9 Tips to Keep You Operating at a Strategic Level
The How and the Why of Operations Strategy
Many companies focus on the tactics of continuous improvement and are often disappointed with their lackluster results. They look at top line growth and see anemic improvement, and instead of bottom line profitability they see little or no growth. Because company value is often based on top line and bottom line growth as well as cash flow, a steep positive improvement curve helps rapidly increase your business’s value.
But isn’t it best to just move ahead with improvement efforts to get the quickest bang for your buck? Not if you really want exponential improvement. The problem with tactics is they focus on the how of improvement efforts without the context of why.
Why is powerful. Why?
- it informs your employees of the purpose of their efforts and ultimately what’s in it for them.
- it puts things in context so priorities are easy to set and decisions are easier.
- it helps focus on what’s important to be sure your improvement efforts are targeted correctly.
Why is strategy, how is tactics. Putting tactics first is putting the cart before the horse. Do you have a strong operations strategy that aligns with your business model and vision? Are you achieving breakthrough results in your business?
Urgent vs Important
The concept of “The Tyranny of the Urgent” has been around for a long time, yet many people get caught up in the urgent every day. Charles E. Hummel wrote the booklet Tyranny of the Urgent in 1967. That was followed by The Time Trap by McKenzie and Co. and then The Seven Habits…. by Covey. Time management is clearly a concept that captures many people’s thinking, especially those who find themselves trapped by urgency.
I’ve seen many companies get caught up in urgency (get it shipped!) without focusing on importance (quality products, on time, complete – the “Perfect Order”). If you focus on what’s urgent, it feels like you’re running a sprint all the time, out of breath, never getting everything done. It’s frustrating and stressful.
The definitions of urgent vs. important actually go back to Dwight D. Eisenhower, 34th President of the United States. He defined urgent as a task that requires immediate attention and is often performed in a hurried, reactive manner. Important is a task that contributes to long-term values and goals and is performed in a responsive mode that leads to new opportunities. Just the sound of “important” feels good.
Clearly, getting away from a narrow focus on urgency and prioritizing importance allows for accelerated growth, profitability and cash flow for your organization. Do you focus on the urgent? Are you trapped in the tyranny? Have you defined what’s important.
Measuring Results, Not Activities
One of the benefits of key performance indicator (KPIs) is they help you and your team focus on results rather than activities, and prevent you from falling into the “busy trap.” Unfortunately, an element of human behavior is that when we don’t know what to do, we tend to run in circles, staying busy but accomplishing very little. Good leaders armed with solid KPIs get everyone to settle down, focus on priorities and get results.
Measuring results helps reinforce priorities and keeps the team focused on what is important. Mid-level managers in particular need to avoid the busy trap of day-to-day urgencies (the “putting out fires” phenomenon), and instead keep driving toward their goals.
Smart companies design their metrics to drive innovation as much as (or more than) efficiency. Often companies set targets for improvement that are too low and don’t drive revolutionary change. Don’t just ask for 2% – 3% improvement; ask for 10% or 20%. The only way to achieve that is to think outside the box and innovate.
Be Succinct
I recently saw a blog post that discussed taking notes electronically, on an iPad, rather than on paper, in order to reduce handling and administration. I tried that approach a few years ago, but I’ve now found that a simple 3 by 5 note card is even more effective for several reasons.
First, I walk around manufacturing and distribution facilities a lot, and often see things that I want to remember. Carry an electronic note taking platform and trying to actually take the notes can be problematic, but writing down a brief memory-jogger type of note on the card allows me to act on the observation when I’m ready to deal with it.
Second, I tend to restrict my note taking to only those points that drive objectives and change. Even in my interviews with executives during my projects, instead of trying to capture every word, I write down only those points that are highly relevant to the issue at hand. I find now that I’m much more efficient, and more importantly, I remain in the moment and actually hear those few important points that can lead to major improvement.
Stay in the moment, focus on objectives and key points, and only write down those things that really drive change.
It Doesn’t Work If You Don’t Do It
Recently I was working a project for a client and I checked several references I’ve used over the years for manufacturing and distribution improvements. Four of the books I often refer to are:
- World Class Manufacturing – Richard Schonberger
- Attaining Manufacturing Excellence – Robert W. Hall
- The New Manufacturing Challenge – Kiyoshi Suzaki
- High Velocity Manufacturing – Michael Tincher
These books guided many of the World Class transformations I worked on in the mid-1990s and beyond. They’re 25 years old (or more)!
The interesting thing is that many companies still aren’t doing what these books (and others) suggest. The ideas in them are extremely effective and produce extraordinary results, so why aren’t more companies using them?
- You can’t learn things by simply reading a book – you need guides to help you along the way and experience from trying things with the resulting mistakes/learning and successes. Would you want to read a book on how to ski and then go hit the black diamond slopes?
- It takes intentionality – you have to have a strategy and then execute.
- It takes leadership – What all of my successful clients have in common is an upper-middle level manager/champion who is driven to accomplish extraordinary things.
The foundational ideas of process and productivity improvement are immutable, but they only work if you use them.
Be Accountable
A wise person once said, “It is better to move three things forward a mile than a thousand things forward an inch.” To help people get things done, top management needs to establish clear priorities to let people know what is important, through a business strategy or an operations strategy. Once priorities are set, if a new project gets added to the list, something else needs to be put on hold, or, as I often call it, put into the parking lot. Empower people to say ‘no’ or at least ask, “If you want me to do this new thing, which of my current priorities would you like to delay?” Limiting high priority tasks to three will help get things done.
To establish accountability, employees and their managers need to know who (and it should be one person) is responsible for a given task. If it is not accomplished, what one person will you talk to? I had a chance to ask a retired Air Force General what single action he took in his career to help people get things done, and he said he always established accountability and measured results. When you assign tasks, establish how you will know that the task is complete, what measures you will use, and when the job will be completed by simply asking yourself, “Who is going to do what by when?”
George Patton, the commander of the third army for the United States during WWII, once said that many officers’ biggest failing was not following up on the orders they gave. If you assign priorities and prepare measures but fail to follow up, people will soon figure out that you weren’t serious and the work will not get done, especially if there is another project that is a competing priority or that they would rather work on. Learn Strategies for Building Accountability
Put Out the Fire Before They Start
As supply chains become more global and the focus increases on Just-In-Time (JIT) inventory to boost speed and profitability, risk management becomes a key topic for supply chain managers and CFOs. What are the right risk management issues to consider? Many companies develop strong capabilities to react once an incident occurs, like putting the fire out if your house catches fire. But how do you minimize the damage before it occurs?
First, consider what contingent action you will take. These actions include things like having the proper insurance in place to help recover from the incident. Did you know you could actually insure the supplier’s facility? You can also get several types of business interruption insurance to help make up for the lost revenue you might experience from the risk event. Talk to your property and casualty insurer and specifically ask about both business interruption and marine insurance.
Second, consider preventive action. This is the best way to manage risk. Develop risk programs with your key suppliers before risk events occur. Also consider Design for Supply Chain Management (DSCM) to design out parts that represent significant supply chain risk (see below). Regionalization of suppliers helps to reduce the risk of natural disasters. Sole sourcing parts while dual sourcing technologies maintains the effect of volume to reduce pricing while simultaneously reducing risk.
Managing risk in a global economy is a high priority for companies today. Managing both contingent and preventive responses is critical for success. Learn how to sharpen your risk management skills.
Design for Supply Chain Management and Dual Sourcing the Technology
In past posts I’ve discussed different kinds of supply chain interruptions, but how do we prevent interruptions from happening in the first place? A few years ago I attended an executive program at MIT on supply chain strategy, and they coined the term: Design for Supply Chain Management (DSCM). In other words, you can design your products to allow for quick changes when necessary.
I was VP Operations of a company that made lock boxes – the ones real estate agents use. Our engineers designed four sixteen-cent screws into the lockbox. They had a special head that required a special screwdriver. Four screws multiplied by 330,000 lockboxes a year really adds up, and there was one supplier in the world that made them. DCSM suggested we should design that screw out of the product, and we redesigned it so that the two parts could snap together, eliminating the screw entirely.
Another prevention strategy is what I call sole sourcing the part, but dual sourcing the technology. Let’s say you have two aluminum extrusion parts. You could have one supplier for all of part A and another supplier that produces all of part B. Having one supplier per part eliminates natural variation, but having two suppliers that make similar parts allows you to be agile in the event of a crisis. If supplier A goes down for any reason, you have a ready back-up source in supplier B: you already have a relationship, and supplier B is ready to make aluminum extrusion parts.
You’ll notice that this strategy includes two suppliers, no more. Keeping the number of suppliers low enables you to better negotiate for price breaks, keeps administrative and accounting costs low, and fosters a collaborative relationship with your suppliers that goes beyond writing them a check.
Partnerships – Not Just Outside the Organization
Companies often overlook their opportunities to develop internal partnerships. How many times have you heard about functional silos, internal politics, ineffective teams and weak communications? Internal partnerships (between employees and departments within the company) often provide the greatest benefits to the organization:
- Bridging the gaps between departments to improve communications
- Breaking down functional silos to improve performance
- Providing strong alignment to help achieve the vision
- Improving product quality and performance
- Driving innovation and speed
- Maximizing profit and cash flow and overall company value
Internal partnerships, just like external ones, are founded on relationships and trust, which require frequent communication. For example, operations and sales representatives should be meeting at least weekly to discuss:
- Changing market conditions
- Sales forecasts and major customer commitments
- Promotions and other impacts to smooth sales flow
- Production and supply chain status and potential interruptions
- Other issues or problems that need a planned response
Here is a lesson on value of becoming a Finance Business Partner.
Frequent communication is one of the key supporters of the golden rule of business – Let There Be No Surprises.
To find out more about partnerships both inside and outside the organization, see Ricks’ book, 1+1=100: Achieving Breakthrough Results Through Partnerships.
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