Public Sector Management Practice and Employee Well-being

Abstract

This paper examines how management practices influence mental health outcomes, combining management surveys, prescription drug records, and employment records in Danish administrative data. Management practices benefit workers uniformly in the private sector but disproportionately benefit high-ability workers in the public sector, who exhibit significantly greater sensitivity to management quality. Decomposing management practices reveals that incentive systems and performance monitoring drive these effects. Organizations with stronger incentive and monitoring practices systematically attract and retain higher-quality workers, creating environments where high-ability employees thrive—either through improved working conditions or better worker-organization matching. These findings advance understanding of how management practices affect employee mental health beyond productivity. The results have particularly important implications for public sector organizations in which effective management is critical for retaining talented workers who accept wage penalties for mission-driven work.