Building operating excellence

Management literature is filled with powerful management advice. Some advice published in the Harvard Business Review asks business owners to focus on three issues in their organizations—internal operations, customer intimacy and innovation. Business consultants refer to these as value disciplines. The idea is to be as good as your competition in two out of the three value disciplines and be superior in one. The one you choose to be best at is the one that gives you the most competitive advantage.

Let's consider your company's internal operations. You've probably been pushed to improve internal operations through quality initiatives. Customers have demanded improvements, and you probably have made similar demands on your suppliers. The question is whether you have done enough. The first things to examine are how to improve specific tasks, minimize costs, and eliminate redundancy or intermediate steps. But there are other ways to improve operational excellence.

Looking inside

For example, I know an insulation contracting company that reduced insurance costs by implementing processes that led to reduced workplace accidents. The company cut its accident incident rate from 14.5 to 2.5 per 100 manyears (2,000 hours equal one manyear) in just six years. How did the company do it?

When the chief executive officer (CEO) first began his attempts to improve safety, everyone in the company believed accidents just happened; they were part of a dangerous business and accepted the danger. The CEO's main strategy was to involve all key employees in discussion and idea generation about safety. He also invited speakers from other companies to talk about what they had done at their companies. For instance, customers offered concrete examples of successful training and incentive programs.

As a result of the information gathered and ideas generated, the company developed a structured process of improvement and a safety-incentive program. And employees began to share how the process was helping them stay safe.

Although it can be difficult to get employees to implement a program, if you can do it, the payoff can be huge. The company's workers' compensation premium dropped 57 percent from $7 million to $3 million in four years.

Here's a second story. One of my business school student groups tackled a problem stockroom at a company. The students' first thought was to automate the stockroom and get rid of employees perceived to be incompetent. I encouraged the group to ask the so-called "incompetents" for suggestions for improvements. Initially, the stockroom employees discussed how difficult their jobs were. But at the second meeting, they discussed how to solve the problems they had identified at the first meeting.

Within a few weeks, 37 suggestions had been made and 24 of them were implemented. Within four weeks, reshipments had dropped from more than 40 to fewer than 20 per month. Customer complaints were down as a result of decreased picking errors. Shipping costs reduced; lead times narrowed; and productivity increased. The stockroom displayed pride in the productivity gains with public charts of their successes.

The key in both of these stories is operating processes were greatly improved by vigorously engaging employees in their resolution.


So how would I suggest you improve your operating efficiency? Here are some ways:

  • Invite everyone to identify tasks that could be improved.
  • Engage everyone in generating suggestions.
  • Develop a plan to screen, choose and implement suggestions.
  • Implement and measure the success of the changes you make.

To engage employees in an idea-generating session, provide large index cards and markers to everyone. Then, break employees into small groups to work together to generate suggestions and have them record suggestions on the index cards.

After you collect the suggestions and sort them into similar areas of focus, use the suggestions to develop a plan to screen, choose and implement suggestions.

Remember: Improvement should lead to greater profits. And involving employees in the improvement process can increase morale and lead to greater improvements and cost savings.

Melody Camp is a management consultant based in Chicago.


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