Report: Mid-market firms have agility, edge for op-ex success
A new survey on operations management in U.S. middle-market companies shows them uniquely positioned to make sustainable process improvements but still trailing their larger peers in developing formal implementation programs.
The report, The Operations Playbook: A Systematic Approach for Achieving and Maintaining Operations Excellence, is authored by Center for Operational Excellence Co-Director Dr. Peter Ward and released by the National Center for the Middle Market, a collaboration with GE Capital and Fisher College of Business. Results find firms between the $10 million and $1 billion-a-year revenue mark generally outpacing larger companies in measures on daily management, strategic alignment and problem solving, among others.
For example, 70 percent of the 250 mid-market C-suite executives surveyed said their companies flag and discuss problems instead of covering them up, a building block of operational excellence practices. Only 60 percent of the 150 C-suite executives in $1 billion-plus companies surveyed said the same, by comparison. Similarly, roughly two-thirds of mid-market companies say they dig deep for the root cause in problem-solving efforts instead of seeking a quick fix, up from 55 percent of larger companies.
Both mid-sized and larger companies, though, appear to have the same Achilles heel: Sustaining gains once they’re implemented, perhaps best-reflected in how they fared in daily management measures. Roughly two-thirds of both mid-market and large companies said they expect their leaders to visit operations frequently, but that same vigilance isn’t applied to other daily management system components, namely just what, exactly, these leaders will see. Only about half of all companies surveyed said visual controls are maintained at all levels of the organization.
Results on the whole point to a high rate of success for middle-market companies seeking big improvements in operational effectiveness, in no small part because of their size.
“(Mid-market firms) are large enough to institute formal processes but small enough that their leadership is still closely involved in the day-to-day functions,” Dr. Ward said. “Leaders can be closer to the work of the business, which helps them to communicate strategic goals, be more involved in developing the skills of employees, and recognize and solve problems as they arise.”
A gap still appears to exist, though, between mid-market companies’ agility for operational excellence and their formal execution efforts. Only 41 percent of surveyed middle-market firms said they implement some sort of operational excellence method, which ranged from Six Sigma and Lean to Toyota Production System and Theory of Constraints. Nearly three-quarters of their larger counterparts said the same.
This gap, Dr. Ward said, likely stems from a greater tendency among mid-sized firms to use these programs in an effort to improve customer satisfaction. This outcome can have more varied, and even nebulous, payoffs than results on a balance sheet, making it more difficult to justify a continuous improvement push from an ROI perspective, he said.
Middle-market firms can take heart, however, in one key measure on the same front: For those that make a Lean or Six Sigma push, they’re deemed more successful than larger companies.
Want to learn more about the study? Check out a multi-part interview with Dr. Ward and NCMM Executive Director Tom Stewart.