The Managers versus the Consultants

Since engineering information is rarely available, standard practice is to benchmark managerial performance against best observed practice. We exploit a rare opportunity to benchmark managerial performance against engineering standards. Our managerial performance describes the activities of Spanish...

Full description

Saved in:

Bibliographic Details
Published in:	The Scandinavian journal of economics 2003-03, Vol.105 (1), p.119-138
Main Authors:	Grifell-Tatjé, Emili, Knox Lovell, C. A.
Format:	Article
Language:	eng
Subjects:	Benchmarking Benchmarks Business management Consultancy Consulting services Cost allocation Cost analysis Cost control Cost efficiency Economic costs Economic models Economic regulation Economic theory Economics Electric potential Electrical industries Electricity Electricity distribution Engineering Input prices L51 L94 Mathematical vectors Operating costs Regulation Revenue revenue cap regulation Spain Studies Utilities
Online Access:	Get full text
Tags:	Add Tag No Tags, Be the first to tag this record!

Description
Summary:	Since engineering information is rarely available, standard practice is to benchmark managerial performance against best observed practice. We exploit a rare opportunity to benchmark managerial performance against engineering standards. Our managerial performance describes the activities of Spanish electricity distributors, and our engineering standards are obtained from an engineering grid created by an international consultancy. We find the consultancy's network to be much less costly to operate. When we decompose the cost differential, we find that the superior network design, combined with lower input prices, accounts for more than all of the predicted cost savings. However we also find that the managers are more cost efficient than the consultancy, presumably because they exploit their incentive to be cost efficient under a revenue cap regulatory regime.
ISSN:	0347-0520 1467-9442 1467-9442