Most companies will enter 2013 with a renewed emphasis on “operational excellence” as the global economy shudders yet again.
This will often end up being defined in ways that can be equated to “competing on cost” — and, as the economic turmoil being experienced as 2012 comes to a close deepens further in 2013 and 2014, operational excellence will often be translated into a need to slash away at budgets yet again.
The problem is that often the real opportunities to truly cut out cost will not be tackled.
Make It Easier to Get Things Done: All organizations find themselves with bureaucratic accretions which have built up over time.
During a downturn is an excellent time to remove these. Some areas I find, again and again, that could be easily tackled in most companies are:
Unlock the power of action: If employees are not empowered to act, make it possible for them to do so.
Remove bottlenecks that require small-scale (say, under $5,000 decisions) to go through multiple levels of review before proceeding; allow micro-scale (say, under $1,000) decisions to take place on the front lines.
If you believe that tight control on expenditures of this nature is essential to managing costs, never forget that the ability to stop the production line — at any station, for any suspected issue of quality — was the mechanism that pole-vaulted Toyota to world automobile leadership.
Yes, there will be small amounts of waste: what you get in return is far more initiative, and far speedier results.
Disable non-essential work: This is not the time to launch a major employee satisfaction survey, study affirmative action quotas in the workplace, or other “nice to have” items.
It is better to approve a budget for travel and training and allow it to be dispensed without further bureaucracy, than to refer each decision to higher authority.
When faced with the need for a decision, make it — do not study it.
Eliminate as many reports as possible.
What this says is that we are serious about the line operations of the organization, and are cutting back on the staff work component. (If you work in a staff function, enable the line; do not burden it.)
“Is this meeting essential?”: Companies battling for the available market share in a time of retrenchment need to focus their efforts outward.
Less time, therefore, must be spent on internal matters.
If you have collaboration tools installed, let these replace the need to meet. Accelerate the process of introducing ideas through these rather than meetings occurring at “calendar-friendly” intervals.
Focus meetings on decisions; let people read for information.
A particular worry should be time spent with suppliers: if you are not actively seeking to buy, say so politely and bar further meetings as the time-wasters they will be.
Managers should be alert for every opportunity to unburden the organization.
This includes turning back “unnecessary work”: operational excellence is about sticking to what earns the company a living.
Challenging the business value of one or another imposition is part of the job.
Focus on what matters: The operationally excellent company also is constantly making process paths smoother — which can sometimes mean breaking the automation and using human beings to handle the “barely repeatable” situations.
Many incremental improvements in this area are often better than one “big bang” reorganization or “new system” effort.
Have a good estimate of how much time is actually spent doing something that leads to cash coming in — and improve that. Shorten queue times, reduce waiting, eliminate as much “multi-area involvement” as possible in favour of clean lines of action and decision.
For corporate support functions (like IT, HR, etc.), now is the time to undertake the work designed to fundamentally shift the cost of doing business.
Reduce your infrastructure costs (simplify your pay/position/evaluation schemes or your asset portfolio).
Remove as much as possible that does not add value.
Then turn to changes that change the company’s operational profile: constant staff upgrading, applications that work “outside in” (every system could be customer-facing and a brand-builder), minimally-intrusive financial controls, etc.
These changes pay off year after year, and are worth far more than 95% of the “projects” you’ve probably got in your 2012 plan at the moment.
The ideal machine would have no friction; the ideally excellent organization’s processes would have none, either.
Note that less than half of all the work to be done in an organization likely lends itself to processes that can be “perfected” anyway. Often, removing process rigidity advances an improved value-for-cost equation.
Perfection is not possible, but progress toward it certainly is.
Those that do a better job in this regard can expect to take share, over time, from those that do not, for they will have the ability to retain profitability even at lower price points.