Operational Excellence

Operational Excellence refers to a business model in which the management successfully plans and achieves a work environment that ensures that there is maximum output with minimum cost and wastage. Continuous positive contributions and improvement at all levels help the business move forward.

The employees are empowered and encouraged to come up with ideas and suggestions that will bring about continuous improvement in the process. This increases efficiency and promotes healthy competition that helps the company not only sustain but also expand. It is meant for both internal and external transformation that will drive the business toward the achievement of goals.

• Operational excellence is a business model that helps companies achieve their goals with optimum use of resources and minimum cost.
• It ensures the returns meet expectations and customers as well as employees are satisfied.
• It guides the business towards a better and more productive future, with flexibility in the adoption of new but varied opportunities.
• It encourages the expression of ideas and positive transformation, both internally and externally, which helps the company to not only sustain but thrive in the competitive business world at the global level.

The process of operational excellence explains how the different activities of the business are well-designed and coordinated to achieve objectives by using the available resources and ensuring control over cost. It steers the business toward a path that leads to value creation and a boost in sales, revenue, and profit.

The operational excellence model allows companies to meet their objective in various ways, like delivering the best quality of products and services, innovation and technological improvement, streamlining operational processes to achieve better coordination among departments, maintaining competitive prices in the market, promoting training and development of employees and encouraging them to contribute ideas and suggestions, eliminating processes that are not adding value, etc.

An operational excellence manager empowers employees to stay engaged in their work through continuous improvement. There is an atmosphere of flexibility to any change in situation. Since the process flow becomes smooth, there is less resistance and friction. Thus, the company can achieve maximum return on investment within a very short period.

Both the management and employees dedicate themselves to fulfilling customer demand by providing them with better experience related to products and services. New and better strategies are implemented that increase brand name and business value in the market, making it the first choice for consumers among all competitors. The model also promotes employee satisfaction to maintain a good work culture within the company.

Now let us study the five fundamental pillars of the operational excellence model, as given below:

Structure

It is essential to have a planned organizational structure that will consist of resources that vary in their efficiency level, goals, and interests. However, the process and the operational excellence manager should be such that their personal goals should not come before the objective of the business, and there should be enough room to use their interest and strength within the jobs to achieve maximum output. The members of the team should be able to turn their weaknesses into strengths and coordinate with each other within the diversified business environment.

People

There is no argument related to the fact that human resources is the most essential part of an entity. They should be capable and trained enough to handle any crisis so that the business does not go down. They should be able to identify opportunities and use them strategically for the betterment of operations. Each member of the team should cooperate to achieve the goal.

Vision

An entity must have a clear vision regarding where it wants to be a few years down the line and work towards it. The management should arrange for resources that can meet the objectives within the set period. It is equally important to understand the ultimate stakeholders of the business and excel by meeting their demands. 

Tools

Many things come under the category of tools in an operational excellence strategy, like the hardware and software in the technological field, the arrangement of the workspaces, the facilities given to employees, the marketing process and standard operational process, etc.

Principles

There are various principles that a company may follow to ensure that the work process is smooth and efficient. The management must shape the vision and values for the future that can be achieved through continuous effort and a healthy work culture. There should be a disciplined approach and a mentality to strive hard to achieve the target. 

It is possible to achieve operational excellence strategy through various processes. The steps are as given below:

Step #1 - A growth mindset

The most crucial step is to have a mindset that encourages growth and the generation of ideas for business development. A positive mindset will create the urge to achieve excellence.

Step #2 - Strategic decision making

The management should have the efficiency and skill to make strategic decisions that will guide the business toward a better future. For this, it is necessary to have the required knowledge and experience.

Step #3 - Invest in People

The next in operational excellence framework is to invest in human resources by providing training for their growth and knowledge. This will enhance their efficiency and understanding levels and lead to more significant contributions.

Step #4 - Track Results

Result tracking is a must, which helps to understand the effects of policy and procedure implementation. Any deviation can be identified and corrected so that there is minimum loss and wastage.

Step #5 - Gather feedback

Next comes customer and stakeholder feedback, which is essential to understand what the level of consumer satisfaction is. If it does not reach the expected and planned mark, then it is necessary to point out the areas where the business is lagging.

Step #6 - Open communication

The final step is a system that encourages open communication within the team and entity. This will encourage the expression of ideas and communication of any complaints and grievances that need immediate attention.

Let us understand the concept with the help of some examples.

Example #1

We assume ABC Ltd is a company that assembles computer parts and delivers them to customers. The company has designed the process and trained resources in such a way that there is continuous monitoring of every step to ensure every employee does their part. Periodic consumer surveys are done to check satisfaction levels, and surprise checks are conducted regarding the supply chain to keep track of any loopholes in the process. In this way, the company achieves operational excellence.

Example #2

According to a report published by McKinsey and Company, the new generation is more inclined to introduce an organizational process that unites all departments towards a common goal, not just do work in an organized manner. Due to very rapid changes in the business landscape, companies are becoming very smart in adopting new technology that will create jobs, increase sales, and create a mindset and daily practice to achieve the organizational objective. This will also increase both employee and customer satisfaction.

Some steps can be taken to measure the effectiveness of the concept of operational excellence framework.

Step #1 - Employee Satisfaction

Employee satisfaction is of utmost importance because it is the employees of the organization who will understand the process of excellence in operation. Therefore, they should not have any grievances.

Step #2 - Efficiency levels

There should be a rise in efficiency levels through minimization of cost, waste reduction, and meeting targets within or before set deadlines.

Step #3 - Meeting deadlines

Meeting deadlines is a very effective way of measuring whether the company can meet the criteria set for excellence and satisfaction.

Step #4 - Cost control

It is equally necessary to keep track of the cost levels, and the focus should be on minimizing it. In case it increases, it is time to scrutinize the process and identify loopholes.

Step #5 - Crossing benchmark 

Finally, the management should note whether the business is able not only to meet but also cross the benchmark related to sales, revenue, or profits. This will serve as a vast criterion to measure whether the strategies implemented are working or not.

Some practical steps for improving the excellence process are as follows:

Step #1 – Stakeholder and employee satisfaction

In this step, the management will have to measure the stakeholder and employee satisfaction levels through tracking revenue and sales growth, rise in customer base, employee behavior, conducting surveys, etc. This will help to understand the satisfaction levels and take action accordingly.

Step #2 – Comparative analysis

A comparison and analysis of information, like financial data, survey results, etc., should be done to identify deviations and implement necessary control. This will stop the repetition of mistakes and improve efficiency.

Step #3 – Implementation of Automation tools

Automation tools using the latest technology are a great way to achieve the objective within a shorter period and with minimum room for error. Therefore, companies should concentrate on the implementation of automation tools.

Some benefits of the concept are given below:

• Better employee management – The concept is based on the training and development of employees within the organization to contribute their best and work towards the achievement of the common objective of the business. Therefore, it encourages employee betterment and management.
• Process optimization – An organization can work towards its fullest capacity only if the operational processes are adequately streamlined with minimum resistance and loopholes. Every step of each departmental process should be optimized so that the resources are utilized to their fullest.
• Minimization of risk – If any process is smooth and works with minimum error, it is evident that the risk will also be minimized, leading to good returns and customer satisfaction. A robust operational process ensures a strong foundation that is difficult to be toppled during any crisis.
• Accountability – It creates accountability among people working within the organization because each one is expected to contribute their best and use their skills and experience in their job, which compels them to take responsibility for their actions and be answerable in case of any discrepancy.
• Encouragement of ideas – The employees working within the entity are encouraged to come up with new ideas and suggestions that will help in the growth and expansion of the business, which is very important in the ever-changing industrial landscape.
• Consumer satisfaction – Any business should have the main objective of customer satisfaction because this is where all the sales and revenue will come from and help the company grow. This model encourages the highest level of customer satisfaction through meeting demands on time and as per requirement.
• Brand creation – Operational excellence is a tool for a good brand name that is essential to sustain in the market among the tough competition and compel customers to come back again and again.
• Revenue growth – A streamlined and flexible operational procedure will lead the organization toward a healthy and sustainable future that will have good sales and revenue growth through customer satisfaction, returns from investment, and expansion.

When it comes to excellence, the performance can be assessed from different perspectives, which further leads to types of excellence models. These models or approaches include operational, business, and process excellence models. Let us now understand how they differ from each other.

This article has been a guide to what is Operational Excellence. We explain its examples, pillars, how to achieve, measure, and improve it, and its benefits. You may also find some useful articles here –

• Operational Leadership
• Operational Efficiency
• Operational Effectiveness