John Fizel and Michael P.D'Itri
Managers perform several functions that are often deemed critical to the performance of organizations. Thus, when organizations exhibit poor performance, there is a common notion that dismissing and replacing the manager will lead to improved performance. While that has intuitive appeal, both the assertion that “performance causes succession” and the counter-assertion that “succession causes performance” are subject to theoretical and empirical debate.
Amid this controversy is the problem of measuring managerial performance. Managerial performance measures in business are often difficult to define, use distorted or proprietary data, or are determined, in part, by forces outside managerial control. We use data envelopment analysis (DEA) to introduce a “new” measure of managerial performance to this debate. DEA estimates the efficiency of a given manager relative to the efficiency of all managers in the industry. This efficiency measure also determines the difference between the actual performance of the manager and what could have been achieved under “best practice” decisions. We believe this innovative measure of managerial efficiency helps to shed new light on the old yet puzzling relationships between succession and performance.
For this reexamination of the “performance causes succession” and the “succession causes performance” hypotheses we use NCAA Division I college basketball data over the period 1984-91. There are a number of reasons why basketball is a useful and convenient point of departure for our measure of