Operational Excellence - what it is and is not

As Roger Martin, Professor Emeritus at University of Toronto, says, a strategy is basically a choice.?

"Making strategy choices is never easy because it means doing some things at the expense of others."

- Roger Martin

While thinking strategically, it is crucial that one is conscious of saying a critical "yes" to a choice while saying a critical "no" to the possible alternative courses of actions. In light of this it would be pertinent to think what operational excellence is and what it is not. It is particularly relevant because over the last 15-20 years a very large number of organizations have started embarking on operational excellence programmes vigorously, but in many of them, it remains a by-lane of activities and not a part of the main road that the business is driven on.

The word excellence is a derivative of the verb - to excel. To excel is to be extraordinarily outstanding or to surpass others in performance such as quality or delivery.

The following aspects have been widely written and acknowledged.

1. Operational Excellence is a certain state of being for an organization whereas Continuous Improvement is a process or a journey. In other words, continuous improvement is a process that, along with a few other processes to complement it, has the goal of operational excellence. Essentially OE and CI go hand-in-hand.
2. Operational Excellence is a result of systematic adoption of a set of basic unchanging principles such as the 10 principles outlined by Dr Shingo (or the 14 principles outlined in The Toyota Way by Dr Jeffrey Liker).
3. Operational Excellence is about processes as well as human behaviours and values.

In spite of this foundational knowledge, which is widespread and easily available or accessible, a variety of organizations goes through a process that creates the aura of innovative improvement programme but, at the end, leaves a stigma of futility, since the results do not necessarily demonstrate a well-measured significant difference between the state of the business before and after it. The staff and employees are left with a slightly bitter taste of a lot of expenditure and work yielding negligible to nil results. This may not be new for many.

Some situations, that I have witnessed over years, and that made me think on what Operational Excellence is not, are as follows. These were partly or fully unsuccessful and either did not lead to any substantial improvements that were envisaged at the outset or, worse, merely drained a lot of money causing only some undue costs to be incurred.?

1. Operational Excellence is not only top-down. One scenario, that is often seen, is about strategic planning being remote and disconnected from the realities of the working world. For example - a Balanced Scorecard is meticulously drawn up to "institutionalize operational excellence" by investing a lot of time, energy, and money. It is detailed for a perfect balance of shareholders and customers on the one hand (finance and marketing) and operations and human resources on the other. Plans are drawn up, schedules are created, key performance indicators are developed, targets for those KPIs are set - issued to the functions or departments - finally sent to the head office. A sigh of relief is heard loudly by even many who were not involved in the process. Then the tabulated KPIs come out for reference only during quarterly or annual performance reviews. A classic mistake. The strategy that is born in the ivory tower stays locked there. It is never backed up by daily operational controls at the working level. Sometimes a large part of the organization simply remains oblivious to the overall approach.
2. Operational Excellence is not a waterfall lifecycle. Too much time is spent on development of framework. Different levels of competencies, actions and outcomes are created. A detailed set of criteria is made. Each criterion is further miniaturized and calibrated. Steps to go from one level to the next are prescriptively documented. People are trained to understand the framework and to train the operational staff. Alas - during this period, the business outside the so-called operational excellence team changes upside down. Mergers and acquisitions, new ERPs, new government regulations, change in labour availability, recession - a flurry of changes mean that the yet-to-be-implemented framework is already partly obsolete! Precisely for this reason, waterfall lifecycle is often not recommended in fast changing businesses. Yet outside the digital world, still "Plan - Design - Implement - Adjust - Control" is considered the way to go.
3. Operational Excellence is not a function separate from mainstream business. Sometimes the programme remains extraneous to the mainstream activities. The "team doing that Kaizen-5S" lives at the mercy of the management team and the sponsorship the team receives when the management team is not busy in solving some burning problem in the "routine business". This is when operational excellence stops being organic and starts becoming just cosmetic.
4. Operational Excellence is not just a corporate directive. Often the whole OE initiative is undertaken as a corporate directive - not business imperative. The processes such as audits are carried out to "the schedule sent by the head-office". The level of urgency on OE goes up when someone high-up from the head office is scheduled to visit the factory. The displays on the shopfloor are quickly updated to ensure that nobody spots anything outdated. Needless to mention that the whole point of the so-called "excellence" is already lost.

Possible mitigation

Some of the possible steps to make operational excellence a truly healthy and fruitful initiative for business are:

1. Consciously follow an iterative lifecycle: It is best to not only take small steps but take them through implementation, while keeping them reversible, till fruition. Such testing validates the effort, engages the people involved and paves the way for the future decisions. Strategy remains a broad guiding framework but is still open to be adjusted now and then (hence iterative) to suit the real-time real-world. For example - I have often seen the information based visual boards used in the shopfloor meetings are straightaway sign-written by some organizations only to realize later that, given choice, each team would slightly customize and make them a lot more effective in their context.
2. De-jargonize: Strike an effective balance between using and avoiding the jargon. Jargon strikes a chord with some but at the same time repels many too. Especially those who have heard a lot of jargons come and go over years making little dent into their core routine operations. Completely eliminating the technical terminologies can deprive the genuine learners of an opportunity to gain awareness and using the terminology to the point of it sounding like "too much of a jargon" can disengage some. Facilitators and coaches must treat this as a balancing act.
3. Engage all: Fix any detachment straightaway - restore engagement. This is, often, particularly required at the top levels of management. It is not uncommon that, in an intense monthly review forum that is heated with concerns about the rising aluminium or steel prices and shrinking market share, when someone says, "Next I would like to present our progress on ISO-9001 surveillance audit and the update on Operational Excellence programme", the statement is met with only apathy - if not antipathy. Instead, if the steel and aluminium prices and the market share shrinkage are integral parts of Operational Excellence and do not have another forum at all, then Operational Excellence becomes a platform that engages all and not a redundancy to be frowned at.
4. Showcase the results: Finally, nothing speaks louder than the hard results. The increased output. The improved quality. The happier customers. However, as is often said, the public memory is short-lived. If the results are not highlighted, and then again cumulatively showcased, with gradually increasing impact day-by-day, in spite of functionally being effective, the evidence of Operational Excellence is lost, and, so is, subsequently, the engagement.

After all, true and ideal Operational Excellence would be evident, when neither is the term needed nor the team separately dedicated to it, and the results speak for themselves.

- Nilesh Pandit

15 December 2022

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