~A company can seize extra-ordinary opportunities only if it is very good at the ordinary operations. – Marcel Telles~
Top-line (Revenue) and bottom-line (Profit) growth are the two priorities that consistently show up in all reports on 2012 business trends. So, how do you ensure that your profits are growing while staying focused on achieving revenue growth? This is where excellence in business operations becomes critical. Operational Excellence is a philosophy of leadership, teamwork and problem solving resulting in continuous improvement throughout the organization by focusing on the needs of the customer, empowering employees, and optimizing existing activities in the process (From Wiki). When people, processes and systems in a business are operating at 100% efficiency and productivity, excellence becomes a given and business goals and priorities no longer remain a wish-list.
In an ideal world, this should be an easy to achieve state – after all why would anyone not want their organization to succeed or why would systems and process not work at 100% efficiency? I have written about how business operations can drive strategy to implementation in earlier posts. Today’s post is focused on the barriers within the organization that limit companies from achieving operational excellence:
Barrier # 1 – Organizational Silos (or Lack of Collaboration): Continuous improvement can only occur and be sustainable if there is a well-coordinated exercise that combines discrete steps into a combined effort. This is very difficult to do if each function in an organization acts independently and does not take into account how and where other functions can contribute to their improvement plans. Duplicate efforts, battles for credit and “left hand does not know what right hand is doing” scenarios become common-place leading to confusion and counterproductive results. If only everyone could sit together and collaborate to build and act on one plan that has a common goal and clear accountability for the steps necessary to achieve that, operational strategies would be so much easier to execute.
Barrier # 2 – Lack of Granular Information: As Sir Arthur C, Clarke said, it is vital to remember that information — in the sense of raw data — is not knowledge, that knowledge is not wisdom, and that wisdom is not foresight. But information is the first essential step to all of these. Financial systems crunch revenues and costs into categories that work well for financial reporting but are not granular enough for effective operations management. Not knowing what you don’t know is a big barrier to do any kind of realistic performance management. Multiple data sources and non-transparency in the sharing of information lead to conflicting information and thus to incorrect planning. A year-long data and knowledge management strategy is a must for the successful creation of any plan that depends on trends and analysis.
Barrier #3 – Not enough Senior Management Commitment and Buy –In: This is one area that needs the full support of senior management in terms of consistency in direction setting and the will to enforce the much needed discipline. The functions are usually not well-aligned to the overall business goals – for example, sales runs after revenue growth and does not care about profitable growth, finance pushes for bottom-line at the cost of top line improvement, delivery gives meeting milestones priority over costs. The message from the powers above on the business priorities needs to be loud and clear and consistent throughout the organization to create a culture where responsibility for performance is pervasive, accountable, and aligned.
Barrier #4 – Poor Planning for Success: Flawed processes for the basic building blocks of planning, budgeting and forecasting throws the entire year out of balance. Too often, these processes are executed in a top-down manner with no tying-in of the strategic goals to the execution steps. People lose focus and direction when they can’t envisage exactly how they are contributing to the high level goals. Whether it be an annual or a quarterly exercise, clear guidelines for planning and execution of the plans goes a long way to ensure that you retain sufficient control over where and how operations needs to focus on during the period to meet the business goals.
Barrier #5 – Outdated Systems and Technology: Legacy performance management systems and spreadsheet-based processes bog down managers in endless detail and eat up large amounts of their time trying to shuffle between systems and sheets and integrate the output of multiple systems. They spend 80% of time getting the systems to work for them and 20% of time on actually executing on the information (Pareto at work again). This is a huge pain point, and one that champions of business performance management (BPM) initiatives often target first. Getting your technology updated to best support your business objectives is a good investment and worth every penny in the long run – as it frees up your resources to spend more time on analysis and execution.
That said, these barriers are not ones that cannot be overcome with a little bit of focus and a lot of effort. With the right tools in place supported by smart people, realistic planning, and the desire to catalyze positive change across the organization, it is indeed possible to make significant improvements to accelerate the journey towards operational excellence.
I would love to hear back from you on your experiences with performance initiatives? What worked and what did not? What were the barriers that you faced in implementing operational strategies?