IT is a common observation that good managers are crucial to an organisation's growth and economic success. While it would be a mistake to discount other conditions such as natural and developed resources, technical education, low factor costs and favourable legal and fiscal frameworks, these factors have to be combined and amplified to produce desirable results. This is the special task of management.

A good manager needs a complex set of abilities including strong business expertise and broad human capabilities in leading and relating.

Some argue that management cannot be taught in the sense that specialised technical subjects can. Great managers are grown in the school of hard knocks, it is said. This is a hard position to dispute and many formal management programmes have reflected this by adopting action research and action learning techniques.

Scepticism of formal management courses has been reinforced by experience of the re entry problem - a manager returns from an intensive 10 week course in Harvard only to find a company climate utterly unconducive to any effort to practice what was learned.

Experienced providers of management development programmes recognise this problem and have shown that carefully designed in house programmes which are aligned with cultural changes in an organisation have the most powerful effect on practice.

This suggests that firms need management development policies sufficiently comprehensive to fit their goals and context and a climate of opinion which permits individuals to upgrade their practice.

But there is still a question over whether and by how much such policies impact on financial performance. Statistical evidence of any direct relationship is scarce and hazardous because it is not possible in individual firms to isolate the effects of such policies from all the other possible contributors to financial performance.

But using a large database of companies it is possible to compare the average, performance of those which have systematic management development policies with those which do not.

In a study of human resource management originated by the Strategic Planning Institute, the University of Michigan and Hay Management Consultants; a number of items of management development activity were measured and tested to establish what impact, if any, they had on the bottom line.

Separate tests were conducted comparing firms in stable or moderately changing environments on the one hand with firms in turbulent environments on the other.

Turbulence was characterised by significant changes in technology, new aggressive competition and volatility of the market shares of the main players. Frequently this turbulence corresponded with changes in product life cycles.

Three indicators of concern for the quality and development of senior managers were measured and tested in the study:

. The presence or absence of a systematic policy within the company for identifying and developing high potential future senior managers.

. The frequency of recruitment of fresh talent from outside the company into the senior management team. This was measured by the percentage of "outsiders" in top management who had joined the company within the previous three years.

. Attendance at formal management development programmes measured as the average number of days spent at such programmes by senior managers each year.

Looking at the impact of the first two factors, firms in turbulent environments benefit positively from having high potential managers identified and ready to new responses.

It also seems to be the time when and infusion of new blood from outside will help the firm to acquire some fresh perspectives about how to keep up to date with the new environment.

The strong presence of the first two factors made differences of nine and II percentage points respectively on return on capital employed (ROCE) in the medium term.

The same two factors in more stable environments had the opposite effect.a "Outsiders" and impetuous "young Turks" had a negative impact of minus three and minus five percentage points on ROCE. There appears to be a genuine, case in these situations, particularly if industry dynamics are complex, for a board to value the experience of older hands who have an intimate knowledge of the rules of the game.

I am happy to say that the impact of the third factor: "time spent on formal management programmes" proved positive in both stable and turbulent business environments.

Its effect in stable situations was to improve profitability by six percentage points and to more than double this to 13 percentage points in turbulent industry climates.

Attendance at management courses suggests a healthy respect for the power of ideas and a belief that high quality and well structured ideas have consequences that can shape our businesses and our lives.

We should not put too much store on the actual numerical estimates reported here but we can make some valid generalisations about the direction of effect (positive or negative) and say confidently that, under different conditions, the magnitude of that effect is substantial.

These studies provide a glimpse of the net additional impact of management development policies on a firm's performance over and above that normally attributed to hard factors such as the level and mix of capital use, product technology and inherited market share.

The study proves, if proof were needed, that learning and continuous improvement based on new experience and formal opportunities is a life long journey for managers.