23 Mar WHY OPERATIONAL MANAGEMENT MATTERS IN YOUR BUSINESS
In a growing business, there is much to consider: cashflow, morale, clients, legalities, growth. As a business owner, you’re far more likely to be focused on growth, sales, strategy than on operations, processes and systems. Why? Well for one, you’re just wired that way! People with the vision and wild courage needed to set up a global enterprise hardly pause to think about the best way in which to structure it – they just do it, they follow their gut!
That said, it’s no excuse to avoid operational matters and in fact, when done properly, operational management takes vision and courage and, resultantly, has the power to transform a business and even become its source of strategic, competitive advantage.
What is operations management?
Operations management is all about turning resources into value. It sounds very crude when you put it like that but we’re all in business to provide value: the more value we can provide for our clients, the more we grow; the more value we can produce with fewer resources, the more we profit. And of course profits fuel growth in the form of investments in, guess what, people, systems and processes because this is what allows businesses to produce the output that generates value.
In our experience, operations management reduces the gap between expectations and reality. For example, we know what we’re capable of as a business but sometimes we don’t deliver on the capability. Why? Well something has got in the way. Operations, then, provides bridges between input and output. It’s a machine for achieving the output you want with the resource you have…or better yet, for acquiring and organising the resources you need to get a job done, well.
Are you sensing the cyclical nature of ‘operations > strategy > operations > strategy’ here? The strategy can inform the requirements of operational design, but equally, operational design might provide a competitive advantage that defines the strategy.
Operational management, then, is one of the most important things you can do in a business of any size. When you’re small, you can go without but you’d be amazed what happens when you grow to ten people, then twenty, then fifty, then one hundred. The demands on the business shift at every stage and the one thing a growing business needs is structure by design, not default. However, putting a process in place to give you control or power is not what operational management is about, in fact it’s the very opposite of what it’s about.
Operations management is about designing a way in which your business can produce maximum value whilst expending minimal resources. It’s about the way in which you build your business to function. If, for example, you’re in a creative environment you’ll want to build it in a way that facilitates creativity. If you’re in a heavily regulated industry, you’ll want to build it in a way that ensures compliance.
Operations management can be a feat of engineering and it takes time, planning and care.
Where does operations management fit in the business?
Operational management can be thought of as a separate function, entity or project but it’s far more effective when it’s built in as a ‘way of doing business’. If for example, your business is geared up to think about value, and how inputs can be turned into value for clients, your team will introduce systems and processes to aid this, not hinder it. Sometimes the best workarounds become the best practice!
In terms of ‘how’ it fits in, it’s easiest to say that Managing Directors (MDs) shape the strategy and revise it over time; whereas Operations Managers support in carrying out, or delivering the strategy in the most productive, sustainable and scalable way possible.
In this sense, the MD of a business must work very closely with the business’s Operations Manager. They must work collaboratively to set the vision and structure the business for profitable growth.
That said, remember what I wrote above about ‘operations’ informing the strategy; providing the source of competitive advantage.
If you don’t have an Operations Manager in your business, you might consider hiring one once you’ve read this blog. Or, you could consider promoting someone within your team, or assigning it to someone as a project. Whatever you decide, make sure you look at this as an opportunity to design your business in the best way possible, not a chance to lock down or control your team and processes.
How to structure your operations management programme
The key to getting this right is to start with the end in mind. What kind of a business do you want to run? How will it look, feel and sound to spend a day, a week, a year in your business?
This is important because operations is about design: it’s about designing systems, processes and environments that will facilitate the production of value. It’s key therefore to define what value means to your clients, to you and to your team.
The opposite approach to this, and why so many operational projects fail, is to launch into tactical delivery: a process here, a system there. If you set up structure for what your business needs now, rather than what it needs tomorrow you will not only stunt your growth, but you’ll waste a lot of time and energy in large change programmes later.
Operations management should facilitate growth, not limit it. For this reason, it’s so important to get out to the floor: ask the people around you what they need, what they wish they had, what one simple thing would transform their ability to produce value for clients. Not to mention the fact that one person or team or department might have already introduced a process or systems or way of working that can be rolled out across the business.
This should start your list of requirements and I would recommend interviewing as many people as you can. This will also build engagement and help people to see the value of operational activities, or better yet, a value based mindset.
The next thing to do is to run a risk analysis on your business. Ask yourself, what are all the things that could go wrong; where are our points of dependency; where are our weaknesses? These should be added on to your ‘shopping list’ of things to address.
Once you’ve started this list, however, it’s important to go beyond the symptoms and get to the route courses of the problems. It does sound like a negative exercise – problems, risks, dependency, all the words business owners like to avoid – but it’s one of the most positive exercises you can do. As our Operations Manager says: “Operations is about looking for opportunities to improve”. Ignoring this vital step gives your competitors the chance to wield a competitive advantage but worse than that, it exposes your business to unnecessary risk and it can severely stunt growth.
Imagine for example, that you find one team consistently producing poor results. You look at this and jump to the conclusion that the team needs a better checklist, or a more rigorous sign off process. By doing this you address the symptom – poor results – and not the cause, which could be anything from poor performance in one person, a training requirement across the whole team, a lack of understanding or clarity on expectations, a system or process requirement. A checklist won’t improve performance and in fact, it could have the opposite effect as it could cause the great performers in that team to leave; leaving you with a team of underperformers and an unnecessary checklist!
In another scenario, imagine if your team asked you for something, such as system to track time – they want to show how long things take. Is this really what they want, or is this just the first solution that comes to mind when the problem is really the fact that the sales team are under quoting on pitches.
Once you’ve engaged your team, assessed your risks and defined your requirements, it’s time to begin the design of your operational management procedures. To do this, list the opportunities in order of impact. Which one change would have the biggest impact on your business? Start here and work with the business to design solution by solution; one at a time.
A great question to ask yourself at this point is “What would I introduce if time, money and resources were unlimited?”. That is your solution. Next ask, “Using what I have available now what is the best alternative or, how can I introduce that same idea in another way?”. Or “What can I do to make that happen in the next 6-12 months?”.
Common areas to address through operational management
Operational management is a big topic but it’s nothing to be scared of. In truth, your business will already have an operational management structure: a way of doing things. This blog is about challenging you to ask: is this the best possible way of doing things, will this get me to where I want to be tomorrow rather than today? You don’t need to come up with the answers yourself. Follow the process above and turn to your team. Use logic and challenge yourself to think bigger: will this system, process or person bring us closer to our vision or not?
Here are some common ‘themes’ to consider when starting your risk evaluation:
Plant layout and structure – what offices, factories or plants do you need for the next phase of growth? Where do they need to be? Why? What will impact this? Who needs a say in this? What do your offices, factories or plants need to say about you? What does your team need from your offices, factories of plants? How will you connect them, how will you manage them, how will your teams and your customers access them?
Project management methods – how will work (products / services) need to be completed in your business in the future, what do future clients and employees expect, want and need? What working methodologies do you, your teams and your clients need to be successful? How will methodologies translate to value: how will you measure the effectiveness of your product management methodologies? How do these methodologies translate into systems and processes? What can you do to automate this? How can you remove barriers and silos, and facilitate cooperative working using project management methodologies?
Equipment selection and maintenance – what equipment (tools, software, hardware like computers, machinery, communication devices, vehicles etc.) does your business of tomorrow need to function? How will you track the equipment you have? How will you keep it at optimal performance? How will the equipment facilitate growth, or speed up operations, or increase the quality of your output? How will you maintain your equipment? How can equipment reduce the touch points and remove inefficiencies in your business of tomorrow?
Design and management of products – what products or services will you offer customers and clients tomorrow? How will they be offered? How will they be designed, developed, built, delivered released and tested? How can you get valuable feedback on your products or services? How will you track your inventory, tomorrow, not today?
Building supply chains – what or who do you need externally to supply value to your customers and clients? Where are the opportunities to rationalize or expand your supply chains? How will you monitor quality? How will you determine who or what to use in your supply chain? What external factors (such as the price of oil) could affect your supply chain in terms of value, reliability and reputation?
Attraction and development of people – Who do you need in your business tomorrow? What knowledge, skills and behaviours do you need to see, why? How will this be developed, how will this be managed and rewarded? How will you track and incentivize performance? What will make you an attractive company to work at, how can you communicate this to the outside world? How will you reward positive performance? How will you engage your team?
Cost control – what cashflow do you need in your business of tomorrow? What investments might you need to make? Where will cash come from and how will you monitor this? How can you incentivize timely payments? Where or when might you have a shortfall and what can you do about this? How can you incentivize cost savings in the business? Where can you save money, or produce efficiencies to reduce expenditure? How will you track and report on cashflow? How will you spot a problem quickly?
Transport and storage – what are your transportation and storage requirements of the future? Is it better to invest in assets, or to find a more flexible, rental or leasing arrangement? How can you rationalize your fleets, or reduce the space needed? What clever storage solutions can you invent to reduce the space needed? How will you protect your assets / products in transit? How will you protect your team (health and safety)?
Remember, operational design is about ‘designing your business of tomorrow’. Try not to put in place solutions for today. Instead look forward and ask what systems, people and processes your business will need tomorrow.