Operational Excellence Starts With Culture
To achieve operational excellence, the existing corporate culture must be addressed head on.
Over the years, just about all organizations have adopted a continuous improvement program, many based on lean principles. But there’s a key question that often never gets asked: How does a company know where to improve next?
One solution is to make a chart of issues and rank them in order of what should be worked on next. Another typical approach is to look at how much effort the improvements would take, consider how many people are available to work on them, and then opt for what can yield the most improvement with the least effort. The most popular method is to send a team to where there is a problem, brainstorm, improve the area, and then find another area with a problem—a whack-a-mole approach.
All these approaches to improvement create a company culture of endlessly seeking out and eliminating waste—until the organization grows tired of it. Fortunately, that sort of culture can be changed. To do that and get people excited about improvement, it’s not enough to tell them that you’re going to spearhead a new lean initiative to achieve what we call “operational excellence,” because the response will likely be, “been there, done that.”
That’s an understandable reaction, because companies have seen varying levels of progress from lean. While manufacturers may have seen some operational improvements based on established metrics, such as lead time, cost, quality and inventory, none of these relate to top-line business growth, market share, innovation with customers, or selling “solutions” instead of “products.” Instead, to achieve operational excellence, the existing corporate culture must be addressed head on.
Thus, to be a catalyst for change, an advocate for operational excellence must hew to the following mantras:
- It’s not about eliminating waste; it’s about top-line business growth.
- It’s not about getting better every day; it’s about moving the company from point A to Point B.
- It’s not an endless journey; it’s a journey with a destination, and we should reach it within a year.
- It’s not about good leadership and management; it’s about a road map and a destination.
- It’s not done by kaizen and facilitation; it’s done by applying principles and guidelines.
To summarize, the advocate has to know where the company is going with all the continuous improvements and be able to explain how those improvements will affect top-line business growth.
Ultimately, the goal of operational excellence is to reach a point at which each employee can see the flow of value to the customer, and fix that flow before it breaks down. Taken a step further, when companies reach operational excellence, all employees should not only know how to perform their work tasks, but also if the flow of the product or service to the customer is on time. Moreover, the value stream flow will be autonomous and self-healing. Managers will not have to oversee the operation and intervene on a daily basis, because the employees working in the flow will be able to see if flow is normal and, if it is not, fix it before it becomes abnormal.
Get Support from the Top
With that goal in mind, how can a proponent of operational excellence change the culture companywide? Without question, support for operational excellence must start with the top.
When leadership views operational excellence as just another improvement program like lean or Six Sigma, it can be challenging to get them to shift their thinking. That’s because most improvement programs focus solely on manufacturing objectives, such as eliminating waste or improving quality, efficiency, productivity or other factory performance metric. None of these initiatives are linked directly with what senior leadership is concerned with—business growth and market share.
To intrigue senior leadership and gain their support, the key is to discuss the impact that operational excellence will have on the business, not the factory. This means discussing the destination of operational excellence and how the business will be affected once it’s reached. Senior leadership needs to know that the goal is seamless delivery to the customer without the need for management intervention. They need to know that managers will be freed up to work on business growth and become solution providers rather than merely part suppliers. To put it frankly, leaders have to understand that they must earn the right to talk to customers and, hopefully, innovate with them.
For example, Hypertherm Inc. in Hanover, NH, has achieved operational excellence in all areas of its operation, from the receiving dock through fabrication, assembly and shipping. In fact, today Hypertherm’s value streams have evolved to the point where they now operate without production control. As a result, Jim Miller, vice president of operations, no longer spends his day on managing the day-to-day operations.
“Operations aren’t a fundamental business problem,” says Miller. “Operations gets time; it’s not ignored. It’s not like we don’t want to talk about it. It’s that we don’t have to talk about it.”
As a result, Miller can now spend the rest of his time on activities that will grow the business, such as supporting new sales and distribution offices in South America.
Once the destination of operational excellence is clearly understood, senior executives will be able to see the connection to what they seek: business growth.
Gain Middle Management Buy-In
It’s not just senior leadership that resists operational excellence; middle management often objects to the changes it signals, as well. Middle managers are used to directing people, firefighting, going to meetings, having daily status reports, and exercising their influence. Most of that will evaporate with operational excellence, which can push middle managers out of their comfort zone. After all, as managers, their job has been to manage.
The key to success with this audience is to have managers understand that operational excellence will allow them to actually become more valuable to the organization. They will spend their time doing things that will affect company growth instead of just making sure things get done. Since it may be uncomfortable for managers to do something new when they have been rewarded for years in their previous role, they need to be shown how the change will affect the entire system. That way, they will understand the end result of operational excellence—a self-healing flow that they won’t need to manage day in and day out—and they can see what role they will play in it.
That’s exactly what happened at IDEX Corp.’s Health and Sciences Division in Rohnert Park, CA. The company applied the principles of operational excellence to a wide variety of precision products. Of particular note is how much less time the supervisor now needs to spend dealing with problems and issues in the flow. Where this would previously have required three to four hours of her eight-hour day, today she estimates that only about 30 minutes of her day are spent dealing with problems in the flow. She spends the rest of her time improving the company’s value streams and working with engineering on the launch of new products.
When managers understand that operational excellence will enable them to shift their role from getting shipments out the door to talking with sales about orders or discussing with engineers about machinery that can be improved or new products that are being built, they will understand they will have a more strategic job, and their reluctance typically fades.
Nonmanagerial employees often don’t understand how applying advanced lean tools can result in anything that directly relates to the company’s success. So even if a proponent for operational excellence starts with the top, employees at other levels of the organization are often concerned that it’s another one of management’s “flavor of the month” programs.
When faced with this feedback, it is important to explain that operational excellence is a destination for all the continuous improvement efforts in which they have been actively involved. However, unlike past lean initiatives that were intended to eliminate enough waste to reduce cost and thereby boost sales (which often didn’t materialize), operational excellence is a strategic plan for producing the products and services customers want, and delivering them seamlessly each day. Simply put, it is a plan for business growth.
Another way to explain operational excellence to employees in practical terms is to describe the synergy it creates between the factory, marketing and sales. That synergy will lead to market share by elevating the company from a parts producer to a “solution provider.” As a solution provider, the company can innovate with its customers. It can talk with them about how they are using the company’s products and gain insight into how to modify those products to make something more valuable. All of which will position the company for growth over the long term.
To create an operational excellence culture, the current culture has to be addressed head on. It’s important to be direct and to talk in terms of business growth and market share with everyone in the company. The catalyst for operational excellence must serve as the educator who speaks a new language, then teaches everyone else how to speak it. When employees understand how they will contribute to keeping the company growing profitably, change—and a culture of growth—will result.