Do managers capture the value they create? Drivers of managers' value capture in a large retail chain

Abstract

We investigate the relationship between value creation and value capture among frontline managers. Using longitudinal data from a restaurant chain, we find that those managers who persistently create more value for the firm capture just 0.5% of that extra value through their pay. We explore the reasons for this limited managerial value capture using an abductive approach. We find some evidence that value capture may be limited by lack of alternative employment opportunities. More extensive evidence suggests that the employer often struggled to identify individual contributions to value creation, limiting managerial rewards. We discuss the theoretical implications of such limited managerial value capture for the strategic human capital literature. Managerial Summary: Frontline managers can differ in how much they contribute to firm profitability. Do those managers who contribute the most to firm performance also capture those benefits back through higher pay? In a study of restaurant managers, we find that managers differ substantially in the profits that they create, but that the most profitable managers only capture 0.5% of the extra profits they create. We also find evidence that the firm often fails to identify which managers are the most persistently profitable, potentially reducing the rewards paid to those managers. By demonstrating that differences in performance are not

What business model factors make SMEs more profitable?

“…However, many entrepreneurial projects fail despite the great opportunities that may exist and the numerous resources available to their promoters. This stems from the wrong choice of business model being made by the company in question, as it is inadequate and unable to create or/and capture value in the form of business profit (De Stefano et al, 2022;Reuschl et al, 2022;Sharapov & MacAulay, 2022). Therefore, the likelihood of a firm achieving success increases considerably if it evaluates its strategic alternatives using an adequate business model (Shafer et al, 2005).…”