Measuring managerial efficiency: the case of commercial greenhouse growers

Recently the managerial decision making process has been given new attention, both in theoretical studies as well as in empirical research explaining differences in farm results. However, while critical to explaining efficiency, managerial ability has been difficult to measure and therefore often ignored. This study attempts to measure managerial ability. It divides the decision making process into four steps: goal formulation, planning, monitoring and evaluation. The quality of each step is measured in a panel of 26 specialised flower producers, The impact of decision making on the firms' efficiencies is measured by means of a stochastic frontier production function. A one‐step procedure is used in which technical and decision making parameters are jointly estimated. The results show positive associations between firm efficiency and the quality of decision making (especially monitoring and firm evaluation), indicating that this procedure has been potentially successful and is a move towards successfully measuring a critical input.