Table of Contents:

Operational Assessments


Organizations should step back periodically to assign a team or bring in consultants to review how work is done and how it could be redesigned to focus more on customers, or how it could be digitized or automated. Operational assessments are a proven strategy for increasing productivity. They are also used to evaluate changes to policies, processes, roles, and responsibilities that impede productivity. This chapter discusses the planning and execution of such assessments as well as the methods for analyzing the information that is gathered. Although it requires an upfront commitment of time and resources, a well-done assessment creates a diverse project portfolio. The portfolio identifies opportunities for increasing business benefits and how to align them to strategy. Whereas available reporting shows known performance gaps, assessments identify gaps that have not yet been identified. These are incremental additions to current operational planning. The resultant impactful projects can be deployed either across an organization to start a new initiative or can be focused on a single function, such as manufacturing or distribution, and then expanded over time.

Assessment preparation begins with forming a core planning team, conducting initial employee surveys, obtaining feedback from key stakeholders, and gathering operational and financial performance information. Stakeholder and contact lists are also created with an assessment plan. Integral to the assessment planning will be identifying where to create value stream maps to analyze the end to end supply chain or value flow maps of key processes. Data gathering helps focus an assessment on areas that have greater potential to create projects with high productivity opportunities.

They also identify which processes would benefit from a value flow map workshop. These are used to fill in reporting gaps. The advantage of creating value flow maps of major processes is that information is gained by walking a process. This is also called a Gemba Walk to reinforce that the concept that it is important to see how work is done in person rather than relying on formal reports. Building a value flow map with the people who do the process work provides accurate information beyond that available from higher-level management reports. Normally the assessment team will find some non-value-add work being done. Examples include workarounds, rework loops, and other causes that together are called the “hidden factory.” A hidden factory is a term used to describe all the undocumented and non-value-add process activities that take place within an organization. An organization is unaware of these activities because they are not captured on current reports, hence the term hidden factory.

A useful tool when doing an assessment is the operational SWOT format shown in Figure 11.1. It uses feedback (opinions) from the employee surveys and interviews to identify, based on opinion, operational strengths, weakness, opportunities, and threats (hence, SWOT). Other information can be also be used to supplement the analysis. The analysis considers an


SWOT analysis for productivity.

organization’s current and future operational environment, strategic goal alignment, and current and anticipated operational performance, including how well an organization executes its goals and objectives in its current business environment. Employees are also surveyed to gather opinions regarding the organization’s operational strengths relative to competitors in current and new markets. Operational weaknesses are also included in the SWOT analysis. These identify gaps to help the assessment team focus its work. Subject matter experts such as marketing, sales, design engineering, and others are also surveyed, with additional questions to provide feedback on external conditions.

Employee surveys are also a useful start to an assessment. They provide feedback for subsequent data collection that can be used for process mapping and financial and operational analysis. Surveys help identify unknown interdepartmental issues that cause organizational friction. Chapter 3 described ways to plan, execute, analyze, and report survey information. Surveys are sent to employees, managers, and executives online (e.g., via e-mail or a website) or in person for key managers. These surveys explore the key themes of the organization’s culture relative to stated values versus expectations, its customer focus, vision, and mission statements, as well as the clarity and alignment of its operational strategy. The survey, or cultural assessment, is the voice of the organization relative to what needs to be improved, when, and sometimes how. The operational assessment will validate whether these employee opinions were correct.

Gathering financial and operational reports and performance data is another critical deliverable from the assessment. These are augmented with interviews with leaders, process owners, key employees, and others to help interpret the report and identify additional non-value-add expenses, barriers for customer satisfaction, and lower-level causes of poor performance. The assessment information will eventually be translated into projects that identify and eliminate the root causes of poor process performance. Financial and operational analysis is also used to benchmark processes internally to differentiate poorer from better performing processes to adopt best practices. During the assessment or shortly after its conclusion, project charters are defined, financially justified and approved by process owners. This creates a project portfolio in areas where the assessment was deployed.

In previous chapters, we demonstrated that several different types operational strategies are needed to execute projects. These depend on the anticipated root causes and solutions. Examples are Lean, Six Sigma,

Total Productive Maintenance, capital expenditures, process reengineering, capital expenditures for new equipment, and savings from purchasing price negotiations, among many others. If an organization does not have an internal capability to do this work, then either external consultants should be hired or employee training is needed to understand and use the required tools and methods. A well-executed assessment will usually identify a portfolio of projects with a potential productivity impact of between 0.5% and 4% of the budget for the area in which the assessment was done. The range depends on the organization’s size and its industry.

In Chapter 7, we discussed ways to translate productivity and other metrics such as economic value added (EVA), return on equity, return on investment, and other financial measures into an organization. The translation process started with the next level of metrics (i.e., sales, cash flow, and operating expenses) and worked deeper into the organization to identify operational initiatives and projects. Assessments use the methods from previous chapters and especially from Chapter 7 to ensure that the project portfolio is logically built and that business benefits are systematically identified to align with operational strategy.

The translation process was shown in Figures 1.1, 1.2, and 7.7. Chapter 7 described ways to analyze financial statements to identify impactful projects that were aligned to higher-level business metrics. Table 7.11 also described how projects should be linked to both enabler initiatives and their tools as well as resultant financial benefits. This is the purpose of an assessment: to ensure the portfolio projects are linked to real productivity opportunities and potential benefits are estimated well.

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