Follow the Money

The Four Dimensions of Operational Excellence

Cutting costs helps the bottom line but weakens future performance.  Sustaining operational excellence in a down business cycle requires the better use of each of the four dimensions of operational excellence: people, process, technology, and time.  However, for many organizations these four dimensions are out of balance.  Creating a balance between them enables a more productive and stress-free work environment.

Traditional approaches to operational excellence tend to be one dimensional. For example, an organization with a primary focus on implementing technology solutions, may not sufficiently invest in people and processes.  Too much focus on technology may provide a cost effective service to customers, but one that is inflexible and difficult to adjust to changing market conditions.  However an office focused primarily on leveraging its people may provide its customers a highly satisfying experience, but that experience may be too costly to maintain.

Considering all four dimensions of operational excellence helps maintain equilibrium between existing people, process, technology, and time resources.  Each dimension offers a different perspective that can be used to manage each individual resource as well as the interactions between all four resources.

• People – role definitions, responsibility transfers, service level agreements
• Process – work instructions, decision points, value added steps
• Technology – role-based inputs & outputs, information milestones
• Time – flow, priorities, work-in-process, outcomes, change

Well defined responsibility transfers make it easier to identify value added and non-value added work steps; reducing costs. Succinct value added process steps describe exactly what information is needed when; reducing lead times.  Concise knowledge of role-based inputs and outputs better defines responsibility transfers; reducing rework.  Pro-actively managing change through result-based outcomes sustains operational excellence; reducing workplace stress.

A four dimensional approach to increasing operational excellence applies four unique perspectives to performance improvement.  Each perspective provides additional insights and management control points that are not available individually.  Applying all four perspectives to increase operational excellence, results in a balanced environment with better solutions, greater employee morale, higher productivity, lower costs, and more satisfied customers.

Quality isn't just for products

According to an article Titled "The Big Picture" by Daniel Altman in the May 2004 issue of Business 2.0, Fifty years ago the typical manufacturing worker produced $48,000 worth of products/services (in 2000 dollars) and the typical service sector worker produced about $39,000. Today the service worker's output has risen by 47% to $54,000, but the manufacturing worker's output has shot up by an astounding 330% to more than $207,000.

Manufacturing's productivity has increased because they had to compete with the rest of the world. Until recently the service-based industries had been sheltered from global competition. No more... Now not only must service sector companies compete with other companies worldwide, but individual service workers must compete for their jobs to stop them from being outsourced overseas.

So is there anything that service-based industries can learn from manufacturers; who have been competing on a global scale for 50 years? Yes ==> Quality isn't just for products! Manufacturers have achieved their tremendous increases in productivity by taking the teachings of W. Edwards Deming and others and driving quality into every aspect of the company.

In a manufacturing company, any activity that does not produce customer value is considered waste, and therefore a quality defect. Just like a software bug or a product malfunction, waste is tracked and eliminated.

Do you know of many service companies that consider meetings that start late a quality defect? A report that no one reads a quality defect? A stack of work in an inbox a quality defect? If the service sector learned from its manufacturing brethren and more did, the service sector could start to see similar productivity increases to the 330% achieved by manufacturing.

Do the math. If any service company increased its output per employee by 20% what would that do to its revenue? To its profits? Sure seems like a no brainer.

Productivity is not a whip

Productivity gains take toll on workers, by David Streitfeld, Los Angeles Times, March 9, 2004
Productivity rose 4.2 percent in 2003, but for some companies there was a cost. It appears the pressure to do more with less sometimes translates into doing more with more. This article describes the pressures on employees as Countrywide Financial Corp. strives to increase productivity. It mentions how Starbucks Corp., RadiosShack Corp., and T-Mobile USA Inc. all paid fines to settle claims of requiring overtime without pay. Readers should realize that the pursuit of productivity does not require illicit activities, but the temptations are there. Any productivity program should include metrics to not only measure improvements but also manage overzealous shortcuts. Productivity is a tool to help organizations work smarter... not make them work harder.

March Madness

March Madness hits the workplace, by Charley Hannagan, The Post Standard, March 16, 2004
The article notes that Challenger, Gray & Christmas, a New York outplacement firm, estimates the U.S. loses about $1.5 billion a year in productivity related to March Madness. The general response to a very informal survey I performed was "no way!" Believe it. People are expensive and a lot of even slightly distracted people are very expensive. The corollary lesson to this is: It does not take much to increase U.S. productivity by $1.5 billion per month.