Management-Driven Firm Expansion
RCTReview
Poor management limits the effective span of executive control, preventing manufacturing firms from opening new factories without suffering severe operational breakdowns.
Picture this
Imagine a chef running a single small diner who personally checks every dish before it leaves the kitchen. If the chef opens a second diner across town without written recipes or trained head cooks, food quality plummets because the chef cannot be in two places at once. Standardizing recipes and training line managers allows the chef to open multiple successful diner locations while maintaining quality from a distance.
What the evidence says
Treatment firms that adopted modern management practices successfully opened more production plants in the three years following the start of the experiment than comparison firms.
- Who was studied
- N = 17 large manufacturing textile firms (comprising 28 factory plants) located in Mumbai, India, averaging 270 human employees, US$13 million in assets, and US$7.5 million in annual sales per firm.
- How
- Randomized Controlled Trial (RCT) evaluating a 3-phase consulting intervention and tracking multi-plant expansion over a 3-year follow-up period.
What to do
Implement standardized operational reporting protocols across core facilities to establish managerial delegation capacity prior to launching new production sites.
From the source
"Better management also allowed treatment firms to open more production plants in the three years following the start of the experiment than comparison firms."
Increasing_Firm_Productivity_through_Management_Consulting_Services.pdf