Operational excellence is a path that a company takes towards significant and high-impact improvement. Although it may seem difficult to work towards in many organizations, with the right set of tools, it is more than feasible than one might think. At the core, engaged employees are critical to any “excellence” initiative and they must be involved in its development as well as execution.
The organizational persistence required to achieve operational excellence results should not be underestimated, but the value that can be accomplished may set a company apart from its competition for years to come. Having a strong culture and mindset is foundational to all operational excellence endeavors.
What Are the Basic Elements of Operational Excellence?
In essence, operational excellence is a combination of three major factors: increased customer satisfaction, empowered employees, and ongoing improvement of existing processes. By striving to excel at each of the factors, a company is more likely to stay on track with improvement initiatives. If necessary, change management and cultural readiness assessments can reveal gaps in culture that may need to be addressed before getting started.
When looking towards an operational excellence culture, frameworks and methodologies can certainly help. But special consideration needs to be given to additional challenges you might face when deploying new technology in support of operational improvements. The Harvard Business Review has a framework called DICE that will help you determine whether or not any kind of change will even be successful.
These factors include:
- Duration – The amount of time it takes for the changes to be completed or the amount of time between milestones for a longer time frame.
- Integrity – The ability of the project’s team to complete the desired organizational changes.
- Commitment – The commitment to make not only changes to the top management but also address any needed changes to the employees who are affected by the change with top management.
- Effort – The additional effort (in addition to the usual work) that the change(s) will demand of the affected employees.
From the perspective of looking at “excellence” models, companies will often build their own frameworks. However, there are others that leverage one of five popular methodologies:
- Lean manufacturing,
- Six Sigma,
- 5-S System.
Each methodology has a clear set of guidelines that help you on the way to attain desired results in your company. To understand what methodology is most suitable for your organization, you should set clear goals.
There are three types of operational goals to focus on:
- Operational-oriented goals
Workflow and task management are some of the most crucial parts of operational excellence, and setting goals in these areas is important. They focus on the productivity and collaboration of employees and the quality of output across teams, departments and the entire enterprise. The goals you set should be SMART (specific, measurable, achievable, relevant and timebound). Examples:
- Implementing workflow automation to save X% of time on planning and monitoring processes within 3 months.
- Meet monthly deadlines and 24-hour escalation parameters for processing financial applications by October 31.
- Achieve 100% service level parameters in your financial services “Know Your Customer” onboarding activity for 98% of all new institutional clients.
- Financial-operational goals
As the name suggests, financial goals are aimed at your company’s budget and other relevant financial performance. The objective is to optimize both the top line and the bottom line so that you can make more strategic investments in your tools and processes.
- Increase sales by 10% by the end of the year.
- Reduce operational costs by $10,000 by the end of February.
- Generate one l source of revenue that will bring in $500,000 by the end of Q2.
- People-oriented goals
Last but not least, you should add people-oriented goals to your plan. For your organization to work smoothly and prosper, you need to engage and empower employees. These goals are aimed at giving your employees tools to work better. This can include access to training that improves skills or software that ease the workload.
- Realize 98% employee satisfaction ratings by June 30th, along with 99% retention rates in all client-facing positions.
- Complete all employee onboarding activities within 30 days of the hire date, along with 95% completion of all required on-demand training modules.
- Launch a new employee engagement program by year-end with 90% attendance at all town hall meetings.
What Are Examples of Operational Excellence?
Below are some insights on companies that have leveraged a formal process improvement methodology to drive operational effectiveness. While we are not suggesting that any of these methodologies are needed to drive process change, creating a culture of change and setting a course with a foundational methodology has proven to be useful.
Methodology: Six Sigma
The engineers at Motorola were the first to introduce the Six Sigma methodology to the world. They came up with it in 1986 to enhance their products’ quality. The core of Six Sigma is to improve manufacturing and remove the causes that lead to defects in processes. As a result, Motorola managed to eliminate variation and achieve better quality, value, and customer satisfaction.
Methodology: Lean manufacturing
Although Dell is no longer in the spotlight, going back a couple of decades, it introduced an innovation that increased its sales. The Lean manufacturing methodology is based on increasing and delivering value to customers, and this is exactly what Dell did. The high-tech company established a direct-to-customer model of work, where customers could order a PC straight from their website in 1996.
Methodology: Six Sigma
When Jack Welch was the CEO of GE, he popularized the Six Sigma methodology. The methodology was at the very heart of the company. Welch made it obligatory to run training programs for anyone who was about to be promoted to a managerial position. Based on the methodology’s ideas, the company also created its own tool, the GE Workout, where challenges and opportunities were identified and discussed.
While use of Kanban boards is a more simplistic approach compared to some other methodologies, the Spotify operations teams uses this approach to manage workflows that are more project-based in nature. Their goal is to try to get as much time during a work focused on creativity than on many other activities. By noting tasks in one of 3 categories (To Do, Doing and Done), teams have found a way to collaborate more effectively.
The operational excellence methodology you choose will depend solely on your industry and needs. There is no one-fits-all approach, and there shouldn’t be if you plan to lead in your segment of the market. Operational excellence is a journey and one that may take years to master. Yet, that shouldn’t hold you back. There are a number of considerations as we’ve outlined but the key is to just get started. Workflows and processes almost always present an opportunity for improvement, and today current trends and industry challenges demand that a better way forward is required.