Editor’s Note: Roger Price is the CEO of Phase 5 Group (P5G) and the visionary behind EON, the world’s first Operational Excellence management solution. P5G is also a partner and author on Flevy. They published a comprehensive guide on Operational Excellence Design Process.
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Operational Excellence (OpEx) isn’t just a “nice to have,” it’s a core part of how modern organizations remain competitive and cost-effective. At its core, OpEx is the execution of your business strategy with greater consistency and efficiency than the competition. The role of the OpEx team is to facilitate the implementation of the behaviors and work process required to achieve what the business requires to be successful.
That being said, it’s important to establish clear goals for the implementation of OpEx so that the organization can fairly judge whether its investment in OpEx is generating the desired return. Generally speaking, OpEx goals can be divided into three broad categories:
- Financial. These goals are focused on the monetary aspects of the business—such as reducing costs or improving revenues.
- Operational. These goals tend to focus on improving productivity or quality so as to differentiate the company from its competitors.
- Cultural/Workforce. These goals are designed to improve the workforce’s capabilities, commitment, and discretionary effort.
Among each of these categories, it is vital for the business to ensure that individual goals and associated metrics align with the business’ needs and overall strategy—not to mention the OpEx vision, strategy, and resource model.
Here are a few examples of operational excellence goals that your organization can get behind to improve the execution of its overall business strategy:
Some key examples of financial OpEx goals include:
- Greater Sales. Most businesses desire to increase their sales volume in some way. However, the organization can only increase sales volume if it can reliably meet the demand. From an OpEx perspective, this means finding opportunity to release resident capacity in the business that isn’t being utilized because of waste, inefficiency, or lack of capability. In manufacturing, this phenomenon is sometimes referred to as the “hidden factory” but it plays out in service-based organizations as well. Unleashing resident capacity is often the key to sustainable sales growth.
- Improved Cost Competitiveness. The ability to differentiate based on cost is critical to the success of most organizations, but particularly those that operate in mature markets where the customer has many viable alternatives. OpEx can play a huge role in driving cost out of the business.
- Improved Cash Position. A sometimes overlooked financial benefit from OpEx lies in the amount of capital that can be made available to drive business growth. For example, if the organization is able to avoid or delay a major capital expenditure (e.g., new manufacturing process, patient care facility, service center, etc.) because of improved productivity within its existing assets, that capital is now available to be used in other ways that could be more beneficial to the business. The same is true if the organization is able to increase inventory turns or shorten the cash-to-cash cycle time.
Some operational goals that can be tied to your OpEx efforts include:
- Improved Safety Performance. While many organizations manage the implementation of their workplace safety program separate from OpEx, the reality is that no organization can be truly operationally excellent if it isn’t operating safely. Therefore, any structured effort to improve operations should at a minimum not interject risk into the organization’s efforts to facilitate proper workplace safety. Ideally though, OpEx will reinforce the importance of proper safety practices and contribute to a safer work environment through hazard identification & risk reduction and employee competency development.
- Increased Value Stream Productivity. A common OpEx goal is to increase the productivity of a given value stream within the organization. The benefits of increased productivity can manifest as increased throughput, improved labor efficiency, or enhanced product/service flexibility (i.e., the ability to produce a wider array of products or provide a more diverse set of services).
- Improved Product/Service Quality. Improving the quality of your organization’s products and services can improve customer retention and brand loyalty metrics. And for certain industries, such as food & beverage or patient care, there are either significant regulatory or customer/patient consequences associated with sub-par product or service quality that require a persistent focus on continuous improvement.
Cultural and Workforce OpEx Goals
Some core cultural and workforce-oriented goals associated with OpEx may include:
- Increased Skills Attainment. Knowledgeable employees are more valuable and productive employees. Embedding new skills, such as structured problem solving, leader standard work, and performance coaching,is a common goal for many companies striving to achieve operational excellence.
- Increased Employee Involvement in Continuous Improvement Activities. Ultimately, the long-term success of any structured OpEx effort is tied to the organization’s ability to drive line ownership and accountability for continuous improvement. For this reason, setting goals for employee involvement in continuous improvement activities might make sense to ensure that the organization is being intentional about driving line that much needed line ownership.
- Improved Employee Satisfaction with Their Job and the Organization. Job satisfaction can have a significant effect on the productivity of employees in any organization. Employees with high job satisfaction are also more likely to remain with the organization rather than seek new employment opportunities elsewhere. OpEx can facilitate increased employee satisfaction by partnering with them to address the sources of waste and inefficiency that negatively affect their work environment or change the behaviors that create friction within and across work teams.
Aligning OpEx Goals to the Organization’s Strategy
The sample goals listed above are by definition generic in nature, but in order for OpEx to make the most positive impact on your organization, its goals and objectives need to be aligned to the organization’s overall business strategy.
One reason is that any time an organization seeks to change behaviors, work practices, or mindsets there will always be some resistance to that change. A thoughtful, deliberate, and aligned business approach to introducing the changes needed to meet OpEx goals is needed to minimize change resistance within the organization.
A key way to make sure that OpEx implementation strategies are aligned with your organization’s business strategy is to ask a few basic questions, including:
- What is the long-term vision for OpEx within the organization?
- How can this vision dovetail with the organization’s business vision/strategy?
- What metrics should be used to measure the impact of OpEx goals on the organization?
- Does the resource model and budget for OpEx align with the business’ vision?
- How will we deploy OpEx into the organization?
- What are the key behaviors and mindsets that need to change in the leadership team to sustain the work moving forward?
By answering these key questions, you can start adjusting your operational excellence implementation strategy to align it with your business’ current situation and future goals—helping you know “where you are” and get to where you need to be.
Implementing OpEx to Drive Goal Achievement
Once you align your organization’s OpEx goals and objectives to the business strategy, it’s time to start the implementation process. However, there are some “evergreen” barriers to implementation that need to be overcome. The most important barrier to OpEx implementation is making sure that everyone can understand and follow the steps necessary to achieve OpEx implementation.
To overcome this barrier, you need to translate the critical concepts and tools of OpEx into a practical and logical sequence of activities that can be understood and implemented by others in the organization. In other words, you need to provide a set of easy-to-understand instructions and tools that others can use to manage their work and meet expectations—this is something that EON refers to as a playbook.
Playbooks are fully-developed models—consisting of a series of implementation toolkits that fully address a specific OpEx-related topic—that OpEx teams and leaders in an organization can use to better manage their work.
Some key aspects of EON’s ready-made playbooks include:
- Simple self-assessment questions;
- Easy-to-read practical descriptions of roles and goals; and
- Tools, templates, training modules, and other resources related to the OpEx topic.
These playbooks provide practical guidance that helps teams implement important concepts, methods, and tools of OpEx so they can work side by side with your operational excellence team.
If you need help implementing or managing your organization’s OpEx goals, contact EON today! Our OpEx platform is designed from the ground up to help you manage all aspects of your operational excellence implementation so you can:
- Deploy strategic objectives;
- Conduct project portfolio and lifecycle management;
- Implement standard business processes;
- Measure performance; and
- Track improvement.
This is all accomplished on a platform that is vastly simpler and more efficient than attempting to manage OpEx through Excel or PowerPoint. With hundreds of assessment criteria on a platform that creates visibility and drives accountability, EON is the perfect solution to your OpEx management needs!