Operational excellence happens when an organization consistently and reliably outperforms the competition through constant improvement and a dedication to customer value. When two companies have the same strategy, the operationally excellent company will have higher revenues, lower cost, and less risk. This type of execution is only possible with a combination of outstanding leadership and a culture that supports problem-solving and transparency.
This post focuses on ten leadership behaviors that help organizations achieve excellence. We didn’t make them up. These principles come from the Shingo Institute at Utah State University’s Shingo Prize for Operational Excellence. In the days before modern business methodologies like Lean manufacturing and Six Sigma, Dr. Shingo worked with Toyota executives to foster the ideas of ensuring quality at the source, reducing waste through just-in-time inventory, and maximized flow of value to customers.
Demonstrate Respect for Every Individual
In our experience, respect isn’t something that many leaders talk about, but if you look at how leaders of successful organizations approach their work, you will find signs of respect at every turn. Defect-free products show respect for customers. Timely payments show respect for suppliers. Ensuring opportunities for professional development shows respect for employees. While c-level leaders aren’t necessarily involved in the daily execution of these activities, they create a culture where such respect is supported and expected.
Respect is particularly important when it comes to employees. When employees are given enough respect to engage in problem-solving related to the operations they perform, they become more personally invested in the outcome of every task and more likely to produce the desired result.
For some people, the most challenging part of solving a problem is admitting that there is a problem. No one likes to make mistakes but acknowledging that improvement is possible and essential is the only way to achieve better results than you are getting today. Leaders of operationally excellent organizations must stomp out the notion that “the way we have always done it is the only right way.”
One reason this is so important is that leaders who refuse to alter course will never be able to leverage one of the organization’s most valuable resources, employee feedback and ideas.
Seek Perfection through Incremental Improvement
It is easy to blow off the idea of seeking perfection by saying that perfection is impossible. That’s true, but its also good news because it means that the opportunity to improve is unlimited. How do organizations with cultures of operational excellence behave? First, they refuse to accept band-aid solutions. They search instead for root causes of problems and implement appropriate countermeasures. Next, they recognize that unnecessary complexity leads to waste and defects, and they seek simple solutions where possible. Finally, they understand that not every change has to be revolutionary. Small changes on a consistent basis walk each operation closer to perfection.
Elevate Scientific Thinking
Leaders in most organizations are smart people. They have experience and often “know” what’s the right thing to do. Operationally excellent leaders are willing to hold their ideas up to the same rigor that scientists apply to testing a theory. Does the data support the underlying assumptions? Can an idea be tested in a controlled way to validate its accuracy? Once implemented, how can it be measured over the long run? Applying this type of analysis is how leaders are able to learn and adjust.
Focus on Processes
When something goes wrong, the easiest thing to do is blame the person closest to the error. However, even the most brilliant and conscientious employee can not produce excellent results with flawed processes. The most successful leaders understand that errors and defects are signs that it is necessary to reevaluate the process and find the root cause of the issue. All of the inputs to the process are subject to review, including information, materials, parts, equipment, and operator instructions.
Build-in Quality at the Source
Operationally excellent organization are able to produce work outputs correctly, the first time, more frequently than others. Quality isn’t something that can be tacked on to a product as it gets sent to the customer. Instead, it is assured only when processes are designed so that potential problems become visible as soon as they occur, and employees are empowered to halt further production until the root cause is uncovered and corrected.
Concentrate on the Flow & Pull of Value
Reducing waste is vital in the pursuit of excellence. The most problematic waste occurs when the flow of value to the customer is interrupted or when value is created in response to targets on a spreadsheet, not demand from the customer. It is helpful to find ways to visualize this “flow & pull” of value so that workers can respond to backlogs and react to unexpected waiting.
Encourage Systematic Thinking
Leaders of organizations that demonstrate operational excellence know that no process happens in isolation. Everything that goes on is intertwined. In fact, most problems arise when work is transitioned from one state or process to another. That means that ensuring quality and consistency requires cross-functional collaboration. Leaders are responsible for removing obstacles that stop ideas, information, and material resources from flowing across departmental or functional boundaries.
Establish Consistency of Purpose
Excellence can not be achieved without a strategic alignment of goals from the board room to the front line. Everyone must have clarity about why the organization exists, where it is going, and the milestones on the path to success. Goals must cascade through the organization so that every person can make decisions and suggest innovations that are in line with the overall objectives.
Create Value for the Customer
We don’t get to decide if we beat the competition, only our customers do. Customer assign value by determining what they are willing to pay for. This isn’t a complicated concept, but many organizations struggle to see through the eyes of the customer. This doesn’t mean that you can’t innovate in a way that will surprise and delight the customer, but it does mean that the customer’s needs, desires, preferences, and budget must be well understood and considered at every step of the way.
John F. Kennedy believed that “Leadership and learning are indispensable to each other.” I think that’s a great unifying theme of these essential behaviors. Leaders must be willing to learn, able to implement practices that embed learning, and capable of supporting the learning of every employee. When that happens, excellence is no longer a fantasy; it’s a predictable result.