Archive

Archive for February, 2012

Operational Governance – Building on P-D-C-A

February 29th, 2012 2 comments

Governance is the act or system of governing.  Governing is to control and direct the making and administration of policy.  So governance is expanded to mean a systematic approach to how policy is created and deployed.  Operational Governance, sometimes referred to as Business Governance, is a commercial entities application of the concept.

Every company has a governance system.  The question is simply how effective is that system.   To gauge effectiveness, measure a company’s rate of improvement and its ability to change directions.  In other words, measure a company’s ability to either drive change or respond to change and you’ll have a good sense of its operational governance system.

To gauge a governance system’s capability, in addition to measuring its effectiveness according its industry parameters, you should also look to see if there is evidence of the key elements in the form of activities.

Download Operational Excellence Executive Brief

an Executive Brief that describes a framework for operational governance that can help you drive real value (ROI) from your operational excellence programs.

A classic model that can be used to establish and measure a governance system is Policy Deployment.  Look for the Plan-Do-Check-Act (PDCA) phases of Shewhart’s cycle or the cycle of Deming’s modified Plan-Do-Study-Act (PDSA).  The cycle speaks to the intended iterations that increase the level of performance.

PDCAWe take the discussion to the next level by laying out activities within each phase of the cycles that can help an organization.  Scorecards and Dashboards within the Plan phase.  The execution of value streams within Do.  The creation of a system of Key Performance Indicators and their constant evaluation against actual performance can fulfill the Study/Check phase. And finally, improvement activities to close performance gaps constitute the Act phase.

We also consider the creation of a well-organized project pipeline to be the link between the Study/Check phase and the Act phase.  It documents the outcome of Study and the path on which to Act.  The project pipeline is the transition point from operational governance to operational improvement.

In fact, we take the four elements of the Shewhart or Deming cycles and think about their movement not as much as a sequential cycle but more like four pistons in a car engine.  Each of them pump on their own cycle but they have a timing that is synchronized and together move the car.

PDCA as pistons

Operational governance systems can be expressed in many ways.  Policy Deployment is a classic framework.  Each is a systematic approach to how policy is created and administered or deployed.  We developed our operational governance system in detail by working with leading companies in many industries and varied countries.  Yet, it still aligns with a classic like Policy Deployment.  If you’d like to discuss how our detailed plan for governance operates, feel free to contact me.

Operational Governance – What is it, anyway?

February 23rd, 2012 Comments off

We all hear a lot about corporate governance.  It’s a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated and controlled.  If you search on Financial, Legal or IT Governance you find a tremendous amount written on the subject.   Since we deal with Operation Excellence, I searched on Operational Governance to see how people were thinking about the organizational structures that drive and support Operational Excellence and business performance improvement.  I was surprised by how so much of the search results dealt with IT and BPM software, and not really what I was looking for.  I can’t help but take this as being a blind spot in how we run our companies.

Through our clients, we see various activities involved in running the business.  We see our clients define their customer, their customer’s needs, how to serve those needs and how to do it better than their competition.  These are their strategic decisions.  When they want to do better, we see our clients define initiatives for improvement.  Within Operations, these initiatives are called Operational Excellence, Continuous Improvement, Six Sigma, Lean Sigma, Quality and many other names.  These are operating activities and they have improved greatly over the last twenty years.

Between the strategic and operational level is where we see the least definition and the greatest variation in practices.  Sometimes we see no activities here at all!  We see improvement projects that bubble up from the bottom and aren’t filtered through any sort of decision matrix.  Other times we see all sorts of pieces including scorecards, dashboard, value streams, process maps, KPI and control charts but they are simply individual activities, reports and discussions.

Download Operational Excellence Roadmap Powerpoint Presentation

 a short Powerpoint presentation that walks through an operational excellence roadmap, with notes included.

Bringing this middle ground between the strategic decisions and the day to day performance and improvement activities is where we believe companies have the greatest potential for their next leg of performance growth.  These are management activities that center on operating decisions supported by continuous improvement.

Operational Governance is what we call these activities and when done right you see all the goals being addressed with improvement activities and all the improvement activities tied to goals.  People don’t just know what they are doing, but why they are doing it.  It is effective Operational Governance that turns strategy into results.  For more on Operational Governance see our web site.  And if you’d like to discuss the how to establish an effective Operational Governance system, feel free to contact me.