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Operational Excellence: Journey to Creating Sustainable Value

ISBN: 978-1-118-61801-1
344 pages
March 2015
Operational Excellence: Journey to Creating Sustainable Value (1118618017) cover image

Description

Provides the foundation and tools that are essential for an enterprise to bring Operational Excellence into their organizational culture; gain maximum results, benefits and value

  • Strategies for and implementing details for enterprises at all levels of maturity from those with programs in place to those looking to improve safety, health, environment performance as well as the efficiency and effectiveness of their operations
  • Includes topics from concept to sustainability satisfying knowledge requirements of all levels in the organization
  • Defines program objectives; develops improvement strategies; identifies and prioritizes improvement opportunities; implements improvement plans; monitors, continuously improves and sustains results
  • Applicable to a broad variety of operating enterprises, academic institutions and third party implementing organizations
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Table of Contents

Biography of John S. Mitchell xv

Preface Journey to Operational Excellence xvii

Acknowledgments xxi

Introduction 1

1 Operational Excellence—The Imperative 7

Definition of Operational Excellence 7

Definitions from Leading Global Enterprises 8

A Simpler Definition for Operational Excellence 9

Operational Excellence Embraces Everyone in an Enterprise 9

Operational Excellence Improves Efficiency 10

Efficiency and Effectiveness 10

A Familiar Program 11

Description 12

The Journey 13

Roadmap to Operational Excellence 14

Reliability 14

Risk 15

Changes in the Business/Mission Environment 15

Conventional Operations Management 16

Maintenance Within an Operating Enterprise 17

Managing Improvement Initiatives 17

The Solution 19

Leadership 20

Working Level Improvement Action Teams 20

Operational Excellence Improvement Initiatives 21

Sustainability 22

Effectiveness and Value Throughout the Enterprise 22

The Operational Excellence Initiative 23

Operating Performance Excellence 24

Asset Performance Excellence 24

Success—Greater Than the Sum of the Parts 25

Essentials for Success 25

Application 26

What You Should Take Away 26

2 Application of Operational Excellence 29

Process Characteristics 29

Operating/Market Environment 31

Enterprise Strategy 32

Strategic and Tactical Endeavors 33

Growth Strategy 34

Effectiveness 34

Changes in the Operating Environment 34

Value 35

Journey into the Future 36

What You Should Take Away 39

3 Foundation Principles 41

Operational Excellence—A Program Equivalent to Safety 41

Use of Proven Practices 42

Scope of Operational Excellence 43

Financial Considerations 44

Driven by Business/Mission Results 45

Foundation Principles 47

Principles of Operational Excellence 47

Six D’s of Operational Excellence 47

Eight Elements of the Operational Excellence Program 48

Results 49

Leadership 49

Requirements 50

Program Definition 50

Supporting Practices and Procedures 50

Working Culture 51

Information Management 51

Follow-Up 52

Implementing the Operational Excellence Program 52

Benefits of Operational Excellence 52

Improved SHE/EHS Performance 52

Reduced Risk 53

Improved Production/Mission Operational Effectiveness 53

Improved Reliability 54

Greater Predictability—Reduced Variation 54

Improved Capital Effectiveness 54

What You Should Take Away 54

4 The Operational Excellence Program—Overview 57

Initiation 57

The Value Principle 59

Use of Proven Practices Processes and Technology 61

Operational Excellence Program 63

Improvement Processes 64

The Operational Excellence DIPICI Process 65

Implementing Sequence 66

Program Elements 67

Essentials for Success 67

Results 67

Leadership 68

Requirements 68

Program Definition 68

Practices and Procedures 69

Working Culture 72

Information Management 74

Follow-Up 74

Implementation 75

Where and How to Begin? 77

Considerations for Commencing with a Pilot 79

Third Party Facilitation Assistance 79

What You Should Take Away 80

5 Business and Financial Elements 81

Connection to Business Results 81

Performance Measures 82

The Opportunity 83

Profit Center Mentality 83

Justifying Improvements 84

Value Prioritization 85

Value Imperative for Operational Excellence 85

Definition 85

Financial Orientation 86

The Financial Statement 86

Selecting Financial Measures of Performance 87

Accurate Lifetime Cost Tracking 88

The Business Value Model 89

Value Within an Operating Environment 92

Value Within Operations and Maintenance 93

Operating Effectiveness 93

Overall Operational Effectiveness 93

Real Compared to Normalized Values 95

Leveraging Mission/Conversion Effectiveness 95

What You Should Take Away 97

6 The Essential Evolution to Real-Time Business Operational Excellence 99

Background 100

Necessity for Real-Time Operational Excellence 101

Integrated Business and Operations System 102

Real-Time Business Focus 102

Developing Real-Time Business-Driven Operational Excellence 105

Segmenting a Complex Concept 107

What You Should Take Away 111

7 Leadership Vision Strategy 113

Executive Champion 113

Visibly Engaged 114

Communicate Compelling Vision 115

Define Overall Enterprise Business Strategy 116

Translate Business/Mission Objectives into Program Requirements 116

Select Appoint and Empower Operational Leaders 116

Continuing Tasks 116

Steering Team 117

General Guidelines 118

Appoint Operational Excellence Program Leader/Champion 119

Define Program Charter 119

Facilitate Teamwork 121

Empowered Decisions 121

Leadership Succession 122

Program Leader/Champion 123

Summarized Duties and Responsibilities 123

Program Leadership Team 124

What You Should Take Away 125

8 Safety and Human Performance Excellence 127

Safety Performance Excellence 127

Risk Management 127

Human Performance Excellence 130

Automation Technologies 131

Improvement Culture 132

What You Should Take Away 133

9 Define the Program and Program Objectives 135

Executive Leadership 136

Operating Organization 136

Steering Team 136

Program Leader/Champion 139

Program Plan 139

Program Objectives 140

Mission Statement 140

Charter 141

Principles 142

Values 142

Program Strategy 143

Organization: Management Control and Administrative Systems 144

Organizational Objectives 146

Business and Risk Models 147

Formulate Program Operating Plan 147

Appoint Working-Level Leaders—Champions 150

Program Leadership Team 151

Add/Optimize Supporting Processes 153

Information Structure and System 153

Activity-Based Management/Accounting 154

Roll Out Operational Excellence Program 155

Maintain Motivation and Enthusiasm 155

Clear Acknowledgement that Sustainable Progress Requires Time 155

What You Should Take Away 156

10 Optimize the Organization 157

Organizational Requirements for Successful Operational Excellence 158

Inspiring People 158

Consistency of Message and Action 159

Necessity for Improvement Requirements and Overall Objectives 159

Empowerment 160

Establish the Basis for Organizational Improvement 161

Initiating Organizational Improvement 163

Improvement Management Process 163

Identify Potential Structural and Organizational Improvements 164

Move the Organization from Management Control to Team Partnership 164

Work Culture 165

Achieving Individual and Organizational Success 165

Improving Behaviors 166

Skills Management and Training 166

Information as a Basis for Training 167

Personnel Reductions 168

Necessity for Effective Communications 169

Communications Requirements 170

Communication Groups 171

Messaging 174

Communications Program 175

Communications Team 175

Methods of Communication 176

Address all Anticipated Concerns 177

What You Should Take Away 177

11 Conduct Initial Training Workshops 179

Establish Team Training Facilitation and Review Process 180

Technical Training 180

Workshop Description 181

Workshop Process 181

Review and Refine Program Basis 184

What You Should Take Away 184

12 Identify and Value Prioritize Opportunities for Improvement 185

Validate Scope of Improvements 185

Opportunity Identification Process 187

Primary Detractors from Business/Mission Effectiveness 188

Performance Objectives 188

Improvement Methods 190

Step-Change Improvement 190

Continuous Improvement 191

Identifying Specific Potential Improvements 191

Quantify and Prioritize Opportunities—In Business Terms 193

Value Prioritization 194

Necessity for Complete Accurate Data 194

Identify Below-Average Performance and Performers 195

History 195

Categories of Performance 196

Safety Health Environment 196

Conformance to Business/Mission Objectives 196

Multiple Objectives 197

Methods for Identifying Opportunities 197

Pareto Analysis 197

Risk 201

Risk Analysis 203

Failure Modes and Effects Analysis 205

Financial Normalization 207

Analyze to Determine Highest Potential Value Opportunities 207

Identify Value Potential Probability of Success 208

Valuation Challenges 209

Final Stage 209

Construct Priority List for Improvement 210

Expand Leadership Team 210

What You Should Take Away 211

13 Process Reliability Techniques Help Make More Money 213

Introduction 213

Pareto Distribution 214

Cause of Deficiencies 215

Traditional Weibull Plots 216

Process Weibull Plot 216

Waste and the Hidden Factory 218

Production Weibull Analysis 219

World-Class Performance 219

4th Quartile Performance 221

Weibull Probit Analysis 223

First Compared to Fourth Quartile Performance 224

What You Should Take Away 226

References 227

14 Plan Opportunities for Improvement 229

Appoint Improvement Action Teams 230

Responsibilities 230

Refine Preliminary Improvement Plans 232

Refine Improvement Opportunities 233

Obtain Required Information 233

Validate Value Delivered: Contribution to Enterprise Business/Mission Objectives 234

Confirm Priority to Assure Greatest Return 235

Select Set of Improvement Opportunities for Detailed Plan Development 235

Prioritize Actions for Quick Results 236

Under Promise Over Perform 236

Compensate for Inadequate or Incomplete Information 236

Develop Detailed Improvement Action Plans for Highest Value

Improvements 237

Define Starting Point 237

Identify Requirements for Success 237

Detail Action Steps 238

Define Investment and Resources 239

Estimate Probability of Success: Potential Risk and Barriers 239

Identify Responsibility 240

Validate Contribution of Planned Results—Benefit/Cost—to Program and Enterprise Business/Mission Objectives 240

Formulate Transition Plan 240

Develop Continuous Improvement and Sustaining Plans 241

Consider Pilot Implementation 242

Finalize and Submit Improvement Action Plans for Approval 243

Following Approval 244

What You Should Take Away 245

15 Measures of Performance—Metrics and KPIs 247

Types of Metrics 248

Activity Metrics 249

Results Metrics 249

Leading and Lagging Metrics 250

Establishing Objectives 250

Benchmarks 251

Use of Metrics 252

Requirements 253

Characteristics 255

Definitions 256

Establish Magnitude of Value/Opportunity 257

Hierarchy of Operational Excellence Metrics 259

Operating Effectiveness 259

Lost Opportunity 262

Quality 262

Other Metrics 262

Selection of Metrics 263

Applicability 263

Best Measures 263

Concentrate on Results and Success 265

Key Performance Indicators 265

Graphical Displays 266

Benefits of Metrics 267

What You Should Take Away 268

16 Implement—Improvement Action Plans 269

Refine the Organization 270

Deploy Resources 272

Purchase Capital Equipment 272

Conduct Training 272

Deploy Practices and Technology 273

Implement Improvement Action Plans 274

Establish Internal Oversight and Monitoring 275

Drive the Improvement Process 276

Overcome Barriers 276

Communicate Results and Successes 277

What You Should Take Away 277

17 Performance Assessments 279

Overall Description 280

Assessment Methods 280

Assessment Process 281

Assessment Preparation 282

Identify Operating/Functional Unit and Requirements 282

Identify the Specific Program Program Element and Procedure to be Assessed 282

Identify Stakeholders 282

Select a Qualified Assessment Team and Team Leader 282

Site Appoints Host and Establishes Timing Commencement and Completion 282

Strategically Plan the Assessment 283

Perform the Assessment 285

Alignment Meeting 286

Assessment Procedure 286

Assessment Template 288

Background 288

Template Organization 289

Evaluating Results 291

Necessity for Additional Assessment 291

Conclusion Summary Recommendations and Site Wrap Up 292

Prepare Formal Assessment Report 292

Executive Summary: Key Findings and Recommendations 292

Introduction and Objectives 293

Conclusions and Recommendations 293

Narrative 293

Appendices 293

Report Submission 294

Actions Required from Assessed Operating Unit 294

Leadership 294

Formal and Informal Employee Satisfaction Surveys 294

What You Should Take Away 295

18 Check—Measure and Manage Results 297

Begin with Metrics 298

Conduct Assessments and Surveys 298

Formal Performance Assessments 299

Confirm Results and Contribution to Enterprise Value and Strategy 300

Continue Checking Until Confident that Improvement is Fully Sustained 301

What You Should Take Away 301

19 Improve—Institutionalize and Sustain Gains 303

Improve and Sustain 303

Continuous Improvement 304

Continue Follow-Up: Adjust/Refine Improve and Extend Improvement

Action Plans 304

Expand and Increase Ownership Responsibility Accountability and

Commitment 304

Continue Training 305

Achieving Sustainability 305

Institutionalize Success 306

Communicate and Publicize Progress and Results 306

Overcome Resistance 307

Results-Based Compensation 308

Some Lessons Learned 308

Final Comment 310

What You Should Take Away 310

20 Conclusion—Now It Is Up To You! 311

Index 313

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Author Information

John Mitchell has held a wide range of executive, managerial and technical positions over the course of his 40 year professional career. He has been a strong, visible advocate for the development and implementation of business, technical, and operating strategies for Operational Excellence, Physical Asset Management, Reliability and Maintenance improvement. He has delivered numerous presentations and workshops throughout the world stressing the necessity, financial and business benefits of optimizing organizational culture and work processes. In semi retirement he provides mentoring and coaching for organizations committed to improving the effectiveness and productivity of their operations.
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