Fundamentals of Operational Excellence

1. Integrate the way you manage to align the organization

Every organization depends on some division of responsibilities, which means it runs the risk of fragmentation. Regardless of how an organization is set up, there needs to be something that provides a common thread pulling everyone in the same direction. By integrating the systematic way in which the company is managed, Operationally Excellent companies ensure key decisions all support the same vision, goals and objectives. This is the idea behind their integrated management systems.

2. Design for agility

Coordination, alignment and consistency can often come at the expense of speed. With the pace of change and increased uncertainty facing most companies today, a key competitive advantage is the ability to retain consistency even through rapid strategic redirection. This requires being deliberate and selective in how processes get locked in by standards, procedures, or even technology. Think of it as creating organizational “muscle memory” around the processes that shouldn’t change, to allow faster decisions and changes when needed.

3. Customize for your needs

One of the most common mistakes we encounter is adopting systems designed for other organizations as a pseudo bolt-on package, especially when it comes to management systems for Operational Excellence. Whether it’s adopting a system from one of many international standards organizations, or from within the industry, this shortcut often creates more issues than it solves. This approach typically fails because it ignores what actually makes any system effective. Like an iceberg, an effective system is sustained by the parts you cannot see or copy. The most successful Operational Excellence programs are built by the people it is intended for.

4. Use a process-based decision-making framework

Every company makes good and bad decisions from time to time, but consistently making good decisions requires decision discipline. A process-based decision framework helps remove bias and leverages information from previous assumptions to improve future decisions. When many companies hear about process-based decision making, however, they picture how decisions are made within their value-chain processes. Operationally Excellent companies also apply a process-based approach to the practices that manage their value chain. This is a very important distinction that This not only improves decision making, but also allows clearer ownership and accountability across interrelated groups.

5. Keep it simple

Simple systems are more likely to be used, which makes them more likely to be refined and improved. Overly complex systems, however, tend to overpromise and under-deliver. Think about this on the micro scale of a procedure for a single task. Procedures that are overly wordy and complex are usually, for the most part, ignored. The same holds true on a macro scale for complex processes, reporting structures and systems.

6. Technology is adapted, not adopted

Technology is an amazing tool, but it’s a double-edged sword that depends on the right conditions and use to function correctly. Operationally Excellent companies use technology in amazing ways, but a key difference is in the role that technology plays. They usually adopt technology as a piece of a bigger solution to a well-defined business need or risk. This broadens the focus from the technology to include systemic issues that may be holding current technology back. Their approach focuses more on internal adaptation to enable and maximize the value of technology than simply adopting more of it.

7. Establish clear ownership and accountability

Imagine this scenario. During an NFL game, the quarterback brings the team together in a huddle, utters out a play, and then, instead of proceeding with the play he goes around the circle asking for the opinion and buy-in of every player. This scenario plays out every day across companies where unclear ownership is compensated for by consensus. Effective teams work together, but they don’t all play the same role. In effective organizations, individuals all know the overall objectives and their individual role in achieving it.

8. Establish governance, but at the right levels of the organization

The need for effective governance is a given, but effective governance looks different for different companies and situations. If you think about governance from the lens of decision making, the governance placed over any given decision needs to be appropriate for the potential risk along with the level of urgency. Also, escalation does not always equate to mitigation for a high-risk decision. It’s not uncommon for front-line leaders to have more accurate and timely information than those a few organizational levels above them.

9. Develop a cohesive culture

Operationally Excellent companies value their culture as a competitive advantage. They recognize that most competitive advantages can be copied and are short-lived, but culture is a primary source of sustained advantage. This is why OE companies protect their culture; they keep a close eye on it and continuously reinforce it. Their culture is embedded within many processes like they way they plan, the way they evaluate potential employees, and their processes for accountability. They also work on it to make sure it is still right for them, particularly as their strategy and operating models change.

10. Emphasize who the system is meant for

Emphasize who the system is meant for

This last one is one of the most important. Operational Excellence, and the management system(s) and culture associated with it, are often seen as tools for managing the front-line towards better performance. People see the standards and procedures and view them as a way to keep their people in check. Operational Excellence requires leadership by example. It will not work if leaders expect everyone else to follow the system, but not themselves.