Elements of Success with Operational Excellence Programs

A study from Archstone Consulting sheds light on what more companies should do to achieve operational excellence


Formula for Successful Continuous Improvement Programs

The results of the study indicated the characteristics of successful companies naturally aligned with four critical themes. Moreover, there were clear distinctions between activities that the studied company did, which we call "table stakes," and those that only the continually successful companies did, which we label "differentiators." Collectively, these four themes and the underlying table stakes and differentiators define the formula for continuous improvement success. They are:

1. Link Operational Excellence efforts to the overall Business Strategy — It is well understood that the best continuous improvement efforts boil up from those closest to the actual work. They know best what the problems are and come up with novel ways to fix them. The logic flaw in applying this approach is that it presumes that many disconnected improvement efforts will add up to meaningful, measurable and significant results in the right areas, which they often do not. In the less successful companies, their operational excellence programs simply add up to a series of disconnected but occasionally "successful" individual efforts, which do not take the overall business where it needs to go. Imagine that a company's strategy focuses on product and service innovation. It is unlikely that a series of independent grass-roots initiatives focused on process efficiency, however well meaning and executed, will drive the company to its strategic goal. What is required is an overall objective, set and communicated by top management, to focus the efforts throughout the company, along with an ongoing process to align efforts behind that objective.

    Table Stakes:
  • The business strategy is clearly defined and communicated
  • The operational improvement planning process is driven by the business strategy
    Differentiators:
  • The planning process uses business cases to ensure that project goals and improvements tie back to the business strategy

2. Link efforts and goals through data and metrics to achieve tangible results — While it is relatively simple to set high-level goals, such as increase productivity by X percent or reduce costs by $Y, it is often difficult to link results of individual improvement initiatives to these metrics. For example: How does a project to reduce setup time by two minutes support the goal of productivity improvement? It depends on many factors, including capacity and utilization of the equipment or line, whether or not it is a bottleneck operation and other factors. Successful companies in our study have rigorous processes to decompose high-level goals and link them to results from individual improvement project targets. At these companies, projects that do not link to the overall strategy are candidates for being dropped.

    Table Stakes:
  • Tracking and reporting of results and progress against original goals
  • Performance improvement objectives are included in employee annual goals
  • Incentive compensation for project team members is partially linked to completion of performance improvement projects
  • Sustainability/control planning is included as part of every improvement initiative
  • Operational improvement results are included in formal performance/compensation reviews for executives
  • Operation improvement results are included in bonus setting for executives
    Differentiators:
  • Business cases are used to prioritize and downselect projects
  • Public recognition is given to management, supervisors and team members for operational improvement results
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