The dictionary defines “principle” as “a fundamental truth or proposition that serves as the foundation for a system of belief or behavior or a chain of reasoning. Principles help us see the positive and negative results of our actions. They enable us to make smarter decisions about what we choose to do.
In business, when leaders, managers, and team members understand the principles of operational excellence, they are better able to align systems and reward ideal behavior. This creates a sustainable culture of improvement in which achieving the desired results is standard, rather than exceptional.
The Shingo Institute at the Utah State University Jon M. Huntsman School of Business offers an award for operational excellence each year. They have outlined the 10 principles of operational excellence based on Dr. Shingo’s decades of work on the fundamentals of providing value and quality to the customer. These principles don’t make up a business methodology in the way that Lean and Six Sigma are applied; instead, they set a foundation of thinking that can inform whatever set of systems are deployed.
Respect Every Individual
The road toward operational excellence begins with respect for every person who comes into contact with the organization. This includes customers, employees, partners, vendors, and the community at large. In survey after survey, employees repeat that respect is what they want more than anything else from their leaders and managers. When people feel respected, they can emotionally invest in their role and give more than just labor. They give their energy and ideas as well.
Examples of respectful actions:
- Creating professional development plans for each employee, including reasonable goals.
- Involving employees in creating process best practices and standard work for the operations they perform.
- A coaching approach to problem-solving.
- Investing in conditions that help each person do their best work.
Lead with Humility
Improvement is an impossibility without the humility to recognize that perfection has not yet been achieved. Operational excellence depends on a leader’s willingness to ask for feedback and input, to listen carefully, ignore rigid top-down thinking, and continuously learn. Under these conditions, employees feel free to respond creatively, offer innovative ideas, and take calculated risks. There is an element of vulnerability in the process of continuous improvement, acknowledging that is an important responsibility of leaders.
Examples of humility in action:
- Leaders spend time and engage where the work happens.
- Employees get a grateful and positive response when they report problems.
- Leaders acknowledge mistakes.
People give us push back when we talk about this principle because they believe that perfection is impossible. That’s true, but the pursuit of perfection is the surest way to get as close as possible. Otherwise, imperfect processes and outcomes are acceptable, and entropy ensues. What’s possible is limited only by creativity and effort.
Seeking perfection involves:
- Finding root-cause solutions rather than temporary fixes or workarounds.
- Simplifying work to reduce waste and eliminate the opportunity for error.
- Using standards to form the baseline for improvement.
Embrace Scientific Thinking
The scientific method involves cycles of experimentation and direct observation that lead to learning and a new cycle. Science is how we understand our reality and refine that understanding. Embracing scientific thinking in business means being open to new ideas, allowing ourselves to experiment even at the risk of failure, and collecting each lesson learned to foster growth.
Scientific thinking examples:
- A structured approach to improvement and problem-solving.
- Encouraging people to “fail forward” and learn by experimentation.
- Consistent methods of data collection and analysis.
Focus on Process
Operational excellence is the result of finely tuned processes. No matter how smart or dedicated people are, they can not consistently ideal results in the face of inadequate processes or imperfect process inputs. It is easy to blame people when something goes awry or when there are defects, but most of the time, the root cause is related to the process, not the people.
Process focus means:
- Identifying and solving the core cause of the problem within the process.
- Requiring that all process materials, data, and other inputs are up to the specifications before using them.
- Documenting each process and carefully managing changes to operations.
Assure Quality at the Source
Quality outcomes are the result of correctly performing every element of work with ideal materials and information. If any process results in defective outputs, the root cause must be found and addressed.
Quality is assured when:
- Potential problems and interruptions in flow are visualized.
- Employees have the ability to stop a process and fix errors before continuing.
- Process results are measured and analyzed for variation.
Pull & Flow Value
The best way to maximize value for customers is to create it only in response to demand and to maintain a continuous and unimpeded flow. When the flow of value is disrupted, waste is generated. Many organizations suffer from distorted demand and uneven movement of work from one process to the next.
When value flow is optimal:
- Organizations create only the products and services that are necessary to meet imminent customer demand.
- Resources are always available when they are required.
- Work-in-progress is tracked visually.
Systematic thinking means understanding the relationships and dependencies within a system and using that understanding to make decisions about process improvements. The biggest opportunities for improvement often lie at the intersection of departments or processes, so no one operation should be considered in a vacuum.
Systemic thinking means:
- Removing silos and other barriers that slow the flow of information and ideas across groups.
- Analyzing the value chain from start to finish and document the interconnectedness of processes.
- Creating the conditions for seamless cross-functional collaboration.
Create Consistency of Purpose
Operationally excellent organizations ensure that each person understands the mission of the organization, its long-term strategic objectives, and the individual’s role in the organization’s success. This clarity of purpose helps everyone make better decisions, innovate with purpose, and take calculated risks.
To achieve consistency of purpose:
- Communicate regularly about the purpose and direction of the organization.
- Cascade goals from the top down to assure alignment.
- Involve individuals in creating performance objectives.
Create Value for the Customer
It is the customer who decides what constitutes value and what they will pay for. Organizations that are able to outpace the competition are those that consistently deliver value effectively and efficiently. No other model is sustainable in the long-run.
Creating customer value requires:
- Understanding the customer’s needs and expectations.
- Responding to customer feedback.
- Continually looking for ways to remove waste and add meaningful value to processes.
For readers of this blog, none of this will feel like it’s coming from left field. These principles are present in many of the improvement processes and techniques that we discuss all of the time. What’s nice about the Shingo Institute’s approach is that it pulls them together for better insight into how the world’s most successful organizations operate.