Operational Excellence

I don’t know of one company with the goal of operational poor performance. Every company wants to achieve operational excellence, perform to its maximum capability and increase its profits.

However, in most cases companies are not performing a maximum performance levels.

Achieving operational excellence requires first, creating the environment for performing at a maximum level, then maintaining operational excellence through change as time and events progress.

 

Every company is unique and will see unexpected challenges. How it is organized will set the course for how the company responds to these challenges, and how the company chooses to respond to events can be a large factor to its competitive advantage. Planning is vital, but the ability to adjust to these changes is just as important.

Every aspect of your business contributes to the operational excellence of your company.

Everyone in your organization needs continual motivation and coordination to reach operational excellence.

This is the first in a series of articles covering aspects contributing to operational excellence and will address organizational factors contributing or detracting from obtaining the maximum performance you seek.

An organization is a clear, non-conflicting authority relationship between positions, which have assigned tasks to achieve your corporate objectives. A full understanding of your company’s goals and objectives is necessary to identify the specific responsibilities involved. Typically you will have a mission statement or company goals stating what the purpose and objective of the company are.

These will need to be broken down into functions required to carry out the stated purpose and achieve the desired performance level. Things like finance, accounting, human resources, procurement, facilities, information systems, contracts, legal, sales and marketing, and operations may form some of the basic functions required to meet your goals and objectives.

These in turn should be broken down into lower level functions to ensure comprehensive coverage of the functions (actions) to be performed, tools and processes required, and skills needed. All of this work will feed the development of an organization structure which should represent all of the functions needed to accomplish your objectives, and the positions within your company.

The delegation of authority to these positions and what that authority allows them to do is key to a successful organization. Having the appropriate authority, and accountability, over budget, personnel, and direction at each level will lead to fast and efficient communications and decision implemented close to the problem.

How do you know if you have the appropriate delegation of authority? A proactive assessment of your organization to improve performance or a diagnosis after an issue arises, can provide insight into organizational factors that lead to improved long term performance.

An assessment of your company’s organization can be made to determine what the intended delegation of authority is compared to how the organization functions, and what the people in your organization perceive their authority to be. Analysis will show where there are gaps or significant overlaps in delegated authority, where people misinterpret their level of authority, and where people are not being held accountable.

All of which when corrected can help achieve operational excellence for your organization.

Also, when problems or issues arise from either conflicting decisions or perceived authority, or no decision being made, a diagnosis and assessment may lead to highlighting larger organizational issues.

EXAMPLE: Company J is an engineering company that provides both engineering services and design, development, and manufacture of complex systems. Company J organized itself as a matrix organization where section managers have responsibility for personnel assignments, work quality, training, and promotions.

The company had a few large long term projects to design, develop and deliver hardware. The projects were having trouble meeting schedules, budgets, and maintaining personnel key to the projects. The reason for this, was that, in this organization, the section managers had the authority to remove personnel from the projects based on their individual priorities, which did not align with the project’s priorities. They also had influence over not only how personnel performed their work but what they should be doing to support the projects, which sometimes conflicted with project direction.

The section managers had no accountability for the success or failure of the project. This resulted in key project personnel being removed from the project on short notice and conflicting direction to project personnel. Lack of authority over resources made executing these projects to plan difficult for the project managers. The project managers did not have the authority to complete their job successfully, and the section managers had too much authority over the project execution without accountability for project success.

A restructuring of the organization and re-alignment of the delegated authority provided a solution to improve the performance of this company in executing its projects.

Organizational Change Needed for Operational Excellence

Organizations operate to effectively and efficiently produce the products and services that achieve the organizations goals and meets the key stakeholder’s expectations.

Organizations develop strategic plans to help guide the organization in meeting its objectives and may include integration of new technologies, implementation of tools, development of new processes, modifications to existing processes, or even acquisitions.

Your organization should have, or should develop, stable and predictable work processes to ensure a consistent performance of your organization. Inconsistent processes will usually show themselves in inconsistent and substandard performance within your organization.

It may not be readily apparent what the root cause of the variation is, but with effort focused on solving the issue, and analyses of the processes in work, you can find and resolve inconsistencies in performance. When assessing the work processes that you use in accomplishing your job, it is very helpful to identify core processes which have the largest impact on your performance so your resources will be spent solving the issues that have the largest impact.

As time goes by, your current processes and tools may become less efficient relative to your competition due to changing business environment, technological improvements, or complacency with familiar well used processes and tools. In order to maintain or regain operational excellence, the process and tools used should be assessed regularly so that new processes and innovative ideas and tools can be incorporated when appropriate.

Improving your organization’s performance through continuous incremental steps or through a step change by introducing new technologies, automation, or acquiring another company requires leadership and a staff with a culture for making positive changes.

The people within you organization require leadership and an environment that supports and promotes a culture that leads to meeting company goals in continuous improvement. Once there is a strategy and clear vision for your organization’s goals, communication to all, along with appropriate actions, must support this culture.

How are opportunities for improvement or significant problems or issues dealt with in your company? In my experience, most companies are interested in opportunities for improvement and do a pretty good job of encouraging people, but there are companies who have done things one way for a long time and are really not interested in change. This is a company decision, usually based on a long standing company culture, but it is worth assessing the value of potential opportunities.

When problems occur, how the leadership responds will define either a culture ranging from solving problems to hiding problems. Problems no matter how costly will usually point to a problem in the organization and/or work processes and provide an opportunity to fix the problem and provide a learning experience for individuals in the organization.

As with delegation of authority, problem resolution should also be delegated to the appropriate level to facilitate faster resolution of the problem(s). If problems reoccur, then it may require organizational changes to resolve the problem.

Communication is necessary from leadership to promote an environment and culture of change and improvement, but communication across the organization is important for collaboration, change management, and implementation of lessons learned. Participation by stakeholders within the organization, supporting departments, and external resources early in a process provides an opportunity for buy in and participation in planning activities leading to better estimates of schedule, budgets, and resources required.

It also provides for a smoother integration and higher performance during subsequent execution of the work. Also, when implementing major changes to your operations, working with your organization’s stakeholders early and regularly provides a buy-in and support to the change.

Another area of communication within an organization that is valuable is the collection and dissemination of lessons learned. Documentation of solutions to prior problems encountered provides a database of information that can be used to help reduce the reoccurrence of the same problem. Disseminating the information and using it while planning new work is extremely useful but not always straightforward.

When lessons learned are held with the local expert or held by different people in different places, there is a risk of losing information if the wrong person decides to leave. It takes time and effort to develop, maintain, and develop a process for dissemination of lessons learned, but is a valuable tool in achieving organizational excellence.

The structure and function of your organization has an impact on operational excellence and can and should be assessed to look for improvements.

The allocation of authority should be clear and non-conflicting and lead to quick decisions and solutions close to the problem. Work processes should produce consistent results, and if an organization has created a culture of continuous improvement, they should improve over time.

Organizational leadership should promote an environment of continuous improvement and a culture of timely communication and successful problem resolution. Maintaining and promoting the talent within your organization should support your company’s goals and continuous improvement culture. Collaboration and communication between groups within your organization should be conducted early and often so that major changes have a smoother implementation, and you will achieve better overall performance across your organization.

A high performing organization provides benefits across your company in all of the things that you do. It is worth investing time and effort to assess your organization’s structure and function to improve performance.

 

Guest blogger Paul Royall provides consulting and support services that focus on helping companies improve performance in Operations and Project Execution. He is an experienced manager planning and executing large complex systems for the military and NASA for over 25 years. He is also an entrepreneur with experience with startup ventures and development of business operations.  A graduate of Texas A&M with an Aerospace Engineering degree, he continued his education with graduate studies in business management and training in project management and systems engineering.  Click here to learn more about him and his company RDMC Group.