operational-excellence

An Introduc+on to

Opera+onal Excellence

“We are what we repeatedly do. Excellence, then, is not an act, but a habit.”

–Aristotle

Top 10 CEO Challenges & Priorities

E  E  E  E  E 

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Opera+onal Excellence – A Philosophy

A Philosophy: 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.

Opera+onal Excellence – An Approach A Value Stream Management Approach: Operational Excellence is when each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.

Opera+onal Excellence – A Model A Process Excellence Model: The Shingo Model The Shingo model is comprised of two elements: the house and the diamond.

The diamond represents the transformation process for embedding the principles of operational excellence into the organizational culture.

The house details the principles of operational excellence and the power of balancing effort across all the dimensions.

Opera+onal Excellence – A “Checklist” A “Checklist”: Oliver Wight Class A Checklist for Business Excellence There are nine chapters describing latest prac+cal and proven best prac+ces. Implementa+on follows the “Proven Path Methodology”.

These support five further chapters that address the prime processes in most organiza+ons: Products & Services, Demand, Supply Chain, Internal Supply, and External Sourcing.

The Oliver Wight Class A Checklist is aimed so that organiza+ons can see for themselves what "excellence" is and what they have to do to be excellent. Its scoring method allows organiza+ons to visualize and measure progress toward excellence in every part of the business.

The four priority chapters describing the processes and prac+ces that enable the whole business to be excellent: Ø  Strategic Planning Ø  Managing and Leading People Ø  Driving Business Improvement

Ø  Integrated Business Planning

Various approaches, frameworks and models exist that are presented under the term Opera+onal Excellence.

What is Opera+onal Excellence?

Opera+onal Excellence – A Defini+on A Business Strategy: In "The Discipline of Market Leaders“ (1995), Michael Treacy and Fred Wiersema describe three dis+nct value proposi+ons or disciplines: Product Leadership, Customer InImacy and OperaIonal Excellence.

Market leaders choose to excel in delivering extraordinary levels of one of these three value proposi+ons, while maintaining reasonable standards in the other disciplines.

Market leaders will not pursue a diffused business strategy across two or even all three disciplines, but will continually focus on their organizational design, processes, technology and competencies to improve the one particular value discipline that they want to provide to their Customers better than anyone else.

Organizations pursuing an Operational Excellence strategy, strive to deliver a combination of quality, price, and ease of purchase and service that no other organization in their market or industry can match.

What is Opera+onal Excellence? Achieving Opera+onal Excellence requires the successful implementa+on of a integrated Business ExecuIon System that effec+vely and seamlessly integrates the following four building blocks: Strategy Deployment, Performance Management, Process Excellence, and High Performance Work Teams.

Strategy or Policy Deployment is the process that aligns and links business strategy and execution.

Performance Management is the process that translates strategic initiatives into measurable objectives and goals.

Operational Excellence can be achieved and sustained with the right attitude, the right mindset, and the right competencies.

Well designed, efficient, and effective Management, Value Chain, and Support Processes are necessary to deliver world-class results.

Strategy Deployment

Performance Management

High Performance Work Teams

Process Excellence

Opera+onal Excellence Business Execu+on

System



Strategy Deployment



Process Excellence


System

“People and their managers are working so hard to be sure

things are done right, that they hardly have 9me to decide

if they are doing the right things.”

Stephen R. Covey

Opera+onal Excellence – Strategy Deployment

Ø  Only 5% of the workforce understands their company strategy.

Ø  Only 25% of managers have incen+ves linked to strategy.

Ø  60% of organiza+ons don’t link budgets to strategy.

Ø  86% of execu+ve teams spend less than one hour per month discussing strategy.

Source: Balanced Scorecard Collabora=ve

Strategy is an expression of what an organization intents to do to get from a current state to a future state. Strategy is often expressed in terms of a vision statement, objectives, goals, and initiatives.

Opera+onal Excellence – Strategy Deployment Process

Phase III – Strategic Vision Elements

Phase IV – Strategic Breakthrough Objectives

Phase II – Current State Analysis (CSA)

Phase I – Organize the Process

Phase V – Strategic Initiatives & Tactics

Phase VI – Strategy Implementation & Review


Once you have completed the strategic grid, go back and make sure everything fits with your overall strategy. A set of strategic grids should provide the strategic model for running the business, outlining the specifics of the strategy. All stakeholders should be able to look at the grids and follow the flow of the organization’s strategy.

Strategy Maps or Strategic Grids: Strategic Focus Area: Increase Shareholder Value

Financials Revenue Growth of 20% by 2014

Customers Acquire More Customers

Become the Price Leader

Internal Processes

Improve Opera+onal Efficiency

Cost Reduc+on Program

Knowledge Based System

Reduce Non-‐Core Ac+vi+es

Learning & Growth

Training – Lean Six Sigma Program

Database Network on Opera+onal Performance

Re-‐Align Organiza+on with Core

Competencies Dimen

sion

s or P

erspecIv

es


The Hoshin X-‐Matrix is a tool that visualizes an organiza+on’s

Ø  strategic objec+ves,

Ø  strategic ini+a+ves,

Ø  key performance indicators,

Ø  key projects & ac+on items, and

Ø  human resources requirements

in one simple matrix. The Hoshin X-Matrix enables an organization to easily review the alignment of its strategic objectives, strategic initiatives, key performance indicators, key action items and human resources.

The Hoshin X-Matrix, if used properly, improves the likelihood of a successful execution of the strategic plan.


7. …x 6. Initiate RFQ Process for Customer Service x x

x x 5. Implement reliability program for new products x x x xx x 4. Establish LSS Black Belt project for return drivers x x x x

x 3. Establish & train order-to-cash process team xx 2. Identify Lean Six Sigma consulting company x xx 1. Define Lean Six Sigma Program x x x

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x x Return Rate reduction from 15% to less than 8% x x x…

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Resource Planning

Operational Excellence Consulting Strategy Deployment Matrix 2012

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Strategic Objectives

Measures & Targets

Action Items

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Strategic Objectives

Organization’s Strategic

Objectives & Goals

Organization’s Key Performance Indicator (Balanced Scorecard)

Organization’s Strategic Initiatives &

Tactics

Organization’s Tactical Projects & Action

Items Organization’s Human Resource Allocation

Opera+onal Excellence – Strategy Deployment

“I sure wish I’d done a be1er job of communicating with GM people. I’d do that differently a second time around and make sure they understand and shared my vision for the company. Then they would know why I was tearing the place up, taking out whole divisions, changing our whole production stCDctDre . . . I never got this across.”

Roger Smith, CEO of General Motors (1981 - 1990)

Strategy Planning & Deployment – Resources

Ackoff, R.L. – A Concept of Corporate Planning (New York, New York: Wiley, 1970)

Collem, Joseph F. – A Field Guide to Focused Planning: Hoshin Kanri -‐ American Style (The Woodledge Group, 1995)

Cowley, Michael and Domb, Ellen – Beyond Strategic Vision: Effec=ve Corporate Ac=on with Hoshin Planning (Burlington, Massachuseos: Buoerworth-‐Heinemann, 1997)

Treacy, Michael and Wiersema, Fred -‐ The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market (New York, New York: HarperCollins Publishers, 1995)

To learn more about our proven OperaIonal Excellence Strategy Planning & Deployment SoluIon, review our “OperaIonal Excellence Strategy Planning and Deployment Training Module”.




Strategy Deployment



Process Excellence


System

“Tell me how you will measure me, and then I will tell you

how I will behave. If you measure me in an illogical way, don’t

complain about illogical behavior.”

Eli GoldraR – “The Goal”

Opera+onal Excellence – Performance Management

“Balanced Scorecards tell you the knowledge, skills and systems that your employees will need (lear:ing and g;owth) to innovate and build the right st;ategic capabilities and efficiencies (inter:al processes) that deliver specific value to the market (customer) which will eventAally lead to higher shareholder value (financial).”

“Having Trouble with Your Strategy? Then Map It.”

by Robert S. Kaplan and David P. Norton - Harvard Business Review

Ø  Help the management team focus on the execution of their business strategy

Ø  Focus and align an organization towards common goals and objectives Ø  Enable an organization to understand the relationship between measures

and performance Ø  Improve communication of organizational priorities across an organization Ø  Help employees to understand and focus on organizational priorities and

realize relevant results Ø  Reduce the number of metrics to the few vital key performance indicators Ø  Strengthen and formalizing the project selection process to focus on key

capabilities and enablers


Benefits of developing & deploying Balanced Scorecards in an organiza+on include:


FINANCIALSHow do you want to look to your shareholders? - Indicators focus on whether your strategic and operational plan contributes to your top-line, bottom-line and/or market share.

CUSTOMERSHow do you want to look to your Customers? - Indicators focus on the specific measures that matter the most to your Customers.

INTERNAL BUSINESS PROCESSESAt which internal processes and capabilities do you want to excel? - Indicators focus on internal operations that enable Customer satisfaction, growth and profitability.

LEARNING AND GROWTHWhat skills and competencies do you need to implement your strategic and operational plan? - Indicators focus on your organization’s ability to innovate, improve and execute.

Objectives Indicators Targets Projects




Vision &

Strategy

Opera+onal Excellence – Performance Management Process

Phase I -‐ Strategic FoundaIon Step 1: Strategic Alignment

Step 2: Key Strategic Focus Areas & Objec+ves Step 3: Strategic Grid & Model

Phase II - Three Critical Components Step 4: Key Performance Indicators

Step 5: Goals & Targets Step 6: Initiatives & Programs

Phase III – Deployment Process Step 7: Integrate Step 8: Cascade Step 9: Manage

Balanced Scorecard Development & Deployment Process


Strategic Focus Area: Increase Shareholder Value

Financials Revenue Growth of 20% by 2014

Customers Acquire More Customers

Become the Price Leader

“Internal” Processes

Improve Opera+onal Efficiency

Cost Reduc+on Program

Knowledge Based System

Reduce Non-‐Core Ac+vi+es

Learning & Growth

Training – Lean Six Sigma Program

Database Network on Opera+onal Performance

Re-‐Align Organiza+on with Core

Competencies

For each objective on your strategic grids, you need at least one performance indicator. Can you have an objective without a performance indicator? Yes, it is possible, but not having a measurement makes it difficult to manage the objective. It’s best to revisit this objective and ask the question: Why is this an objective?

Dimen

sion

s or P

erspecIv

es


From: January 2010ORGANIZATION: TBD Until: December 2010

Current Month: TBD 2010

KPIKPI Name

(Unit)KPI First Name

Champion Last Name10 STRETCH987 GOAL6

5

43 BASE2

10 ZERO

WEIGHT 02010 TOTAL SCORE

JANUARYFEBRUARY

MARCHAPRILMAYJUNEJULY

AUGUSTSEPTEMBER

OCTOBERNOVEMBERDECEMBER

CURRENT SCORE 3 4 7 2 3 5 6 9

Stretch 2010 1000Goal 2010 700Base 2009 300Actual 0

TOTAL

ORGANIZATION

OPERATIONAL EXCELLENCE BALANCED SCORECARD

FINANCIALS CUSTOMERS PROCESSES

RESULTS

1 2

5 7

4

12

11

8

9

3

6

10

For each strategic objec+ve on your strategic grid, you need at least one performance indicator. Can you have an objec+ve without a performance indicator? Yes, it is possible, but not having a measurement makes it difficult to manage the objec+ve. It’s best to revisit this objec+ve and ask the ques+on: Why is this an objec+ve?

Performance Management – Resources Chang, Richard Y., and Morgan, Mark W. – Performance Scorecards: Measuring the Right Things in the Real World (New York, New York: John Wiley Sons Inc., 2000) Kaplan, R.S. and Norton, D.P. – The Balanced Scorecard (Cambridge, Massachusetts: Harvard Business School Press, 1996) Kaplan, R.S. and Norton, D.P. – Putting the Balanced Scorecard to Work (Harvard Business Review, September/October 1993)

Kaplan, R.S. and Norton, D.P. – Balanced Scorecard: Translating Strategy into Action (Cambridge, Massachusetts: Harvard Business School Press, 1996)

To learn more about our proven OperaIonal Excellence Balanced Scorecard SoluIon, review our “OperaIonal Excellence Balanced Scorecard Deployment Training Module”.





Strategy Deployment



Process Excellence


System

Process Input: Strategic and Annual Operating Plan (Objectives, Goals, Initiatives)

Process Output: Exceeding the Plan

Opera+onal Excellence – Process Excellence

• Clarify big picture using strategic & operating plan

• Prioritize projects based on impact, value, resources, timing

• Select key projects with leadership buy-in

• Check accountability - business and personal

Select the Right

Projects

Select and Train the

Right People

• Ensure the right leadership and ownership

• Select the right team leader & team

• Develop a training plan

• Dedicate time for training & application

• Ensure the right support resources are available

Develop and Implement

Improvement Plans

• Utilize the right improvement methodology for the right project

Manage for Excellence in

Execution

• Stay focused • Frequently review

progress and remove barriers

• Check real business impact

• Continuously communicate progress

•  Link to performance management and R&R

Sustain the Gains

•  Implement effective control plans

• Conduct regular training focused on the process

• Review the system effectiveness at least quarterly

• Continually identify and launch new projects based on strategic & operating plan

Balanced Scorecard Project Selection Matrix

KP

I #1

KP

I #2

KP

I #3

KP

I #4

KP

I #5

KP

I #6

KP

I #7

KP

I #8

Weights 20 10 15 10 5 20 10 10 100 50 30 20 100 70 30 100

Project Definition

1 Project #1 10 0 5 0 0 3 0 0 3.4 5 0 5 3.5 0 5 1.5

2 Project #2 0 3 0 5 0 0 0 0 0.8 0 5 0 1.5 3 0 2.1

3 Project #3 5 5 10 10 3 3 8 8 6.4 3 8 5 4.9 5 8 5.9

4 Project #4 0 0 10 5 0 0 5 0 2.5 0 0 10 2.0 3 3 3.0

5 Project #5 5 10 0 0 1 0 0 3 2.4 10 5 3 7.1 3 5 3.6

Ranking 0 = none Not Started 3 = low On Track 5 = medium At Risk 8= high Behind Schedule10= very high

CORRELATION MATRIX

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Size of the Ball = Size of the Risk

1

2

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State of Michigan Department of Management and Budget (DMB)

Coordinator Kathe Carter:

"Our management team evaluates poten=al new programs/ini=a=ves by seeing how

they fit in with our strategy. In the past we would con9nue stacking new projects on

everyone's plates, but now if it doesn't fit with our strategy we don't do it." Just as

important for the DMB is that "whenever a new project or ini=a=ve is proposed, our

people ask 'how does this fit in with our strategy map /scorecard?' They feel that this

connec=on a]aches a higher level of importance to the ini=a=ve."


SystemaIc, ScienIfic & Disciplined Problem Solving

Process Development, Improvement & Management

Lean Methodology

5. Pursuit Perfection

2. Map Value Stream

3. Create Flow

4. Establish Pull

1. Define Value Lean

Principles

Six Sigma Methodology

BPI 7 8 D


Process Excellence

Lean is about creating flow and

identifying & eliminating waste in a process or value stream.

Six Sigma is about understanding and

eliminating variation in a process or value stream.

C I A M Project Management

D

Process Excellence – Resources Breyfogle, Forrest W. III – Implementing Six Sigma: Smarter Solutions Using Statistical Methods (New York, New York: John Wiley & Sons Inc., 1999)

George, Mark O. - The Lean Six Sigma Guide to Doing More with Less (Hoboken, New Jersey: John Wiley & Sons, Inc., 2010)

Ohno, Taiichi - Toyota Production System (New York, New York: Productivity Press, 1988) Rother, Mike and Shook, John - Learning to See - Value-Stream Mapping to create Value and eliminate Muda (Cambridge, Massachusetts: Lean Enterprise Institute, 2009)

Womack, James P. and Jones, Daniel T. - Lean Thinking (Free Press, 2003)

To learn more about our proven Operational Excellence Process Excellence Solutions, review our various “Operational Excellence Process Management, Lean Management, Six Sigma Methodology & 8D Problem Solving Training Module”.






Strategy Deployment



Process Excellence


System

“The rate at which organiza9ons learn may soon become the only sustainable source of compe99ve advantage.”

Peter Senge

“The thing I have learned at IBM is that culture is everything.”

Louis V. Gerstner, Jr.

Opera+onal Excellence can and can only be achieved and sustained with the right amtude, the right mindset, and the right competencies.

Empowerment = f (Authority, Resources, Informa+on, Accountability)

Low High The Empowerment ConInuum

Selected Employee

Input

Ongoing Employee

Taskforces High Performance

Work Teams

Opera+onal Excellence – High Performance Work Teams

Empowerment = 0, if Authority or Resources or Informa+on or Accountability = 0


In their book Gung Ho ! – Turn on the People in any Organization, Ken Blanchard and Sheldon Bowles describe three distinctive phase of transforming a traditional organization to an organization based on high performance work team.

Spirit of the Squirrel Way of the Beaver Gift of the Goose


Spirit of the Squirrel

WORTHWHILE WORK

1.  Knowing we make the world a better place.

2.  Everyone works toward a shared goal.

3.  Values guide plans, decisions, and actions.


Way of the Beaver

IN CONTROL OF ACHIEVING THE GOAL 1.  A playing field with clearly marked territory.

2.  Thoughts, feelings, needs, and dreams are respected, listened to, and acted upon.

3.  Able but challenging.


Gift of the Goose

CHEERING OTHERS ON 1.  Active or passive, congratulations must be TRUE.

2.  No score, no game, and cheer the progress.

3.  E = m · c2 – Enthusiasm equals mission times cash and congratulations.


While an organization transitions from a more traditional “top-down” organization to an organization build around high performance work teams, the role of a supervisor or manager changes to the role of a leader and coach, with six distinctive capabilities.

Leader ≠ Supervisor

Coach

Facilitator

Result Catalyst

Living Example

Business Analyzer

Barrier Buster

High Performance Work Teams – Resources

Blanchard, Ken and Bowles, Sheldon – Gung Ho ! – Turn on the People in any Organization (New York, New York: William Morrow and Company, Inc. 1998)

Fisher, Kimball – Leading Self-Directed Work Teams (New York, New York: McGraw-Hill, 2000)






Strategy Deployment



Process Excellence


System

The House of Opera+onal Excellence

"The House of Opera+onal Excellence" provides a high-‐level framework for an integrated Business Execu+on System for Opera+onal Excellence organiza+ons.

“Perfection is not aFainable, but if we chase perfection we can catch excellence.”

Vince Lombardi

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