to the slow diffusion of management practices that could improve organizational performance.
- Both Toyota and Southwest Airlines appear to have used investment in relational contracts as routes to enter industries that had for many years been dominated by firms with harder assets-superior brands and prime geographic locations.
- Relational contracts are an investment that might improve an enterprise's productivity. But investments are costly, and there are typically many such investments a firm could make.