What is Operational Excellence?

Published on:

June 17, 2021

Man standing in front of a group of people presenting on operational excellence.

Put simply, the objective of operational excellence is to maximise operating profit by creating as much value as possible with the resources available. This has the effect of minimising costs, raising productivity and driving increased revenues.

Suffice to say, all businesses should strive for operational excellence. That’s why we’ll be answering the question, “what is operational excellence?” in this article, as well as looking at its benefits and strategies to improve operational excellence in your business.

What is Operational Excellence?

There are many different definitions of operational excellence, but we like this one best:

Operational excellence is the execution of continuous business improvement leading to outstanding performance metrics.

Simple and to the point.

When we're coaching small businesses and larger SMEs, operational excellence involves us creating a culture of continuous improvement which creates a more efficient company with higher levels of staff productivity, and employee engagement. Perhaps most importantly (and often overlooked), it refines the company’s competitive advantage and unique selling proposition (USP).

Operational excellence enables a company to effectively implement its business strategy. Each employee is clear about how value is being created, the part they have in creating that value themselves and how to quickly fix issues when they arise which drives long-term sustainable growth.

With this understanding, operational excellence is unique to each organisation. But culture, employee engagement, leadership, process management, quality management and relationship management all have a part to play.

Whilst typically associated with manufacturing, all companies of any size and type should aspire to operational excellence. Operational excellence tools include lean principles and six-sigma which aim to minimise waste in time and costs, as well as maximise quality.

Principles of Operational Excellence

The principles of operational excellence can be summarised as:

  1. Respect for employees
  2. Focus on value streams
  3. Think systemically
  4. Embrace continuous improvement
  5. Encourage collaboration
  6. Standardise wherever possible
  7. Build your people, suppliers and partners

Perhaps the best-known framework for operational excellence is the Toyota Production System.

Operational excellence is therefore very much about improving employee productivity. Happier staff will make for more productive staff, more loyal customers and ultimately, improved profitability. There are two aspects to improving employee productivity, that’s their personal productivity (their time management) and their worker productivity (their worker efficiency).

As a business grows they take on more staff, more customers, more products or services, suppliers, partners and so on. If there is insufficient focus on continuous business improvement, eventually the issues generated stops any further growth.

The Benefits of Operational Excellence

There are many, many benefits for businesses who strive for operational excellence, but some of the most notable include:

  • Improved competitive advantage from better market alignment
  • Reduced service costs from streamlined operational processes
  • Fewer service delivery issues from more standardisation and low-friction customer experience both internal and external to your organisation.
  • Personalised service delivery from a more engaged workforce
  • Improved profitability from increased sales and lower operating costs
  • Improved company culture from increased employee engagement
  • Increased company longevity from enhanced adaptability and market relevance
  • A more engaged leadership team; a prerequisite for any successful change programme
  • Improved internal communications from a shared and motivating vision
  • End to end business performance improvement from aligned continuous improvement efforts
  • Sustained business growth from increased accountability for process improvement
  • The considered adoption of new technologies based only on results, not trends
  • Recruitment of digital talent who know how to embrace new technologies and its benefits
  • Increased customer satisfaction from a shared focus on customer delight
  • Increased sales from word of mouth referrals amplified by social media

How to Implement Operational Excellence

The first challenge in achieving operational excellence is one of leadership, ensuring that the leadership team is fully committed to the change programme.

The second challenge in achieving operational excellence is one of culture, ensuring your staff are fully engaged with the change programme.

The third challenge of achieving operational excellence is one of sustaining the operational excellence programme, without change fatigue wearing everybody down or another change programme being launched.

8 Strategies to Improve Operational Excellence

Strategies to improve and aim for operational excellence will vary depending on how well your business operating system is functioning currently. This is why Awardaroo creates bespoke strategies to achieve operational excellence depending on your unique business needs.

This said, some common strategies to improve operational excellence include:

1. Increase the ROI From Staff Learning and Development Investments

Sending staff on training courses, away-days or improvement courses in itself does not always generate the desired goals. Training alone is not the way to improve the customer experience.

What is more important is in the understanding of how your staff apply their training in real-life situations. How much of the training did they absorb, remember and feel motivated enough to change their behaviour. Your frontline staff are your bottom line when it comes to operational excellence.

2. Increase Sales From Higher Conversion and Logging Rates

Is your best salesperson selling or simply not getting in the way of the sale?

How engaged, understanding and involved are your sales team with each call they take?

How prepared are they and trained?

Are they helping to grow your company or just paying their mortgage?

You need to know the answers to every single one of these questions in order to strive for operational excellence.

3. Enhance Customer Service and Minimise Service Calls

How many service calls should you not even be getting? How can you know?

Many service calls are actually hidden complaints. For example, if you have a high number of service calls regarding follow ups, you know your current process for following up customer leads isn’t working. To achieve operational excellence, you need to address your unnecessary service calls.

This improves customer satisfaction, reduces staff workload and bumps up your profitability.

4. Improve Marketing Results With Improved Metrics and Insights

A simple fact is most companies simply don’t know how well their marketing performs.

By analysing and reviewing your web analytics more effectively, businesses can increase their ROI on marketing campaigns. This can cut costs pumped into lacklustre campaigns, as well as increase quality leads and sales.

5. Engage Your Staff in Helping to Grow Your Business

Your business is your staff. People buy from people. Today with social media, your staff are your customers. Rubbish to buy from and rubbish to work for will soon become one and the same.

Those processes don’t write and run themselves. Your reputation is dependent on how well your employees know, like and perform their jobs. They’re your biggest overhead.

Unengaged employees are unproductive employees. To achieve operational excellence, businesses must have engaged and inspired staff who love where they work and want to grow with the business.

6. Implement a Continuous Business Improvement Strategy

Perhaps the most powerful method is to adopt a continuous business improvement strategy, a mindset that sees problems and issues as highly valuable learning points.

This strategy focuses on streamlining processes and work practices, reducing wasted time and effort is the cornerstone of all business best practice.

This approach has the added benefit of working in a more efficient way because it’s a much more rewarding way to work. It’s working smarter, not harder and longer.

7. Plan Ahead to Minimise Risk and Increase Confidence

Planning ahead really matters when it comes to operational excellence. You minimise risks, move away from only fighting fires and work becomes more rewarding. Be it at an individual level, team level, department level or company level.

“Failing to prepare is preparing to fail”, said Benjamin Franklin.

The value of a plan is not just the plan itself, but the thought that has to go into it first.

8. Measure Your Business Productivity

You can’t manage it unless you measure it. Achieving operational excellence is all about benchmarking where you’re at so you can figure out where you’re going next.

But what will you measure? What are you looking to improve?

Business productivity is measured as input/output. Your top level business productivity metric is total salary/total revenue. You need to look at how efficiently your business is converting staff costs into revenue.

If your competitor has a better ratio, who will be in business longer as the competition increases and who will have more money to invest in growth?

We Help Businesses Achieve Operational Excellence

We can help your business learn to strive towards operational excellence every day with our business improvement programme.

Our unique combination of project, people and business management will transform your business into a productivity powerhouse, putting you miles ahead of the competition.

About Paul Freudenberg

Paul Freudenberg is a business productivity coach and consultant with a focus on operational excellence delivering improved profitability and business performance, and Founder of Awardaroo in 2005. Paul has set the mission of Awardaroo to help raise UK Business Productivity from one of the lowest in the G7 to one of the highest by 2030. Connect on LinkedIn

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