Operational efficiency strategy: concept, comprehensive approach, development phases and results

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Remember the famous "Fast, high quality, inexpensive: pick two." The fulfillment of three mutually exclusive wishes at the same time was considered impossible in principle. Now we need to get rid of this stereotype.

The strategy of operational efficiency is aimed precisely at improving the quality of the product without loss of time and with minimal production costs. This is a departure from rush jobs and force majeure to a new state of companies, the name of which is not yet very well established. This is sometimes referred to as "agility" in business, referring to speed, agility and agility.

The operational efficiency of an enterprise is the improvement of product quality while reducing costs. This is not an easy task, and achieving such ambitious goals will require strategies and major changes in the company.

But the game is worth the candle, because the main advantage of the best modern companies is the ability to quickly and adequately respond to external changes, keepingthis is the optimum cost. The technology for achieving a high level of operational efficiency needs to be well understood.

Something went wrong. Everything went wrong

The company has been operating for several years with a good profit and a stable market share. Nothing changes in the management system, because “the best is the enemy of the good”, and why, when corporate indicators go hand in hand with inflation charts and regional market statistics. It's all good.

Good, but not so good. Because in this situation, alarming symptoms will definitely appear:

• extra procedures and regulatory actions that are outdated, but no one has eliminated them;
• duplication of work by different departments;
• lack of reliable current information about the state of resources, including financial ones;
• lack of cost and cost optimization plans;
• old equipment, outdated technology;
• decrease in the creative activity of employees: they simply have no time.

Such symptoms can't lead to anything good. They don't.

Here is the result:

• the state is inflated, the payroll is growing catastrophically - the article on wages;
• nobody controls costs;
• superfluous papers appear - documents of unnecessary reporting, unprofitable positions in reports, etc.;
• in warehouses - overstocking, and in financial statements - freezing money in stocks;
• the mood of employees resembles the general depressive syndrome of the company,any motivation has ceased to work, only the “under the stick” method remains.

Diagnosis, as you can see, unimportant. The best modern means of treatment is to increase operational efficiency. Let's move on to how to use it, dosage and contraindications.

Concept, nuances and differences

What is the fundamental difference between the standard methods of improving the efficiency of the company and the project initiative "Operational efficiency"?

There are never trifles in the operational block of the company's activities. A seemingly insignificant defect at the beginning or in a side branch of the process chain can lead to serious negative consequences. Eliminating such situations is usually very expensive from all points of view: psychological, financial, communication, etc.

For example, you begin to act in a traditional way and begin to solve the problem of overstocking in warehouses - to reduce the level of stocks of finished products. You are looking for a solution within the company. And in such a situation, there is a risk of getting a negative side effect in the form of a conflict with manufacturers, to whom you have made impossible demands to increase the speed of product release.

Unfortunately, the effect of trying to win in one area while incurring losses in another is ubiquitous: a strategy to improve individual indicators often leads to the introduction of another IT program, complicating business processes, or simply increasing costs.

The operating room strategyefficiency implies a balanced approach to finding opportunities for internal reserves and their implementation. It is the integration of all activities in the company.

Business operating efficiency is by no means a strategy, it is very important to understand this. The strategy is developed with the definition of target indicators, ways to achieve them, the main vectors of development. Operational efficiency is essentially a tactical tool, it is the day-to-day state of the company with stable performance across all positions.

Everything, at once and quickly

The best ratio between the costs and the final results of the work is the main condition for the implementation of the concept. Companies operating in this format perform the same actions faster, better and with a minimum number of defects. It is this combination of properties that is a powerful competitive advantage in the market. Because it will not be possible to achieve high performance indicators quickly. It's so expensive. To implement the concept, you need patience, determination, high communication skills, the operational efficiency program itself, and much more. These indicators cannot be "stealed" - it will not work to use someone else's. Therefore, operational efficiency has two more valuable properties - sustainability and longevity.

Two in one: an integrated approach to strategy implementation

There is no clear classification of the main approaches to managing an organization in the economy. There is no doubt that it should be systemic. But the choiceof the available management methods can cause certain difficulties. What is the best approach to increase operational activity: structural, functional, situational, process or project?

It seems that a hybrid solution would be appropriate and logical: combine the two approaches. We are talking about the integration of project and process approaches. To harmonize them, it will be necessary to develop the structure of operational activities, create and implement processes using the unified execution of operational efficiency projects. All these actions are not new and superfluous, they are needed in any case. Therefore, the choice of process and project approaches seems quite acceptable.

Phases of development and implementation

Optimization of the organization's business processes. If the process approach is not implemented in the company or formally implemented, this situation will have to be changed. It will be necessary to calculate and build optimal chains of actions that will lead to improved results with minimal costs in the form of material and human resources. Employees responsible for the process "philosophy" in the company should be specifically assigned with a clear description of functional responsibilities. Direct subordination should be very high - best of all the head or first deputy head

• The most important and very promising component is the rational use of human resources. This principle is by no means limited to the intelligibleorganizational structure with well-defined functional responsibilities of each employee. We are talking about new recruiting technologies, talent management, new formats for training and developing employees. In other words, the optimization of human resources implies, first of all, the high quality of these resources. These are competent and educated employees.
• "Resource" principle - careful attitude to resources. Nowadays, the expression “lean manufacturing” is often used, which does not look very professional. The fact is that the Japanese system of "lean manufacturing" includes quite specific and stringent requirements that many are unaware of. One way or another, the efficiency of the operating system includes a "resource" issue. An important point to keep in mind is that "careful attitude" does not mean saving money, but the optimal use of resources of all kinds.
• Monitoring changes of any nature - internal and external. This is not as simple as it might seem at first glance. Information about competitors, new technologies, changes in legislation, quarrels between heads of departments, accidents at distant warehouses - everything must be processed and transmitted through established channels. The information component should be well written in a dedicated business process.
• Control and accounting system. Competent flow of reporting in compliance with the rules of classical bureaucracy. The concept of bureaucracy is undeservedly discredited, it means the correct workflow: "the minimum necessary for the right people." process approach, as well asother changes should be documented for one reason: to track results and changes in KPIs for operations.

Tasks for Russian companies

Against a backdrop of tight market regulation, more sophisticated consumers, a slowdown in GDP growth and many other events that do not make it easier for companies to grow, the scope needs to be clearly defined. They can even be called combat, and their urgent implementation - front-line activities. You can do without jokes, but the specifics should be ironclad:

• Providing transparency with partners, optimizing costs, increasing coverage, updated distribution channel strategy.
• Building strategic alliances with key partners of a new type: with integration and changing contractual conditions.
• Unconditional high-class service: the only way to keep customers and have a competitive advantage.
• Developing and implementing new standards for direct and indirect sales.

Russian companies have every opportunity to improve business functions and improve operational efficiency. The strategy should include at least four areas:

1. improving labor productivity;
2. effectiveness of personnel management;
3. rational capital management;
4. productive customer relationships.

Operational efficiency management

Of course, this is the business of the first leader. Among the control toolsperformance of the tasks set, the balanced scorecard is also included, which does an excellent job with the analysis and calculations of operational efficiency.

There are three areas to keep in focus:

1. Building and maintaining a lean and stable operating system.
2. Formation of a new organizational structure.
3. Integrate corporate culture and employee engagement into all improvement activities.

When planning any effective action, there are four questions to ask yourself:

• How to optimize the conditions and the necessary resources to perform this action?
• Which personnel should be involved? How will people be contacted?
• What is their motivation and what should be done to increase it?
• Are people competent enough, or do they need to be trained?

All types of operations and activities fit perfectly into blocks of business processes. If they do not yet exist, they will need to be described in order to then be optimized according to all the rules of modern business management science. The process approach is fundamentally different from the functional one, and above all, in its ability to quickly change and focus on the final result.

If, with the traditional functional approach, a company is a set of departments, then with a process approach, it is a set of operations in the form of processes. The main working unit of the entire improvement strategy will be the operation - the main brick of success.

People

Now they call it fashionableHR term "staff engagement", which is actually the most important component of success. It is important not to replace this involvement with numerous internal employee surveys, as unfortunately often happens. A survey is a great tool that you will definitely need in the course of all the work. But before conducting a survey, you need to work hard so that absolutely every employee understands where and why the whole company as a whole and its division in particular are moving. And the most important thing will be understanding his own role in this movement. Such motivation has never failed anyone, it is worth a lot.

In addition to a deep understanding by employees of all changes in the company, it is necessary to seriously implement the system of key KPI indicators. After all, if you look at it, then the classic key indicators are also indicators of operational efficiency.

Results: success is needed today

Most likely, companies today need to reconsider their views on technology improvement: they cannot avoid project activities to improve processes and operations. A few years ago, competitive advantages were formed by focusing improvements in one direction - for example, reducing production costs or revising the customer loy alty program. The effects of the changes made most often did not come immediately, but over several months or even years.

Todaysuch rates are unacceptable. The situation is changing with cosmic speed on all fronts, now the “success today” installation is working. But it's not just about speed. Having achieved an increase in production quality indicators against the background of cost optimization, stopping at this is like death. Already in the second or third cycles of the process, you need to start achieving higher profits. Do not wait for negative symptoms to start a new project to eliminate them - this approach does not work anymore.

Today there are no and cannot be any corporate secrets or secrets associated with specific benefits. Successful developments and temporary advantages of any one direction in the company's activity are quantities with a very dubious value.

Keeping competitive advantage will be possible not with specific products or areas of activity, but with the company's ability to quickly and effectively adapt. The ability to change across the board at once-human resources, inventory management, workflow, product line, key customers, risk management, and more-that’s what operating performance management should be like as a permanent company.

Instead of a conclusion: a he althy lifestyle

The operational efficiency of an enterprise is a constant and continuous process that should never stop. This format of work should become a “he althy lifestyle” for the company – a way of existence. Speaking in metaphors, there is no need to go on a strict diet in order to urgently lose weight by the summer. Or shoot downspiked blood pressure with hard pills.

Telling employees on Monday morning, “From now on, we will be more efficient” is not an option, experienced leaders understand this well. Involve everyone, explain as much as possible and provide the necessary tools - this is the task of the first leaders, so that people will follow him.

No fires or force majeure. To be in good shape all the time, to track any changes around, to find beautiful and smart solutions, to act pro-actively… Just like that. There is no other way.