The Effect of Positive Management Practices on Firm Profitability: Evidence from Text Mining

Becker, Martin

Abstract

The concepts of positive psychology and positive organizational scholarship emphasize the value of employees’ positive emotions and satisfaction for organizations to thrive. However, conceptions of positive practices or virtuousness emanating from managers are not yet fully established and suffer from incompleteness and inconsistency. This study establishes a framework that holistically and coherently captures management practices that lead to satisfaction among employees, applying text mining and unsupervised machine learning methods to a large sample of employee reviews (n = 5,650). The framework of positive management practices (PMP) encompasses the six dimensions of respectful interaction, open communication, interpersonal support, reasonable instructions, intellectual support, and managerial competence. In a subsequent analysis, this study finds a positive association between PMP at the organizational level and firm profitability, indicating that companies should ensure that employees in leadership positions understand and adopt PMP.