Perspectives of Operations with Reference to SME
A Critical Examination of the Four Perspectives of Operations
Strategy, Operations Performance and Contributions with Reference to an SME in an O.E.C.D. Member Country.
This work explores the operations management process employed by companies or firms vis-a-vis a medium-sized company FreshMinds which is based in the UK and is a member country of the O.E.C.D. (Organisation of Economic Cooperation and Development). It looks at the four typologies of operations as they affect the firms, while looking at their performance objectives and operational stage of contribution within their sector. The work also analyses the operations strategy of the medium-sized company in reference while concluding with some recommendations to help the firm in its strategic objectives.
Operations management as defined by Heizer and Render (2006, p.4) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs. All firms or companies stated by Slack et al. (2006, p 11) produce goods or services by transforming inputs such as materials, information and customers into outputs such as goods and services. It thus means that for a firm to be successful, no matter how small or medium-sized it is, it needs to put in place an operations system that is effective and ensures its long-term sustainability by looking at factors such as its volume, variety, variation and visibility as well as its performance objectives to design its operations process and operational strategy.
Small and medium-sized enterprises (SMEs) in the UK are defined for the purpose of accounting requirements. Sections 382 and 465 of the Companies Act 2006 define a SME for the purpose of accounting requirements. According to this a small company is one that has a turnover of not more than £6.5 million, a balance sheet total of not more than £3.26 million and not more than 50 employees. A medium-sized company has a turnover of not more than £25.9 million, a balance sheet total of not more than £12.9 million and not more than 250 employees. It is worth noting that even within the UK this definition is not universally applied. (Source: http://www.lib.strath.ac.uk/busweb/guides/smedefine.htm)
In recent national statistics (Department for Business, Innovation & Skills, 2010) there were an estimated 4.8 million private sector enterprises in the UK at the start of 2009, an increase of 51,002 (1.1 per cent) since the start of 2008. These enterprises employed an estimated 22.8 million people, and had an estimated combined annual turnover of £3.2 billion. This makes the selected SME – FreshMinds, which is used in this work as a reference case study – fall within the definition of a SME.
Company Profile and Position
FreshMinds is a medium-sized market research and recruitment company in the UK and as evidenced in Appendix 1, which shows that they meet the criteria of a medium-sized company in the UK by their turnover and employee number, which numbers just over 86, and they are listed as one of the best 100 SME companies to work for (Times, 2010) and are based in London. It was founded in 2000 by Caroline Plumb and Charlie Osmond with the intention of becoming the world’s most respected research and recruitment consultancy. In 2007, FreshMinds Research and FreshMinds Talent were formally established as stand-alone business units within the FreshMinds Group. Later that year, another unit FreshNetworks was launched.
FreshMinds Research provides organizations with inspired thinking and analysis that helps them understand their customers, competitors and markets.
FreshMinds Talent works with companies to source outstanding executive, graduate and interim talent.
FreshNetworks builds and manages online communities that help you get a deeper understanding of customers’ needs, drive innovation and build advocacy for your brand.
FreshMinds is accredited with Investors in People Standard, demonstrating their commitment to the training and development of their people as the video illustrates (FreshFilms, 2008). They were also crowned as the industry’s “Most Innovative Employer” at the 2006 Research Excellence and Effectiveness Awards (source: < http://www.freshminds.co.uk/about-us>).
FreshMinds as a company can also be further understood in terms of the Input- Transformation-Output Model in Appendix 3 as described by Slack et al. (2009, pp.11–12) which proposes that operations that process information and customers like FreshMinds have this as inputs to their process and are called “transformed resources” while the transforming resources which is also part of the inputs are their staff and facilities that go through a transformation process and bring out the outputs. In the case of FreshMinds this would be their customers and the market research reports they produce, as shown in Appendix 3.
Operations Typology (The 4 Vs)
The 4 Vs are listed according to Slack et al. (2009, pp.19–22) as:
Volume: The volume dimension of operations according to Slack et al. (2009, pp.19–22) banks on the systemization and repeatability of the process. This may lead to standardization of the operations process, but Heizer and Render (2006, p. 10) insist that services are often difficult to standardize, automate and make efficient as one would like because customer interaction demands uniqueness and in many cases the customer is paying for the uniqueness. They also claim that services are often knowledge based so cannot be inventoried. Therefore, in the case of FreshMinds, being a market research and recruitment consultancy its services are knowledge based and thus are not fully affected by the volume typology of operations. This means that there is low repetition of the jobs the staff at FreshMinds perform, coupled with less systemization and leading to high unit costs for the company according to Slack et al. (2009, pp. 19–22).
Variety: This according to Slack et al.(2009, pp.19–22) would see an operations of a company having to be flexible to be able to offer variety though the cost may be higher compared to a standardized operation as the company tries to match customer needs. In reference to the FreshMinds case study, the customer uniqueness of their
services means their operations have high variety as they are flexible, complex and try to meet customer needs both in terms of their market research and candidate recruitment, and this would inevitably add to their unit costs.
Variation: This has to do with the variation in demand for the services of a company and it means operations must change its capacity in some way, for example by hiring more staff to meet demand argues Slack et al. (2009, pp. 19–22). But Greasley (2008, p. 10) also argues that for service operations the fact that services require simultaneity, i.e., they are produced and consumed simultaneously in terms of the interaction of the customer, the service provider and the surroundings, causing a variation in the performance of the services, as humans make mistakes and are likely to vary their actions on a day-to-day basis. FreshMinds in this case, has high variation in demand hence they have changing capacity. Their staff strength is mainly about 86 but they have about 16,000 researchers and analysts on their reserve list, whom they call ‘Minds’, whom they can call on to fill their change in capacity when demand varies.
Visibility: Refers to how much of the operation’s activities its customers experience or how much the operation is exposed to customers says Slack et al. (2009, pp. 19–22). This visibility part Hill (2005, p. 143) argues that for a service firm is part of the delivery system for the customers as they are actively engaged. In relation to FreshMinds, the firm has high customer contact or visibility and this increases their operation cost.
These are the things a company would want to do to get things right to avoid mistakes and satisfy their customers while also delivering on time as promised with little operating costs. The five performance objectives as described by Slack et al. (2009, pp. 19–22) are:
Quality: This, according to Slack et al. (2009, pp. 19–22), has to do with reducing mistakes in the operations process and thereby reducing cost. For service operations, variability in performance and customer perceptions may lead to difficulty in maintaining a consistent level of service quality argues Greasley (2008, pp. 18–20), though he agrees quality helps reduce costs. While Dilworth (2000, p. 49) says service quality can be judged by reliability, responsiveness, tangibles, assurance and empathy. FreshMinds would have many of these attributes in their service quality as the company seeks to be a reliable market researcher which is always responsive to the market needs and they also show empathy to candidates they recruit for companies as they follow them up whilst still new on the job that they got for them and throughout their career.
Speed: Greasley (2008, pp.18–20), in his analysis, insists that speed cannot be used for services but may help improve delivery time and lead to better customer service. Speed, Slack et al. (2009, pp. 19-22) says, also helps increase value with customers. FreshMinds in this context would have some level of speed with the way they move information within their operation hence the level of awards and recognition they have earned for their services.
Flexibility: Flexibility according to Greasley (2008, pp. 18–20) is the ability of a company to change what it does quickly and also their ability to offer a wide variety of product or service to the customer. FreshMinds in this regard can be deemed flexible as its research services are rendered to a large number of sectors and industries ranging from Education, Telecoms to FCMGs. Due to the variation in their demand they are also flexible in change in capacity and have launched new products, such as their FreshNetworks services in 2007.
Dependability: This performance objective Slack et al. (2009, pp.19-22) claim saves time and also money. Greasley (2008, pp. 18–20) define it as consistently meeting a promised delivery time for a product or service and can be measured by the percentage of customers who received the service in the delivery time promised. Though FreshMinds did not state their delivery time for the service they render to their customers, the large amount of companies they have worked for and still work for coupled with the industry standard awards they have won and being listed in the Sunday Times 100 Best SMEs demonstrates that they are dependable.
Cost: This is a very important performance objective which every operation strives to keep low. Greasley (2008, pp. 18–20) says it is important to maximise profit and deter competitors from the market and it deals with the finance required to obtain the inputs and manage the transformation process which produces the services. Heizer and Render (2006, p. 33) argue that a firm can create competitive advantage over competitors by creating a system that has unique advantage over competitors. FreshMinds have a low volume, high variety, high variation and high customer contact operation, hence they have high costs of operation but this is mitigated by unique or competitive advantage they have in services like FreshNetwork, a social networking site they created for businesses that is also a head-start over competitors.
Operations Strategy Perspectives
Slack and Lewis (2008, p. 6) define operation strategy as how competitive environment changes and what the operation has to do in order to meet current and future challenges, it must according to Waters (2002, p. 20) consist of all the strategic decisions, policies, plans and culture relating to the operations. Slack et al. (2009, pp. 19–22) classify them into four perspectives, namely: Top-down, Bottom-up, Market requirement-based and Resources-based.
Top-down Perspective: This form of operations strategy perspective according to Slack et al. (2009, pp.19–22) has to do with what the whole group or business wants to do. This according to Hill (2000, p. 26) can also be called corporate strategy and it concerns the business as a whole in terms of industrial or service sectors in which it wishes to compete. The top-down perspective of FreshMinds is to compete in the market research and recruitment sector and become one of the world’s most respected research and recruitment consultancies. This has led them to recruiting the best brains in the industry for their research and also making sure that they only recruit the best people for companies they work for through their rigorous recruitment process.
Bottom-down Perspective: This form of perspective according to Slack et al. (2009, pp. 19–22) is where operations improvements cumulatively build strategy. Slack and Lewis (2008, p. 9) further explain it as the perspectives that shapes a firm’s operations from knowledge it gains from day-to-day activities. This applies to FreshMinds in terms of separating FreshResearch – its research arm from FreshTalent – its recruitment arm has different stand-alone business units within the group in 2007. They also launched FreshNetwork in the same year, an online social community network which they believe from knowledge they gained in past operations would help companies get in touch with customers directly online and find out what they really need.
Market Requirement Perspective: This, Slack et al. (2009, pp.19-22) claim, is an organisation trying to satisfy the requirements of its markets. FreshMinds responds to its market requirements by gathering people in research, mostly on a temporary basis, whom they call ‘Minds’ to work together with the company staff any time they need to work on a research project.
Resource-based View (RBV): RBV, Slack et al. (2009, pp. 19–22) argue, is the way an organisation inherits, acquires, or develops its operations resources over the long term as it will have significant impact on its strategic success. FreshMinds is known to recruit quality staff and also gives adequate training to them as their major resource is being a knowledge-based firm, which has them named amongst the Best 100 SMEs to work for in the UK (Times, 2010).
Operations Contributions (Hayes and Wheelwright Model)
The Hayes and Wheelwright model as explained by Slack et al. (2009, pp.19–22) traces the movement of a company’s operations from a largely negative role in stage 1 all the way to an excellent role in stage 4. The stages are: Stage 1) Internal Neutrality, Stage 2) External Neutrality, Stage 3) Internally Supportive and Stage 4) Externally Supportive. Kleindorfer et al. (2005) reported that the model has been further developed by Wheelwright and Bowen (1996) who say the four stages progress from ”internally neutral” (catch-up or reactive mode) to ”externally neutral” (matching but not exceeding industry practice and standards) to ”internally supportive” (setting priorities to support the business strategy) to ”externally supportive” (providing externally recognised superior operational capabilities for competitive advantage). In light of all these, FreshMinds as a company has gone beyond the first two stages of the model as it isn’t playing catch-up in the market research industry, nor are they just matching industry standards. This can be judged by the number of awards and recognition the firm has won and by the numerous companies they have as clients. Their stage of operational contribution would be at the third and fourth stage, whereby they have set priorities to support their business strategy with the calibre and range of candidates they aim to be recruiting for companies through their firm FreshTalent and not just mass recruit like other recruitment firms. They also are trying to establish a competitive advantage over other competitors in their industry through the setting up of FreshNetworks, an online social media agency which helps organisations connect with customers using social media and online communities.
It can be concluded that FreshMinds as an operation is affected by low volume, high variation and high visibility which leads to high operating costs, as explained by Slack et al. (2009, pp. 19–22) and would thus have cost as a major problem with the operations of the company. Its quality as a service operation cannot be fully measured due to variability in performance and customers being the only ones that can give their own perception of quality. However, their flexibility and effort to meet customers’ specific needs shows they would have a high level of quality judging by the numerous clients they work for. In terms of recommendations to be given to the firm, Boyer and Lewis (2002) report that a firm at times needs to make trade-offs whereby a company chooses for example between achieving low costs or high flexibility. FreshMinds as a firm should probably adopt a mass customisation approach as part of their operating strategy to help reduce their operating costs, this, as Slack et al. (2009, p. 47) explain, is to produce customised services for each individual manner but managing to produce them in high volume thereby driving down costs. They also need to increase their competitive advantage which Vonderembse and White (2004, p. 28) says can be done through delivery lead time on their services or market research reports which gives organisation an edge over the competition, and they can also achieve this through differentiation by providing uniqueness, low cost leadership in their sector and adequate response to market requirements, as argued by Heizer and Render (2006, p. 33).
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