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What is operational excellence and how can your business achieve it?

Operational excellence and process optimization are the most foolproof ways to ensure your business runs as smoothly as possible. Master the principles of operational excellence and learn to apply them to different industries

Succeeding in business isn’t just about establishing a logical business model or increasing short-term profits. Business process optimization is essential if you want to create a thriving company, since your goal should be continuous improvement. This is where operational excellence comes in, as a strategy that helps your business adapt to changes in the environment or market conditions.

By improving efficiency at every stage, operational excellence gives you a competitive advantage. A series of gradual, specifically targeted improvements lead to a business that runs like clockwork.

Table of contents

1. What is operational excellence?

2. What are the benefits of operational excellence?

2.1. Optimize workflows

2.2. Fewer risks

2.3. Standardized processes

2.4. Accountability

2.5. Empower employees

3. What is operational excellence in construction?

3.1. Define processes

3.2. Daily management

3.3. Problem solving

4. What is operational excellence in hospitality?

4.1. Foster teamwork

4.2. Establish consistency

4.3. Ensure safety

5. What is operational excellence in manufacturing?

5.1. Include your frontline in quality desing

5.2. Monitor quality control on the floor

5.3. Pursue continuous improvement

6. How does technology facilitate operational excellence?

6.1. Automation

6.2. Integrations

What is operational excellence?

Operational excellence is a business management philosophy that prioritizes continuous improvement and promotes an improvement culture. In order for the concept to work, not only leaders, but also employees, need to be invested in providing quality products and customer experiences.

When improving your business by implementing operational excellence, always remember that every part of your business can be improved. Thorough application of process optimization principles means inspecting every facet of your operations, especially employee performance.

Like many other workplace optimization systems, this one has its roots in Japan, specifically in the Shingo model, which was developed to help optimize workflows and supply chains. The core principles behind operational excellence are:

  • Respect for individuals: As multiple studies have shown, respected individuals are better-working individuals
  • Collaborative decision-making: Though leaders ultimately make final decisions, they should value input from stakeholders at every level when doing so
  • Scientific thinking: Scientific thinking doesn’t just mean embracing data, it means allowing employees the freedom to experiment and implement fresh ideas
  • Focus on processes: If something doesn’t go as planned, look for ways to improve your processes rather than blaming specific employees
  • Get it right the first time: Operational excellence means using the correct tools, people, and methods to produce quality results consistently
  • Transparent goals: Running an optimized business means communicating business goals and purpose as well as helping employees to internalize those themselves
  • Create customer value: Customers are the heart of any business, so every decision you make needs to be taken in light of how it serves customer needs

Several other management, manufacturing, and quality assurance processes fall under the umbrella of operational excellence. The Kaizen method promotes process optimization by emphasizing teamwork and assigning various team members to specific areas. Lean manufacturing aims to maximize productivity by eliminating waste. And the Six Sigma method encompasses a set of processes that improve efficiency by minimizing defects in production.

Hospitality workers serving customers

What are the benefits of operational excellence?

Operational excellence represents a complete overhaul of the way your company runs. Continuously changing isn’t a simple task, and it doesn’t happen overnight. But that openness to change and willingness to admit your processes aren’t perfect yields several rewards.

Optimize workflows

Operational excellence improves your workflows because it helps you identify potential roadblocks long before they put a stop to production. Business management software creates more accurate visualizations of processes and shows you where waste is occurring. Part of adjusting your workflow is fine tuning your supply chain management, so that you don’t over or under produce.

Fewer risks

When you pay attention to process optimization and examine all the different areas of your business, you reduce the risks of error. A large part of increasing your efficiency is making sure that workers can do their jobs unhindered by hazards; meaning those jobs will be done faster. It’s also important to keep your tools and equipment working.

Reducing the number of risks your employees face also lowers operating costs, since every incident that occurs carries a financial as well as a human cost.

Standardized processes

Successful business process optimization ensures that, after the most effective methodologies are identified, every worker adheres to them. A shared vision for end results and a commonly agreed-on way of reaching those results promotes teamwork in your organization.

Accountability

Operational excellence involves clarifying everyone’s roles and responsibilities, to eliminate ambiguity and make communication smoother. Defining team members’ specific functions also makes it easier to identify where errors have occurred; and although operational excellence should never be about assigning blame, that information makes adjusting your processes easier.

Empower employees

Operational excellence is not a strict top-down system. Frontline workers receive the tools and the training they need to make decisions on their own. These decisions are made within the overall strategic framework defined by leadership, but your employees retain a good amount of autonomy.

Operational excellence benefits every industry. However there are several industries where it has transitioned from a bonus to a necessity. These industries include:

  • Construction
  • Manufacturing
  • Hospitality

What is operational excellence in construction?

Operational excellence in the construction industry
is more complex than in other industries for a few reasons. Construction workers and site managers deal with a variety of different resources and have to comply with local laws and regulations around their work. But the biggest reason operational excellence is such a challenge in construction is that no two job sites are the same. The push for process optimization is reflected in sustainable construction

That said, there are three general steps towards process optimization you can apply to any project you’re working on.

Define processes

Before you can collaborate effectively with team members and stakeholders, you need to define all the processes that are involved with the project. Some processes your construction team will likely deal with include:

  • Defining project scope
  • Quality management
  • Third party approval
  • Mobilizing subcontractors

Knowing your approaches to these issues helps you create a project schedule. To make sure everyone involved in the project understands the processes involved, the key questions to ask before you start are:

  • What processes are part of this project?
  • Which of these are the most important processes, and where will there likely be bottlenecks?
  • How do these processes work?
  • How should these processes be adjusted to reflect team capacity and still finish on time?

Daily management

For each process involved in your construction job, develop a framework for evaluating its implementation on a daily basis. The daily frequency is important because constant re-evaluations help you spot issues early.

This framework should ask questions such as:

  • Are the right measures in place?
  • Is it easy to judge performance at a glance?
  • Are there regular opportunities for review?

Ideally, you’ll want to develop a system with clear, observable parameters that signify problems, with space set aside for developing corrective actions
.

Problem solving

As a construction site manager, it’s likely you will find yourself undersupplied at some point. This is the kind of situation where it becomes necessary to approach tasks differently. Problem-solving efforts in construction should primarily focus on improving the efficiency of specific tasks, since even though no construction jobs are the same, they do involve the same or similar manual processes.

Assessing the way your workers complete tasks helps pinpoint errors and suggest improvements. In construction, that’s important not only because you’ll finish your work faster, but because improper behavior is one of the biggest causes of on-site incidents.

Construction workers in orange PPE in the middle of work

What is operational excellence in hospitality?

Since hospitality
is the most customer-facing industry out there, and operational excellence is all about delivering value to customers, the two are a perfect match. As applied to the hospitality industry, operational excellence:

  • Raises customer loyalty by making your service and offer more consistent
  • Leads to fewer mistakes by implementing precise systems
  • Improves the customer experience, since employees have more time to respond to customer requests
  • Improves competitiveness, allowing your business to remain more desirable than the competition

In order to implement operational excellence in your hospitality business, and reap the above benefits, there are three steps you can follow.

Foster teamwork

Effortless process optimization means collaboration between team members. You can use software to help with this if available – it will make things easier. Your goal is to facilitate instant communication between team members at all levels, meaning that staff can communicate with each other and with management in real time.

Another important element of teamwork in hospitality is keeping your employees happy and enabling them to thrive on the job. Do as much as you can to simplify tasks like room inspections and food safety checks so that employees have everything they need to work at the highest level possible.

Establish consistency

Operational excellence and continuous improvement are habits, meaning they need to be repeated consistently. The faster you establish consistency, the better you’ll be at identifying deviations and isolating the cause of suboptimal performance. Defining your standards helps you allocate resources where needed.

Ensure safety

Because hospitality workers interact with customers all day, it’s not only themselves they harm with unsafe practices. To ensure the well-being of your customers, it’s imperative that your health and safety processes be as thorough as possible.

Integrating safety measures into daily tasks helps employees develop a habit of safety consciousness. And things like wearing PPE while working also help protect your team members.

What is operational excellence in manufacturing?

Manufacturing excellence is a framework companies use in order to meet their operational, financial, and people-oriented goals. To accomplish this, managers use the principles of Six Sigma, lean manufacturing, and continuous improvement. Operational excellence in manufacturing requires every employee to understand how their tasks deliver value to the customer.

The number one obstacle to manufacturing excellence is resistance to change on the part of employees. That’s why you should follow these three steps to integrate process improvement principles throughout your facility.

Include your frontline in quality design

It’s important that your workers are involved in the planning, testing, and implementation of new quality assurance processes. They are the ones seeing the impact and performing the checks, so they will have insights you won’t.

Soliciting employee feedback also engages them more in the continuous improvement process. Respecting their ideas breaks down barriers between worker and supervisor and supports cross-team collaboration.

Monitor quality control on the floor

You can’t achieve manufacturing excellence without process excellence, and for that, you need to be paying attention to how your workers implement processes. Make sure your quality control is simple and easy for workers to follow, so they don’t miss anything.

You need to check with your workers regularly to understand recurring issues or inconsistencies. Constant feedback on the state of your quality control efforts enables you to find the root cause of problems faster.

Pursue continuous improvement

Continuous improvement is at the core of operational excellence no matter your industry. In manufacturing, everyone needs to be working with the same data in order to make informed decisions and identify flaws in processes.

Continuous improvement is the practice of taking the quality controls you designed and applying them to your workflow. It’s essentially asking your employees to add extra work to their daily routine, which is why it’s imperative you include said employees in the quality design process.

How does technology facilitate operational excellence?

A lot of business functions are supported or executed entirely by technology, and operational excellence is no different. There are a wide range of automation, data management, and analytics tools you can use to drive operational excellence in your business.

Automation

Automating key administrative and routine processes saves businesses enormous amounts of time and reduces error. From paperwork like accounting or inventory management to more hands-on mechanical work, any task that doesn’t require creative thinking can be automated.

Examples of software you might consider include:

  • Business process management software, which acts as a portal where you can view, measure, and adjust processes
  • Process mining tools, which are used to assess whether measures are working as intended
  • Process automation tools, which allow for tasks like extracting data, filling forms, and organizing files to be fully automated

Integrations

Operational excellence rests on the availability and accuracy of data. When all your systems are connected and your teams are working with the most accurate information available, your chances of success are higher.

Luckily, there are powerful integrations you can use to collect, maintain, and seamlessly transfer data at will. Companies use programs like:

  • APIs: APIs connect your systems to make sure you can access and share data across teams and with stakeholders
  • Application integration: Application integration allows you to move data from anywhere to anywhere, meaning you can easily migrate all your resources to any newly deployed applications
  • Event streaming: This helps you bring value to customers by capturing real-time data you can use to automate customer-facing actions

Using a digital checklist app like Lumiform makes promoting operational excellence in the workplace easy. Distributing pre-made or customized checklists to your employees tells them exactly what their tasks are at any given time, and you can create a schedule as well. Since checklists are arranged intuitively, they’re easy to understand at a glance and you save time training your workers.

Scheduling daily routines with Lumiform drives process improvement thanks to the automated reports that are generated after checklists are completed. Having a visualization of your results enables you to single out areas for optimization. And you can report issues directly while completing a checklist. Lumiform also integrates with all your existing systems, as well as supporting integrations like Microsoft Power BI.

Factory workers performing tasks with the help of automation

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