Looking at this important front with a long-term perspective
By: Ignacio Barros
If your business has survived, or even prospered, during these last three years of historical challenges (pandemic, war in Europe, inflation, rising rates, and political crisis in much of Latin America) you may think that you are ready to face what is coming. Don’t be so sure. Sustained high performance organizations know that a skill in which they must always excel is in operational excellence, and that is not a milestone that is achieved; it is something permanent. And there are three reasons why this concept, so ingrained in fundamental management principles, is more important today than ever. First, finding and retaining talent remains a huge challenge, as a whole new generation seeks more flexible work. Second, labor productivity has stagnated in much of the world, as labor costs have risen and outputs have not grown proportionately. And third, according to McKinsey, two-thirds of the top executives interviewed are dissatisfied with the return on their technology investments. With all that said, there’s probably never been a better time than now to get really good at what your company does, and specifically your operations.
Operational excellence, as we define it, includes a strong commitment and alignment with the company’s strategy, with the organizational behaviors that underpin that strategy, and with the support of technology-enabled organizational, management and operational systems. Those who really understand operational excellence see it as a commitment to action. It is not a function or an organizational area: it is a way of working, a way of investing in people, a way of delivering more value to customers. It is important enough to be among the top priorities of directors and CEOs.
But operational excellence depends closely on the ability of a company’s executives to apply it. Therefore, it will be different in a mine, in a department store and in a call center. But the behaviors that should be expected from leaders, and their ability to connect with their teams, shouldn’t change.
In our work with many organizations we see four paths they have taken:
- First movers are the best in their respective industries: they move before everyone else, take calculated risks, and use operational excellence as the foundation to reach their potential.
- The cautious focus on preserving their efficiency base and shoring it up with incremental improvements; they risk less.
- Irregulars begin to implement the principles of operational excellence, but along the way get sidetracked by conflicting priorities.
- The reluctant have yet to embark on a journey of operational excellence and have therefore never established a meaningful level of maturity.
Our suggestion to a CEO or chief executive officer is that they begin by defining where is their organization’s starting point to the path to operational excellence. Second, don’t take anything for granted: there is a high possibility that the ways of working in your organization are very different now than they were a few years ago, so the second recommendation is to understand in detail how things have evolved. (people, processes and technology). And the third opportunity is to think of this whole set of actions as a general mindset that outlasts a CEO’s tenure; it is a long-term career in which an outgoing CEO can say to his organization: “I am leaving my successor a better company in terms of how it is managed, the maturity of its processes and the development of its people.” That is a legacy worth leaving.
- The immediate need for operational excellence (David Hamilton, McKinsey, Dec. 2022)
- 4 Ways Operational Excellence Helps Attract and Retain Employees (Diana David, Oil & Gas IQ, July 2022)
- Emerging trends in business transformation and operational excellence in 2022 (Helge Hess, Process Excellence Network, Jan. 2022)
- SYNERGOS internal cases