The impact of management techniques on performances in technology-based firms

The study begins by examining the degree of profitability of technology-based firms. The results indicate that annual gross profit varies from breakeven to as much as £90,000 per full time employee. Two distinct clusters were identified; high performers (23 firms) achieved profit levels per FTE ranging from £40,000 to £90,000) compared with profits per FTE for low performers (194 firms) ranging from break even to £35,000. In order to ascertain why some firms achieved higher profitability compared with others, we compared and contrasted the following aspects in both groups; costs, employment patterns and the use of efficiency/quality techniques. The results indicate that low performing firms spend significantly more proportionately on direct labour, whilst high performing groups spend more on indirect labour. High performing firms in the study maintained lower staffing numbers. Arguably, they have a core full time staff, and buy in expertise when required. Next, we examined the use of management techniques in technology-based firms. The literature to date indicates that the success rate of these initiatives is a mixed picture. Indeed, some analysts go so far as to say that such initiatives are a waste of time and should be discontinued. This study found no significant correlation between the use of techniques and profitability and in fact, found that high achieving companies tended to be less interested in these techniques than those with a lower gross profit per employee. However, we found distinct patterns in the drivers of the introduction of such techniques in manufacturing firms as well as the main obstacles to their introduction. © 2003 Elsevier Ltd. All rights reserved