New Readings on Talent Assessment

This week, we explored two insightful articles on talent assessment.

The first, 'The Value of Bosses' by Lazear et al., delves into an academic examination of the impact of supervisors on worker productivity. Utilizing a company-based dataset on technology-based services workers, the paper employs changes in team composition to estimate supervisor effects. It reveals substantial and statistically significant supervisor effects, highlighting that replacing an ineffective boss with an efficient one can boost a team's total output more than adding an additional worker to a nine-member team. The study also discovers that workers under better bosses exhibit higher retention rates, and the average boss proves to be approximately 1.75 times as productive as the average worker.

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The second article, 'Quantifying Managerial Ability' by Demerjian et al., introduces a novel measure of managerial ability based on efficiency in revenue generation. This measure, applicable to a broad sample of firms, outperforms existing ability metrics. Using data envelopment analysis (DEA) and regression analysis, the authors assess the relative efficiency of managers in transforming corporate resources into revenues, accounting for industry and firm characteristics. The study validates its measure through strong associations with manager fixed effects, stock price reactions to CEO turnovers, and subsequent firm performance.

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