An Operations Scorecard for Driving Success based on Safety and Quality

Operations is often an area that is overlooked in the success of businesses and business models - particularly in the start-up phases of a new business or in challenging periods of slowing growth, brand maturity and late-stage product life cycle management. Often set aside in favor of the latest marketing fad or other initiatives. The best solution would be to work in concert between top and bottom line to restore profit growth.?In companies where these challenges are overcome and long-term success and business resilience become the status quo - it is often because of consistency and excellence in Operations, and business process discipline that aids the enterprise to remain focused and supportive of core operational strengths.

After years of experience in start-ups, turn-arounds and building sustainable operations for large multi-nationals and smaller private companies; I have seen the following scorecard priorities emerge as a solid road map toward and directional indicator of long-term Operations success.

Fundamentally, I believe in servant leadership; and I believe that the order in which leaders consider issues and performance ultimately dictates culture and sustains long term positive results. Every successful venture I have been part of, have read about, have heard about or that exists in corporate lore - will attribute its success - short or long term - to its people. Often it is a story sparked by entrepreneurship, or a great idea, or a charismatic leader - but always, particularly when the success is generational and long lasting - it is about a number of people picking up on those fundamentals and reinforcing them to forge a culture of success that adapts, overcomes and ultimately flourishes. These groups of measures (KPIs) help ensure that servant leaders recognize issues and act accordingly to enable the organization to perform. The order of addressing and reporting these issues assures people throughout the enterprise and value chain feel valued and cared for, Safety First and Quality Always. This prioritization and “culturalization” of safety and quality will support the organization to put forward efforts to improve and create a virtuous cycle of performance (more on the Virtuous Cycle vs. Vicious Cycle in a later article).?Performance at the Individual, team, plant, company, customer, consumer, and value creation levels that support and renew the enterprise cycle.

Here are the categories of operational measurement and the order of review that I think best supports long term business success.

1. Product Safety
2. Plant Safety
3. Employee and Cultural Wellness
4. Quality Assurance
5. Customer/Consumer Experience
6. Value Delivery

Product Safety -?This would seem clear - but even today we see classic failures in automotive, consumer and food products - that indicate that someone, somewhere did not put this characteristic first, cut a corner, neglected a procedure, thinking somehow cost or profit was ultimately more important. The failure to put this simple idea first - perhaps to simply apply the fundamental axiom of Hippocrates – “First and Foremost do no harm”; results in the greatest harm to business. If this core commitment to product safety does not exist - and if there is not an unwavering belief among employees and consumers that this is what your brand, products and organization stand for - then any success will be short lived - and I truly question whether success is even an option.

Every enterprise needs to have meaningful measures (and these will vary by industry and product) as to what characteristics, testing, controls, and audits exist to ensure the fundamental ‘fit for use’ and safety of their products. These measures need to evolve over time and be responsive to emergent risks in the real world - from the growth of identity theft and data misuse - to material compliance and performance - as well as sanitation, quality, and process assurance methods.

Placing this attribute and measurement first - assures people all along the value chain that doing the right thing, providing constructive feedback, and working to improve methods and results will always be embraced and that they can take pride in their work and their use of the product.

Plant/Personnel Safety -?It is not reasonable to expect people to support or give sustained effort toward improving an enterprise that they think "consumes" them, their colleagues or even suppliers and contractors. Evidence suggests that companies that fail here - fail elsewhere. Active and pervasive programs that seek to find and eliminate hazards in the processes and the workplace are fundamental to building trust, commitment, and loyalty both inside and outside of a facility.

Lost time and near miss incident reporting are basic requirements in this area - but tend to be too reactive - proactive measures of workplace and worker preparedness audits as well as a focus on Behavioral Based Safety are more suited to supporting a healthy environment that seeks to improve and sees these efforts as caring for and assuring wellness of the enterprise and its members.?A focus on prevention and upon mutual care for all employees by all employees can drive or support a cultural shift, and cultural shift will struggle in its absence.

Employee and Cultural Wellness -?Maslow's Hierarchy of Needs suggests that creating a sense of attachment, belonging and security are keys to fulfilling basic human wants. Coupling this with an environment that offers growth and challenges people is an engine for success - it fosters commitment and loyalty and, when well directed, creates positive change and resiliency within an enterprise.

There is little question that in today's "war for talent" - retention and development of existing team members ought to be a primary goal of every individual and leader in every enterprise. Job satisfaction, having a friend at work, and sensing opportunities for growth are key to improving retention. Starting with "why" and assuring that team members and leaders can provide rationale for why practices and procedures are what they are - and assuring that all levels listen, and value questions and challenges is key.

Consistently the area of opportunity in most cultural and employee satisfaction surveys is – Communication.?Fundamental to communication is listening – most companies do a lot of talking – newsletters, websites, town halls – all are great – sharpening the listening and input collection skills of the organization are often overlooked.

Finding measures that reflect the true and shared efforts of the enterprise to improve in this area for the benefit of the team members and the business is critical but is not easy. Again, I have seen many different measures and methods contribute to success in this area - the one fundamental element that is required but not often present is: this work needs to be the shared work of the organization - in all functions, at all levels - not an HR program and not the flavor of the month. "The soft stuff is the hard stuff."

Quality Assurance -?Every enterprise needs to be certain that there are active and pro-active process measures to assure the consistency of products and services. The processes a scorecard should target here relate to product and process performance. These are the control and audit processes that assure consistency of product in the face of supply and production variability; as well as adapt to changing product expectations and uses in the market.

Some of what is effective here, is at a minimum, linked to prior discussion of product safety and fit for use - but most important are those control processes and audits that assure product and process performance at the detail level - things like product efficacy or taste - and processes like fulfillment, freshness and delivery. Fundamentals of product and package impressions and product characteristics are never too small to overlook.?In food processing, for example, these would include key process steps with critical temperatures and times – the conditions that differentiate safe and/or successful batches from failed batches and rework.

Effective reception and application of feedback and performance in this area can lead to developing new insights or supporting initiatives for business growth or evolving product uses, applications and expectations. Building a robust system here can be key to finding new areas of growth or stemming issues of decline.?The emergence of electronic tools to aid in data collection and its visualization will be helpful in driving performance.

Another core area of focus must be to improve product consistency, reduce quality deviation through a systemic focus on process capability (another article).

Customer Experience –?The next critical area is assuring an active voice of the customer and consumer as critical feedback within each aspect of its business model. ?The question I most here at this point, “Isn’t the customer always first?” ?My answer is yes they are – and that is why the prework of the first three areas is critical we must be good at those elements to be ready to be in front of customers and consumers.?

Customer Experience can be another area of “soft stuff” – not that there cannot be good measurement and analytics – but often true customer and consumer experiences are impacted by many external, environmental and other business factors that can be more subjective in their application and can override even the most successful production and fulfillment processes.?But let’s measure on…

The usual suspects here are the measurement of order fill rates, on-time in-full (OTIF) service metrics, and even delivery service and rating interactions with personnel within the fulfillment cycle (online rating systems). These and other metrics need to be combined with business strategies and commercial realities relating to pricing, channel development plans, discounting, marketing support, media and top to top customer relationships. All of these are critical in finding the cocktail that best assesses performance against current goals and competition. I am sure we can all relate to ending up in a customer's "penalty box" for issues outside of flawless fulfillment.?

Keeping these targets in balance with other supply chain measures of working capital and inventory turns are important to driving improved cash flow and reducing the cash cycle of the business.

Not to be forgotten or discounted is the ‘voice of the consumer’ - assuring that beyond customer interactions and service - feedback about the consumer experience is also actively sought and meaningfully interpreted to drive process improvement. Every enterprise needs to assure connectivity and measurement of its processes from sourcing and conversion to delivery and consumption.

Value Delivery -?This is where the rubber meets the road - where the use and conversion of resources is most critically reviewed. Measurement here needs to start with strong process knowledge and expectations of resource usage - whether that is through target setting, standard costing methods, long established yield standards, or real time measurement of productivity and performance.

Primary concern should be given here to usage variances and material yields with respect to direct materials and consumables, then attention to productivity and utilization issues around human and capital resources need to follow close behind. Usage rates, yields, OEE (Overall Equipment Effectiveness), productivity, and maintenance performance (PM Completion Rates) are among the measures where most issues and opportunities reside.?Capturing the data as close to the source as possible is helpful – again with automation levels on the rise and enterprise data capture solutions and floor-based MES systems – automation here and employee engagement in issue identification and solution will drive results.

It is unlikely ventures can "save their way to profitability" but an enterprise that continuously improves its value delivery within its operations to create products and experiences that address consumer demands will build longevity, resiliency, and success for the long term.

I'd love to discuss thoughts and reactions and to learn about other experiences in this area. Please reach out to me at?[email protected]