A Systematic Approach for Achieving and Maintaining Operations Excellence

We’re almost half-way through 2017. Are you working on your business or simply reacting to fires? Do you have a playbook for operations?

More than two-thirds of middle market companies (defined as annual revenue of $10 million to $1 billion) feel they “have trouble making improvements stick.” Based on experience and data (survey of 400 C-suite executives), The National Center for the Middle Market shows that companies do better, “when they approach their operations as systems, with parts or subsystems that can be fine-tuned both individually and in concert.”

Their guidance is simple:

1. Manage Operations through Governance of the following subsystems:
   • Strategic Alignment
   • People Development
   • Daily Management
   • Problem-Solving.
2. Stay Close to the Work through leaders (managers) who are “visible and engaged” to your operation, resulting in:
   • Faster problem-solving
   • Better understanding of customer needs.
3. Choose an Operations Method that Works by having a formal method that is comprehensive and systematic.
4. Share Your Strategy such that everyone’s work aligns with your mission and vision.

Each of the subsystems require attention individually and works in sync with the overall operations system:

Strategic Alignment guides employee action by setting priorities based on a clear understanding of the overall strategy. This starts from the top down and requires that leaders check in with employees to review priorities and challenge processes.

People Development enables employees to address customer needs in the operation by building their capabilities and skills. People must understand their roles and be able to perform them. The EOS (Entrepreneurial Operating System) Model sums it up this way: they get it (their role), they want it (they like and believe in what they are doing), and they have the capacity to do it. Once the people are in place, the key is building a learning organization (we will post more on this shortly).

Daily Management allows leaders to identify issues and/or gaps to get the right work done. The first step is to have visual controls to track progress and coordinate across functions. The second step is accountability. This requires knowing what each person is responsible for at any given time. The third step is “leader standard work” or “management by walking around”, which means routinely checking that the work is getting prioritized and completed.

Problem-Solving ensures that people can quickly address problems when they occur. This first requires having some system to report the ‘problem’ and then prioritize what to address first. In this process, it is critical to identify the Root Cause of the problem, a skill-set which may require training. Often, the solution may involve working across functions and levels within the organization (i.e., teamwork with transparency into roles and responsibilities).

Finally, operational excellence requires Measurement. In the survey, they identified the following metrics to judge operational excellence: Customer Satisfaction, Profit Margin Changes, Productivity Changes, Employee Satisfaction, and Employee Training Hours.

In conclusion, while middle market companies may struggle to make improvements stick and may be less inclined to formalize an operations method, they do have some advantages over larger companies. Typically, they have greater focus on customer satisfaction, and senior leadership is more involved in operations than at larger firms. Ultimately, good governance is the key to operational excellence. Know what your company is all about. Share that from the top down. Have a formal operations method and stay close to the work. Make sure your subsystems are in sync.

We encourage you to take the Operational Excellence Questionnaire at the end of the report.

Read the full report here.

Courtesy: National Center for the Middle Market