Beyond Management Systems: Achieving Operational Excellence
Published: May, 2016 in Plant Engineering
By: Alfonsius Ariawan, Global Solution Architect
The concept of implementing a management system to enhance business performance is not foreign to most organizations. Many have designed and implemented a system that outlines how their operations are managed – at least on paper. It typically contains several elements, complete with standards and policies intended to guide personnel through their daily tasks. Recently, however, many organizations are adopting a more integrated, overarching management system that covers the broader aspects of operations, including safety, health and environment; asset and risk management; supply chain; and continuous improvement. This shift reflects the recognition that protection of assets and the extraction and creation of value are intertwined and need to be a part of an overall management system that enables operational excellence.
However, DuPont Sustainable Solutions (DSS) has seen many organizations fail to benefit from implementation of an OMS. For example, process safety incidents still occur due to poor maintenance practices even when asset reliability is a key OMS element with clearly defined expectations. Similarly, we have often seen inconsistencies in how operations are being managed within an organization, resulting in various operational wastes, contrary to the intent of the OMS. Most often, these developments are a reflection of weak execution discipline.
There are certain aspects of management systems and execution variables that DSS feels are critical in enabling the pathway toward operational excellence. These are 1) Organizational capabilities; 2) Operational culture/mindset and behavior; and 3) Leadership and managing processes (see Figure 1 on PDF). Together, these form an integrated execution model that has been shown to be effective in delivering business results.
Before discussing these three execution variables that we feel are critical for operational excellence, it is worthwhile to note that there is no right or wrong OMS. Management systems provide a useful framework for how businesses operate and are, therefore, organization specific. At the end of the day, an OMS needs to be appropriate for the risks that the business is attempting to manage. It must not be overly complicated, or the organization will not follow it. It must not be too simplistic, either, as it will then defeat the purpose. Given all the elements of a management system, an organization needs to ask whether or not each one of those elements individually and collectively will result in the actual reduction of risks. We have seen organizations design an OMS that does not link back to the intent of risk reduction. The result is a system that is more of an administrative burden than impactful, and that does not help with execution.
Even when companies have a world-class system in place, if it is poorly executed, it is worthless. Our experience tells us that people drive operational excellence. To get maximum performance, however, we find that organizations need to engage, develop and focus on their personnel to crystallize a culture that enables the system to be self-improving and self-sustaining.
Since people drive performance, it is not unreasonable to say that organizational capability is a critical execution variable. Personnel need to be functionally capable to perform their tasks well. But how is this best accomplished?
When we think of capability building, our first thought is usually of training. There is usually a training-related element within the OMS, most likely in a classroom environment. Unfortunately, capability building is not all about training. Rather, it is about learning, and learning happens through both formal interactions and informal experiences. By focusing on learning and on improving learning effectiveness, investments in capability building will be better optimized and will yield more valuable returns.
Consider an example of organizational capability in the context of operational risk management, specifically process safety. An operator new to a task is usually on-boarded with classroom training sessions. All may be well until a few months later when the operator takes a short cut, resulting in a near-miss event or an incident. In this case, the operator has been trained, but there has been a failure in the operator’s learning process resulting in the event.
In this hypothetical example the organization’s reaction is typically to increase training efforts, but the solutions to preventing future occurrences may not necessarily include additional training sessions. Instead, there may be learning variables that need to be addressed, ranging from training-related variables such as trainer’s capability, training contents and delivery methods, and timing of training, to other variables such as supervisory or peer influence, awareness of previous incidents related to the task in question, or regular coaching.
Organizations that invest in workforce capability will enhance their ability to follow through with their operational excellence roadmap. To be most effective, organizations have to focus on personnel learning versus simply training in their efforts to build capability.
Operational Culture (Mindset and Behavior)
Operational culture is an important component of performance. To achieve a healthy culture that achieves positive outcomes, employees need to execute because they understand the importance of executing well and not simply because they are required to do so. Otherwise, the organization risks delivering ‘check the box’ results, where tasks are completed as expected, but inefficiencies and incidents still happen.
One way to enable a strong operational culture is to engage personnel and consider their input during the design and roll out of OMS. A two-way communication process could be established to facilitate this. While communication is a tool that has been underutilized in many organizations in their journey towards excellence, simply establishing a communication flow is insufficient.
DSS has found that to achieve the next level of performance, the right kind of communication needs to flow and its method of delivery matters. Messages used during these communications must touch the hearts of the organization. Data and information need to be presented in a way that invokes feeling and connects with an outcome that has an emotional impact on the employee. Reaching the hearts of the organization facilitates cultural change that results in more sustainable safety, and therefore, operational improvements.
Leadership and Managing Processes
Leadership plays a key role in the success of a company by setting the tone for the organization, establishing expectations, monitoring performance and steering the company towards its goal (facilitated by data-based managing processes). But a leader’s primary task can be boiled down to prioritizing the use of the organization’s limited resources to invest in growth, or in the prevention of losses.
To guide these decisions and allocate resources effectively it is important that a leader understand his or her company’s organizational risks, both financial and operational (see Figure 2 on PDF). Surprisingly, while leaders are generally aware of their organization’s financial risks, they are much less familiar with their operational risks. Leaders need to know what layers of protection exist to manage these operational risks and ensure that these layers of protection function on demand.
The best way for leaders to gain this understanding is to be familiar with site activities. Leaders need to spend time at sites regularly, asking and learning about the risks in a humble and open manner from front-line workers. In the process, leaders must demonstrate affective leadership as previously discussed and adopt a style that appeals to the hearts of employees.
Managing processes also need to be established to ensure the disciplined execution of OMS, including talent management, capability building, and cultural strength. These processes must also emphasize behaviors that the organization should adopt, including those that direct resource prioritization in order to address more urgent risks.
An integrated OMS can be helpful for an organization as it strives to achieve operational excellence, but an OMS by itself is insufficient. To achieve desired performance, companies need to establish a risk culture within the organization, place an emphasis on learning versus training, and enable leadership to make decisions based on a clear understanding of top operational risks. In short, to achieve true, sustainable excellence, a company’s approach needs to appeal to the heads, hands and hearts of the organization.
Alfonsius Ariawan is a Global Solution Architect with DuPont Sustainable Solutions (DSS) specializing in Operational Risk Management. He has extensive experience in providing performance management, data collection and analysis support to clients in various industry sectors, and is a certified Six Sigma Master Black Belt.