operations management improvement in an engineering services firm

8/9/2019 Operations Management Improvement in an Engineering Services Firm

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Malaysia Campus

Nottingham University Business School

MBA Programme

Operations Management N1DM18

Module Convenor : Prof Chris OBRIEN

Individual Coursework:

The Consultancy XYZ Delivery Process :Operations Management Improvement In An Engineering Services Firm

ZHIJING, EU (UNIMKL 004151)

Date: 27.04.2009

COPY I

[Word Count : 2553 Words Excluding Executive Summary, Table of Contents,

HeadinConsultancy XYZ, References & Bibliography ]


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Executive Summary

The following paper outlines the operational challenges facing an engineering

services firm Consultancy XYZ. The paper proposes a number of improvements

in the delivery process in terms of how a team is resourced, how performance is

measured and how quality is assured. In brief, these suggestions involve a re-

engineering of the organizational structure to deliver capacity improvements via

the promotion of task force teams, the re-balance of focus on effectiveness

instead of only efficiency thru the formulation of new leading key point indicators

and the trimming of the existing technical governance and assurance processes

to match the risks profiles of individual contracts. However, in conclusion, it was

recognised that the key challenge in change implementation will be the

involvement of the staff as the benefits from the structural changes will only be

fully realised when adopted willingly by staff.


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TABLE OF CONTENTS

1.0 Company Background & History ............................................................................. 3

2.0 Business Process ...................................................................................................... 4

2.1 Service Product Design: .............................................................................. 4

2.2 Service Facility Design & Customer Interaction Process Design ................. 5

2.3 Service Operations Process Design ............................................................ 5

3.0 Operational Challenges : .......................................................................................... 7

3.1 Challenge #1 : Diffused Team Alignment & Silo Mentality .......................... 7

3.2 Challenge #2 : Expensive Contracts That Do Not Deliver Customer Value 8

3.3 Challenge # 3 : Long Delivery Times Due To Bureaucratic Governance &

Assurance Processes ........................................................................................ 9

4.0 Suggestions For Operational Improvements ...................................................... 10

4.1 Suggestion #1 : Introduce Decentralised Multi-Disciplinary Task Forces /

Teams & Segregate Complexity ...................................................................... 10

4.1.1 Changes Required , Timescales & Responsibilities : ...................................... 10

4.1.2. Expected Benefits & Challenges .................................................................... 11

4.2 Suggestion #2 : Emphasize Team Based KPIs or Incentive Schemes and

centralise the work hour benchmarks .............................................................. 124.2.1 Changes Required , Timescales & Responsibilities : ...................................... 12

4.2.2 Benefits & Drawbacks ..................................................................................... 12

4.3 Suggestion #3 : A Fit For Purpose Risk-Based Assurance System. ....... 14

4.3.1 Changes Required , Timescales & Responsibilities : ...................................... 14

4.3.2. Expected Benefits & Drawbacks .................................................................... 14

5.0 Conclusion ................................................................................................................ 16


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1.0 Company Background & History

Consultancy XYZ (CONSULTANCY XYZ) is a wholly owned subsidiary of the

Anglo-Dutch company ___ XYZ PLC. CONSULTANCY XYZ currently operates

from several locations globally with major offices in Houston, Hague and Kuala

Lumpur with approximately 5000 personnel worldwide.

The company was formed in 1998 to consolidate the technical expertise within

___ XYZ into an independent commercial entity providing consultancy services to

XYZ subsidiaries/joint ventures and to centralise the ownership of technology

patents/licenses.

CONSULTANCY XYZ business is the delivery of technical and operational

consultancy in the form of technical services, testing & analytical services, project

management, training and licensing technology design in the energy and

processing industries. (CONSULTANCY XYZ Website 2008)

Approximately 70% of CONSULTANCY XYZ customers are XYZ subsidiaries or

joint ventures while the balances are national oil companies such as Petrochina

and Petronas.

CONSULTANCY XYZ is organized into various business sectors such as

Refining and Gas & Power each with their own reporting lines. These business

sectors have centralized managers as well as location managers at each office

within a matrix reporting structure.

The business groups are further split between Delivery Groups and Service

Groups. The Service Groups focus on developing contracts while the Delivery

Groups execute the contracts. These Delivery Groups are typically organised into

technical disciplines such as Rotating Equipment or Electrical.


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2.0 Business Process

2.1 Service Product Design:

CONSULTANCY XYZs offerinConsultancy XYZ vary from point solutions that

address specific technical issues to enterprise solutions that focus on complex

cross-business challenges.

There are several categories of services offered:

Operational services involving ad hoc support to customer facilities

Technical development services covering project development, technical

research or technology licenses.

Professional advisory services ranging from training to consultancy.

The outputs normally take the form of corporate workshops, written

reports/presentations and professional advice with the service process itself often

inseparable from the end product.

Business

Process

Operational

Concerns

Business

needs

Undeveloped

Concepts and

Ideas

Practical Design

& Technical

Solutions

Plans For

Implemetation

Professional

Advisory services


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2.2 Service Facility Design & Customer Interaction Process Design

CONSULTANCY XYZ delivers its services through a multi-disciplinary approach

that places experts from different fields (and often varied locations) together to

develop the relevant solutions.

Work delivery takes place from the office geographically closest to the customer

taking into consideration the availability of key technical competencies.

The service design is such that for low to medium complexity assignments, the

customer interface is limited to input data gathering. However for complex

assignments, the service delivery team may be integrated with customer

representatives.

2.3 Service Operations Process Design

CONSULTANCY XYZ has a Deals Management process for acquiring new

contracts comprising the following stages:

Advice Mandate Contract Delivery

o Advice -business prospects are identified

o Mandate - a high level description of deliverables, schedules and pricing is

put into place for the contract bid

o Contract for successful bid, an operational or technical service agreement is

executed.

These three phases are typically coordinated by a Deal Manager from the

Service Group organization who then hands-over the assignment to an Activity

Leader, who is likely to be from the Delivery Group.


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This paper focuses on the Delivery stage after the contracts have been won.

The Delivery process comprises the following:

It starts with a customer service request

The Service Group develops the offering and defines the scope of

services with the customer

The Activity Leader estimates the resources required and issues a Work

Order.

The customer responds with a Purchase Order.

The Activity Leader ensures that team resources are allocatedfrom the

various Delivery Groups.

The delivery of the workthen takes place.

A work scheduletogether with a time-writing system tracks progress

A quality assurance processensures that deliverables are checked

Post completion, the customer is invoicedand feedback requested.


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3.0 Operational Challenges :

There are several recurring challenges in the contract delivery process.

3.1 Challenge #1 : Diffused Team Alignment & Silo Mentality

Much of CONSULTANCY XYZ work involves cooperation and coordination of

experts from different departments (Called disciplines). Ward (1995) found that

an organizational design that uses team working in concurrent engineering

activities compresses the development time. Furthermore Parry (1998) argues

that an organizational design that supports de-centralized and distributed task

forces encourages organizational flexibility and learning.

The current CONSULTANCY XYZ organizational structure is not conducive for

multi-disciplinary team work and encourages silo mentality due to the lack of

opportunities for individuals in the same (contract) delivery team to align to

common goals related to the customers need.

Although Activity Leaders are meant to marshal the team resources, individual

team members parent departments often have stronger influence on the

individuals progression within the firm. Unfortunately, departmental pressures

sometimes run counter to individual contract delivery objectives. This means that

Activity Leaders are not formally empowered to hold on to the resources

assigned to them.

For example, theoretically the allocation of work is subject to the individuals

technical competency profile and availability. In practice, work assignments are

often fragmented with most individuals working part time on multiple projects due

to departmental pressures to maximize work-hour utilization on a departmental

basisleading to conflicting work priorities. This is related to the second

challenge.


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3.2 Challenge #2 : Expensive Contracts That Do Not Deliver Customer

Value

All staff submits a weekly timesheet and the ratio of billable hours to total hours

(technical work hour utilisation) is tracked and reported monthly. Top

management has set 75% average utilisation as a performance measure for the

group.

The trouble is that utilisation is too strongly linked to individual performance,

overshadowing other Key Performance Indicators. Some departments have

even published all the staff monthly utilisation on the department intranet pages.

This is exacerbated by the lack of independent workhour benchmarks when

Activity Leaders estimates the initial work orders. Also these benchmarks, if

available, tend to be managed by the department personnel instead of being

consolidated transparently in a catalogue of work service offerinConsultancy

XYZ.

The majority of CONSULTANCY XYZs contracts are reimbursable

-hourscontracts where the larger the agreed work hours, the more profitable the

contract. While working best in complex non-routine contracts, this model

discourages a good definition of service scope as vagueness helps to justify

scope creep to boost billable hours later.

This focus on maximising utilisation erodes the customer value offered as staff

try to pad their hours and think up ways to charge more hours. In relation to

Challenge #1, while the Activity Leader tries to maintain the promised workhours

to the customer, team members are more worried about their utilization.


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3.3 Challenge # 3 : Long Delivery Times Due To Bureaucratic Governance &

Assurance Processes

CONSULTANCY XYZ has an existing set of procedures to manage the risks in

technical design activities, Management of Technical Authorities (also known as

the Responsible/Verify/Approve RVA matrix) that recognizes the technical staff

competence levels.

A Responsible rating certifies an individuals ability to perform the work

independently in a specified area of expertise. This work then must be checked

by another person with the authority to Verify. Finally, senior staff provides the

final Assurance. Each Delivery Group maintains a catalogue of competencies

for various tasks for all staff.

The governance and assurance process is often tediously adhered to. For

example, before a technical report is issued to a customer, each discipline must

have their individual contribution to the document verified and approved by

different individuals in their department. This is in addition to other internal panel

reviews covering commercial viability, execution strategy and design integrity.

The current procedures use a one-size-fits-all approach without considering the

individual complexity and risks. The reviewer / approvers often make suggestions

on the content without being privy to the work details and audits purely from a

procedural compliance perspective.

The requirements also distract senior staff from coaching and mentoring less

experienced personnel as they are pre-occupied with writing assurance /

verification reports. The present quality assurance framework does not

encourage innovation in engineering problem solving.


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4.0 Suggestions For Operational ImprovementsThe following sections outline changes to how a team is resourced, how their

performance is measured and how technical work quality is assured.

4.1 Suggestion #1 : Introduce Decentralised Multi-Disciplinary Task Forces

/ Teams & Segregate Complexity

4.1.1 Changes Required , Timescales & Responsibilities :

It is proposed that when an individual is assigned to a team, the Activity Leader

should have the authority to assess their individual performance. Presently, the

Activity Leader has little influence over the individual team members

performance ratings aside from informal feedback to their department managers.

Currently, different delivery groups are seated separately from each other. An

office re-layout would allow task-force areas to be created where delivery teams

comprising personnel from differing technical disciplines will be physically based.

Concurrently members from other regions could be re-organised into sub-

projects with deliverables to the main project are agreed upfront. This would

segregate complexity in licensed technology packages that often form a

component of larger contracts.

Long term multi-disciplinary task forces should be set up for some routine jobs.

For example, in the past few years, a common project in the refinery industry has

been the revamp design of hydro-desulphurisation facilities. The skills mix

needed are similar even across different contracts. Therefore rather than

disbanding and re-forming new teams every time, some teams could be kept

together to build on the lessons learnt.

Office re-layout can be done relatively easily (1 to 3 months) as it does not

involve any renovation work. However, other changes are medium to long term


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(9 to 12 months) tasks given the adjustment needed from a divisional/top -down

control to a more distributed network of teams/self-directional organization. The

global leadership team, being the only ones who will be able to drive this change,

should be accountable for this change.

4.1.2. Expected Benefits & Challenges

The task-force approach focuses the service delivery team on a single team

objective due to the increased Activity Leader authority over them. This should

indirectly improve service capacity as staff is more likely to gain multi-skilling

opportunities while working in a task force model as opposed to an internal

service provider model (Fung, M. 1998). Multi-skilling has the additional benefit

of improving the value proposition for employees who are seeking diversity intheir work.

However the risk is that a task force works best on assignments that are project

based where there is a clear objective with a set time frame and budget.

Anumba (2002) found that at a higher corporate level, divisional and functional

structures should be maintained as it gives the dual benefit of high levels of

technical expertise while the team-working aspect provides operational flexibility.

The greatest implementation challenge is that the shift from a

department/discipline centric structure to a de-centralized multi-disciplinary

structure requires a resource pool of Activity Leaders who are able to see

across group boundaries.


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4.2 Suggestion #2 : Emphasize Team Based KPIs or Incentive Schemes and

centralise the work hour benchmarks

4.2.1 Changes Required , Timescales & Responsibilities :

The immediate change is to stop publishing utilisation on the intranet website.

The bigger task is integrating commercial pricing aspects of the contracts with

the appropriate key performance indicators (KPIs).

In line with the first suggestion of decentralised multi-disciplinary task forces, one

possible KPI scheme could be the aggregate team work hour utilisation. When

the team achieves a value below the target hours a performance bonus is

allocated to all members proportional to the savinConsultancy XYZ. Othermeasures such as customer feedback or the requirement to pass internal quality

checks could regulate against setting unrealistically high hours at the Mandate

stage or cutting corners to save hours. The development of these new incentives

is a medium term (6-9 months) task carried out concurrently with the other

changes discussed in this paper.

Another short term action (1-3 months) would be to codify and categorize the

historical work packages to develop benchmarks that should be accessible to all

Activity Leaders and Service Group staff. These benchmarks would allow for a

constructive challenge of the work-hours estimated by team members during the

mandate phase.

4.2.2 Benefits & Drawbacks

These benchmarks and incentives will result in more focused performance

measures. If implemented well, high utilisation will be a natural consequence

thereof rather than artificially trying to improve utilisation thru direct

measurement.

The emphasis on customer derived performance measures also focuses the

work on delivering value to the customer. This is may even be an indicator of


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future business given CONSULTANCY XYZ large client base of repeat

customers.

The challenge here is for a much stronger link between crafting the contracts and

designing the KPI schemes that are harmonised with the commercial terms and

conditions. Ultimately, the goal would be an individual contract Profitablity KPI

that links both the commercial rates and the operational work-hour controls.


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4.3 Suggestion #3 : A Fit For Purpose Risk-Based Assurance System.

4.3.1Changes Required , Timescales & Responsibilities :

A short to medium term change (3-6months) would be to replace the present

RVA system that requires three separate individuals to read thru the same

document with a simpler technical authority certification system. This change

must be coordinated and agreed by all the Delivery Group managers as they are

the natural owners of the technical assurance process.

Another simplification is for the Technical Assurance Manager for the entire

contract to be nominated from the Delivery Group that performs the most critical

work. This individual should have the highest tier rating for his area of expertiseand have a sound grasp (but not necessarily in-depth) of all technical fields.

Before the work is performed, the Technical Assurance Manager, the various

Delivery Group managers and the Activity Leader would jointly review the

technical assurance requirement. Only the critical items will be required to

undergo the RVA process.

This recommendation will allow for self-approval of non-critical work. The

individuals performing the work will also have clearer accountability for the quality

of their contribution.

At the same time, the Verification and Approval that is required for the critical

items can also be consolidated to a panel review format instead of an individual

document review format.

4.3.2. Expected Benefits & Drawbacks

There is a need to reinforce the front end certification process to ensure that

individuals are appropriately rated. The suggested change focuses on assuring

the quality of individuals rather than just documents.


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An implementation risk could be that it may jeopardize the XYZ group standard

engineering practices compliance and CONSULTANCY XYZs ISO:9001 (2000)

rating. A mitigation measure would be to enact a robust change and deviation

management plan.


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5.0 Conclusion

CONSULTANCY XYZs operational performance can be improved if:

o The organization is re-engineered to deliver capacity improvements

o Performance measures focused on effectiveness instead of only efficiency

o The technical governance and assurance process match the risks profiles of

individual contracts.

The high level one year schedule below indicates some of the action items that

need to be undertaken

As the implementation challenge is getting the staff involved in the process, it is

recommended that CONSULTANCY XYZ senior management creates a multi-

disciplinary implementation team with key representatives from the Delivery and

Service groups.

Different team members would need to champion the various initiatives in

coordination with the Activity Leader, who would not only reports directly to the

highest level of management but is empowered to remove any blockers to

change.

For the benefits to be fully realised, the end user community must adopted the

change willingly. Accordingly, this Activity Leader should ensure that there is a

coherent and integrated communication strategy amongst the different work

streams.


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References :

1. Parry I.J , Tranfield D. , et al., 1998 Reconfiguring your organisation: ateamwork approach Team Performance Management, Vol. 4 No. 4, 1998,pp. 166-176, MCB University Press, 1352-7592

2. Consultancy XYZ Website, Available at : , Accessed 19th April 2009

3. Ward A, Liker JK , Cristiano JJ and Sobek II, DK , (1995) The second Toyotaparadox : How delaying decisions can make better cars faster SloanManagement Review, Spring pp 43-61.

Bibiliography :

1. Abernethy, M.A. and Lillis, A.M. (1995), The impact of manufacturing

flexibility on management control system design, Accounting, Organizationsand Society, Vol. 20, pp. 241-58

2. Anumba CJ, Baugh C & Khalfan MMA (2003) Organisational structures tosupport concurrent engineering Industrial Management and Data Systems102/5 2002 , p.p. 260-270

3. Aranda DA ,2003, Service operations strategy, flexibility and performance inengineering consulting firms, International Journal of Operations &Production Management Vol. 23 No. 11, 2003 pp. 1401-1421

4. Barker R.J , 2003, Trashing The Time Sheet, Available at :, Accessed 18th March 2009

5. Fung,M., A learning team approach for service organizations to achieve TQMand beat the competition Managing Service Quality Volume 8 Number 5 1998 pp. 367-374
http://www.shell.com/home/content/global_solutions/http://www.accaglobal.com/pubs/members/publications/sector_booklets/public_practice_sector/m-ttt-01.pdfhttp://www.accaglobal.com/pubs/members/publications/sector_booklets/public_practice_sector/m-ttt-01.pdfhttp://www.accaglobal.com/pubs/members/publications/sector_booklets/public_practice_sector/m-ttt-01.pdfhttp://www.accaglobal.com/pubs/members/publications/sector_booklets/public_practice_sector/m-ttt-01.pdfhttp://www.shell.com/home/content/global_solutions/

operations management improvement in an engineering services firm

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