Management contracts : main features and design issues
Hegstad, Sven Olaf | Newport, Ian
Management effectiveness is widely recognized as a critical factor in determining the performance of enterprises. The management contract offers a vehicle by which an integrated package of management skills, technical and other resources can be acquired from one source by the enterprise owner. Ownership is retained but management control is effectively vested in an external manager or management company possessing the specialized skills required by the owner. Over an agreed period of time, well-defined business objectives can be achieved by this injection of external management skills and the enterprise enabled to develop a sound internal management base for the future. The purpose of this paper is to familiarize operational staff in the World Bank with the main features of management contracts and the design issues common to such contracts whatever the sector. While sector specific issues are important, the cross-sectoral issues addressed in this paper tend to be universal in character and are of fundamental importance to the successful development and implementation of management contracts. The paper draws upon a review of 40 contracts, discussions with individuals and enterprises familiar with management contracts, and the limited writings available on the subject.
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