Step by step: Measuring the value of managing by walking around

New research finds that executive visits boost employee motivation and sales.

Some managers tell employees that their work is deeply valued and critical to the company's success. Others downplay motivational speeches, focusing on the need to improve specific performance metrics.

Which approach gets better financial results?

Despite decades of research studies on management styles, nobody knows. And that is a nut that Pablo Casas-Arce, associate professor of accountancy, was determined to crack — or at least, begin to crack.

When a Latin American bank he had worked with hired a new divisional manager for its retail operations, he saw his chance. Along with Professor Asís Martínez-Jerez of Cornell University's SC Johnson College of Business and PhD student Joseph Moran of the University of Pennsylvania's Wharton School, he designed an experiment to analyze the effects of the motivational, visit-the-facilities-and-rally-the-ranks management approach, a methodology that gained popularity in the 1970s and '80s, when it became known as "managing by walking around" or "management by wandering around."

Though the concept never went away, it became one of many managerial approaches that today's businesses use.

"A lot of companies do it, but there's no evidence on how effective it is," Casas-Arce says.

The experiment

In the researchers' experiment, the bank's retail divisional manager, responsible for 79 bank branches employing around 1,000 people, visited each branch and gave a motivational speech to employees.

"He said he was there to support them. He emphasized the impact of their daily work on the entire organization," Casas-Arce says.

Afterward, the manager mingled with workers in an informal atmosphere. Visits lasted two or three hours, with some branches providing refreshments.

What the visits deliberately did not include, Casas-Arce says, were any discussions about achievements, problems, metrics, or results compared with other branches.

"We wanted to make it clear that the visit was not about monitoring performance," he says.

Measuring results

To measure the outcome of the visits — as opposed to simply asking employees whether they felt more motivated — the researchers calculated before-and-after averages of the same metrics the bank itself uses to judge branch performance, including size of deposits and sales of credit cards, insurance, and other financial products.

Their findings, described in the research paper "Motivating from the Heights: A Field Experiment On Top Managers Visiting the Front-line," published in the Review of Accounting Studies, show a significant improvement in performance metrics after branch visits at each bank.

Across branches, sales and deposits began to rise as soon as a visit from the high-level manager was announced. They peaked in the period immediately following the visit and continued to remain in force for at least a month — and sometimes as long as two months — before reverting to their previous levels at each branch.

The study suggests that workers who feel valued are more productive and make more sales than others, Casas-Arce says.

"If you don't feel your work matters much, selling someone another credit card may not seem to make much of a difference. If you are motivated and energized, you may be more proactive," he explains.

Shifting to a quantitative perspective

The researchers' findings are consistent with management theory, which predicts that happy employees are more productive. What makes them stand out is that they are not just theoretical, but quantitative. Obtaining quantitative results is what makes company directors, charged with making money for investors, sit up and take notice. Still, further research is needed, Casas-Arce says.

"We see a return. Sales went up — there was a financial impact on performance. When the branches perform better, the bank performs better. The question is, is that impact commensurate with the demands of the task?"

What he means is, is it worth the effort for executives, whose jam-packed schedules are filled with competing demands, to make scores of time-consuming on-site visits, compared with, say, meeting with leaders at another bank to discuss a possible merger, or brainstorming with staff about how to use AI to improve productivity?

"There is scope for doing more research on what managers do and how visits compare in impact to other managerial tasks," Casas-Arce says.

He would love to do another study — one that compares the results of managing by walking around to managing by focusing on performance metrics.

"A manager could give two different sets of messages to different teams," he explains. "In some instances, he would give motivational speeches and talk about the importance of individuals' work. In others, he would discuss matters like sales performance in the past week and the past month, how it compares to that of peers, and what might be done to improve it. Afterward, we would have two sets of results we could compare."

Even so, measuring sales metrics is not the same as measuring overall performance, he points out. More studies would be needed to compare the financial results of both types of visits with those of other managerial activities.

But in our data-driven world, the quantitative work of Casas-Arce and his colleagues offers a value that's lacking in management theory alone. And like a good investment, its value has the potential to increase, especially if other researchers start to take a more quantitative approach.

"If you're raising capital or negotiating a loan, it's easy to judge financial impact," Casas-Arce says. "If you're visiting a branch, many intangibles make it more difficult to measure. Our research is one step in that direction."