Operational Excellence Basics: The Big Picture In Perspective
EP Editorial Staff | April 24, 2013
This organization-wide approach to boosting performance and results calls for an all-hands-on-deck focus on continuous improvement and added value.
By John S. Mitchell
You may already be familiar with this strategy. Embraced by many leading industrial enterprises, Operational Excellence is the latest name for and most comprehensive manifestation of an ongoing, evolutionary drive to achieve business and mission excellence. That evolution began in the 1950s with the introduction of Preventive Maintenance (PM). This, in turn, led to successful programs like Condition Based Maintenance (CBM), Predictive Maintenance (PdM) and Reliability Centered Maintenance (RCM). Invention of the personal computer (PC) streamlined the adoption of these strategies, and revolutionized maintenance by making CBM cost-effective and ushering in Computerized Maintenance Management Systems (CMMS) to increase the efficiency of planning and scheduling tasks.
Those earlier successes didn’t come without some dark clouds, though. Countless highly successful CBM programs, for example, were downsized or terminated because the they had worked as designed: They reduced the numbers of serious problems. This conflict—trying to cut costs by eliminating types of programs that really could cut costs—
set the stage for adoption of the multi-part effort we now call Operational Excellence.
The value principle
The main goals of Operational Excellence (OE) are as follows:
- Meet all business and mission requirements safely and effectively at optimal cost.
- Safely produce the greatest sustainable value.
Achieving these goals requires an enterprise to define and understand everything that detracts from them.
Actions and activities must be prioritized based on value delivered. Participants must also understand that OE is oriented toward business results and effectiveness: It’s not implemented to protect activities and tasks. Continuous, value-prioritized improvement is its objective, and it links opportunities, prioritization and measures of performance to mission and business goals. Increases in mission and business performance, along with reductions in risk and cost, are gained through the application of programs and improvement initiatives that are based on value gain to the enterprise.
The OE approach uses several support strategies. These include: Failure Modes and Effects Analysis (FMEA), to identify, prioritize and mitigate risk; Root Cause Analysis (RCA) to identify failure and incident analysis; and PM, CBM and other proven, proactive maintenance practices. All are assembled and optimized to gain the greatest value within specific business and mission objectives, operating conditions and risk profiles.
Unlike some company-wide improvement efforts, OE is opportunity-driven, i.e., implemented to address specific, value-prioritized opportunities. While this difference might not sound important, it is huge in terms of identifying, prioritizing and pursuing opportunities for value improvement, as well as the success gained for the investment.
Value prioritization is a prime, driving factor within OE. It’s critical to understand what activities and tasks contribute most to value and business success. It’s also important to remember that there are always more opportunities for improvement than time and resources. Consequently, if the sightline between a given task and its business results can’t be defined, has low value-add or low probability of success, the task should be modified or, perhaps, eliminated.
An OE program also requires cooperation across all functions. This includes complementary, mutually reinforcing, internal processes, along with a time horizon and response mechanisms that are short enough to assure continuing success within a changing business and operating environment.
More than a management system
Operational Excellence has been defined as a management system, but it’s more than that: It reflects a high-performance, cooperative, success-oriented work culture that elevates mindset, actions and activities. Think of it as a master program that incorporates, governs and coordinates all enterprise functional improvement programs.
OE doesn’t replace or eliminate functional improvement initiatives implemented to address single problems such as low-quality production, excessive failures, too much work in process, etc. Instead, it becomes their home.
All functional-improvement programs are identified, applied and coordinated through the OE management, administrative and control structure. Everyone is aware of what everyone else is doing within the overall objective of safely and sustainably increasing value.
Potential contributions and conflicts across organization-al functions become quickly visible for discussion and cooperative resolution. Thus, anticipated requirements within and across functional boundaries are identified early, as opposed to showing up as late-breaking surprises. In this type of opportunity-driven environment, if there are too many failures or disruptions (of any kind), it is more logical (and an axiom of the value principle) to identify and correct the causes rather than develop robust processes to deal more efficiently with conditions that shouldn’t exist in the first place.
Benchmarks are a readily available source of targets for excellence. They’re good for pointing out deviations and gaps between best-practice and actual performance—all of which are opportunities for improvement.
But benchmarks alone don’t identify specifics for improvement. The next step must be to determine the specific differences between best and worst performance. More important, what are the causes and how can they be eliminated?
The differences can be discovered with processes such as Weibull and Pareto analysis. Each difference opens the door to improvement opportunities.
With Operational Excellence, facilities that find themselves subject to the 80/20 rule—where 80% of operating and cost deficiencies are caused by only 20% of assets—can make big improvements by simply focusing on the smaller, problem-causing portion of the larger population. This can be a relatively manageable task that vastly improves the overall average.
The reliability factor
The term “reliability” often is included in definitions of Operational Excellence, especially by those in an operating environment who view reliability largely in terms of systems and equipment. But within OE, reliability also applies to the following:
- Performance that safely meets requirements with mini-mum, predictable variation
- An organization wherein roles and responsibilities are completely defined, a consistent decision process is used and employees are empowered
- Work culture that is committed and accepts ownership for excellence in all activities, delivers the highest-quality performance and continuously improves
- Processes and practices that are fully defined and accurately documented, totally repeatable, of high quality and produce consistent results
- Systems and equipment that can meet all operational requirements safely and cost-effectively
- Skills that are based on well-defined requirements and qualifications, as well as kept up-to-date and backed by effective training
- Data that is accurate, secure, up-to-date and accessible
The keys: total involvement and safety
Of all the elements of Operational Excellence, working cooperatively in teams across functional boundaries to identify and develop improvements is by far the most important. OE involves everyone in the organization. It broadens horizons, builds on, consolidates and enhances most existing programs, while providing a greater focus on the whole. It also calls for thinking beyond increasing efficiency to improving effectiveness and achieving results that contribute value to organizational objectives in real-time. In turn, the program’s internal culture sustains itself.
Another key element is safety, which everyone recognizes is much more than a management system or program: Safety is a working culture that demands total organizational and individual commitment—as well as intolerance for deviations. It begins with extensive training to set standards of performance and develop a safety mindset. Adherence to safety procedures will help avoid hazards and minimize risk, but it calls for constant effort, thought, vigilance and reminders. Compliance is a cultural imperative, and requirements are continually reinforced with reminders and training.
In a safety-conscious facility, every associate understands his/her role. For example, it is not unusual for an administrative assistant to quietly suggest to an embarrassed senior manager that he should hold the handrails when walking stairs. It also isn’t uncommon to hear safety messages in an industrial facility addressing automobile and home safety issues. OE should be approached much the same way: It’s not as a project with a beginning and end. It’s a type of work life and culture that can also influence off-work activities.
Operational Excellence is best implemented in a circular sequence, similar to Shewhart Deming (PDCA) and Six Sigma (DMAIC) implementing sequences, but with the following modification: Design, Identify, Plan, Implement, Check, Institutionalize and Improve.
There are some important rules for accomplishing this process. They are as follows:
- Program implementation steps are defined and fully documented, and the sequence explained in detail.
- Organization and leadership structure are specified in detail, including roles/responsibilities of the steering team, selection and function of champions and composition of improvement action teams.
- Detailed improvement action plans are prepared to address the highest-value opportunities.
- Value opportunities are determined from performance history and benchmarking procedures.
- Improvement plans are created and implemented at the working level.
- Results metrics demonstrate progress and value created by improvements, linked top to bottom and bottom to top, with time lines.
- Performance reviews are ongoing, along with efforts that ensure the program continually improves.
The initial Design stage varies from the widely used PDCA and DMAIC sequences in that the OE program is designed for specific site/facility conditions and mission objectives. Since each facility is unique (even within the same enterprise or site), this is the most practical way to begin an improvement program.
Further, OE is a dynamic program. As market and business conditions change and implemented improvements take hold, the program must be continuously reviewed and revitalized. OE incorporates internal mechanisms that not only sustain results but assure the program itself remains evergreen within what can be constantly and/or rapidly changing environments.
An OE program is most effective when centered on working-level, multi-function improvement action teams that are directed to safely increase value and reduce risk. Optimally led by a production manager, OE action teams reflect the degree of experience and skills necessary to identify and prioritize potential improvements, and develop, implement and monitor results. By combining operations, maintenance, engineering, finance, IT, HR and others into a team with a common purpose, functional barriers quickly disappear. Team members identify and accommodate varying perspectives and learn to devise mutually beneficial value-improvement initiatives.
Looking at success
The proven processes and practices necessary to assemble an effective OE program are readily available to any organization. When facilities fail in their efforts to implement such programs, it’s often due to a lack of communication and coordination between the working levels—where knowledge of improvement opportunities typically reside—and senior management. Those at the working level are often frustrated when suggestions they make that could contribute to corporate profitability and success are ignored in management decisions that focus solely on short-term cost issues.
Experience has shown that when workers are consulted about how to correct a given problem and their suggestions put into practice, the business runs better. As a Fortune 250 executive once noted, “Employee-led leadership teams do unbelievably good strategic and tactical planning, if you give them the opportunity. Most important, they gain total buy-in for the plan, its implementation and results.”
All too often, management focuses on practices like headcount reduction as a way to cut costs. In reality, the only way to permanently and sustainably reduce costs is through increasing effectiveness that eliminates the need for spending. Operational Excellence provides just that type of methodology. MT
John Mitchell, “Advocate for Change,” has served in a variety of leadership roles during his 40 years in the maintenance and reliability field. Founder and Past President of MIMOSA, he’s the author of several books and a frequent speaker on asset-management topics. This article draws from some chapters of his forthcoming book on Operational Excellence. Mitchell is a graduate of the U.S. Naval Academy. Telephone: (949) 496-0873; email: email@example.com.
The Benefits Of Operational Excellence: What’s In It For Your Organization?
There are many benefits to an OE program, including:
1. The highest level of safety and environmental performance
2. Connections among all processes and improvements necessary to establish and maintain best performance in the most effective, risk- and value-prioritized sequence
3. Increased business value and operating effectiveness via identification and exploitation of improvement opportunities in order of return
4. Risk reduction through identification, management and containment
5. Optimal operating effectiveness and reliability with minimal surprises and lost opportunity
6. Optimal effectiveness of all resources (i.e., people, material and financial)
7. Establishment of an effective organizational and institutional culture that creates engagement, energy, ownership, commitment and responsibility
8. Improved practices in an effective value-return sequence
9. Demonstrated results in credible business and financial terms