The effects of managerial turnover on employee performance

Abstract

Introduction

Managers are a crucial ingredient of a well-functioning team. Thus, managerial turnover is critical for teams worldwide and of all sizes. Moreover, the teams themselves are becoming increasingly diverse and international, which poses a major challenge for managers. Managing a team becomes even more challenging when new managers take over a team they do not yet know. This article examines the effects of managerial turnover on employee performance by considering the tradeoff that originates from these two managers’ responsibilities. The tradeoff exists between the employees’ work quality, depending on the task allocation, and the employees’ exerted work, depending on employee motivation. We measure performance not on a team but on an individual employee level. To overcome the obstacles in measuring the individual employee’s performance, we focus on the sports industry, in which the performance of employees is highly measurable and comparable. On the one hand, to measure how efficiently managers allocate tasks, we look at pass accuracy. On the other hand, to measure how effectively managers motivate their employees, we look at distance covered, runs, and sprints performed.

Methods

To explore how managerial turnover affects individual employee performance, we built a unique 7-year panel dataset consisting of performance, game, and contextual data of 1,284 players playing across 2,141 German first soccer division (Bundesliga) games covering the seasons 2011/2012 to 2017/2018. The final sample contains 29,962 player-game observations for a total of 929 players. Using four fixed effects instrumental variable regression models, we uncover the causal relationship between managerial turnover on the one hand and employee performance on the other hand.

Results

The results demonstrate that managerial turnover negatively affects work quality because new managers allocate tasks less efficiently. Moreover, the results demonstrate that managerial turnover positively affects employees’ efforts because new managers motivate more effectively. By combining arguments of the human capital theory, the social capital theory, and the principal-agent theory, we can theoretically explain these opposing effects and the inconclusive past results.

Discussion/Conclusion

The contributions of this article to the existing body of literature on the effects of managerial turnover are twofold. First, this article is the first to examine the effects of managerial turnover on the individual level rather than overall team performance. Second, we split the individual employee performance into work quality and effort and connect these performance categories with two prominent managers’ responsibilities allowing a better understanding of the relationship between managerial turnover and employee performance and explaining previous theoretical and empirical research’s inconclusive findings. The results have important implications for human resource management.