WHY BOTHER?
Business Excellence simply means being the best you can possibly be as an organization. The intent of this article is to outline what is involved if your organization decides to undertake this never-ending journey. When implemented properly, business excellence yields immense benefits to private, public and not-for-profit organisations.
However, let me issue a warning here... as a result of running my own businesses plus facilitating or advising on practical implementations for approximately 1,000 other businesses over the past 35 years, I have found that the traditional recommended implementation approaches are just not practical enough for Small to Medium Enterprises (SMEs). This overview is therefore written for any SME aspiring to excellence and is built on 3 foundations: Simplify; Integrate; Sequence.
THE 5 MASTER STEPS - Overview
Not surprisingly after some 60 years of application and testing, there is now a high degree of alignment between the nationally advocated frameworks for business excellence from around the world. But there are 3 major problems for an SME when trying to implement any one of these frameworks:
Typically having 7-9 criteria for success, these frameworks are proving too complex for people to remember off by heart.
There is no recommended sequence for addressing all the criteria over time.
The recommended approach is to begin with a comprehensive review of the organisation's current performance against each of the 7-9 criteria and then to address the highest priority areas for improvement - but this takes significant time and money and doesn't involve all the employees.
We have found that a simplified framework is essential to integrate all the implementation activities. This framework is consistent with the internationally recognized frameworks but has only 5 Master Steps (instead of 7-9 evaluation criteria). We have also found that these 5 Master Steps should be implemented in a logical sequence. With Customer Focus as the overriding driver, the 5 Master Steps (all of which are prerequisites for Business Excellence) are:
Shared Strategic Direction
Process Design & Imnprovement
Performance Measurement & Feedback
Knowledge Capture & Leverage
Leadership & Management of Change
1: Shared Strategic Direction
With customer focus as the all-pervasive fundamental driver, the first prerequisite for business excellence is a Shared Strategic Direction - effectively enabling every individual in the organisation to 'pull the rope in the same direction'. The essence of strategy is to move everyone from where we are now to where we wish to be at some future point in time.
The evidence of great strategy is a clear and consistent pattern of decisions actually made by the organization as a whole!
2: Process Design & Improvement
Since all work is done through processes, it follows that Process Design & Improvement must be the second prerequisite for business excellence. In other words, Process Design & Improvement is HOW we will achieve our Shared Strategic Direction.
This Master Step usually yields the greatest net benefits for the organisation!
3: Performance Measurement & Feedback
As time goes by, of course we will want to know whether we are achieving our Shared Strategic Direction and whether our key processes which will get us there are healthy! Hence the next prerequisite for business excellence must be Performance Measurement & Feedback.
It works best when we measure Key Performance Indicators (KPIs) for a) achievement of our agreed Strategic objectives and b) for the health of our Key Processes that together make up 'Operations'. Best practice is to limit the resultant number of KPIs to only those that are considered to be essential. This minimizes the effort required to keep them up to date and to present the information to those accountable.
4: Knowledge Capture & Leverage
Knowledge Capture & Leverage has become increasingly important over the past 40 years as organisational assets continue to become more knowledge-based and less finance-based. There are 3 compelling reasons why an SME needs to harvest its knowledge efficiently:
Dramatic technological change (Internet; email etc) has enabled competitors to capture and leverage their knowledge with increasing ease.
Globalisation demands that we keep on top of industry developments in order to remain competitive.
Mobile Workforce - employees tend to take their knowledge with them when they leave unless we do something about it.
5: Process Design & Improvement
Finally, Leadership & Management of Change is critical because transformation towards business excellence can occur only if all your people are keen and able to participate in the changes.
Let's now further explore each of the Master Steps in the recommended implementation sequence...
MASTER STEP #1: SHARED STRATEGIC DIRECTION
The organisation's Strategic Plan is predicated upon having an agreed high level (1-page) Process Model for the entire business of the organisation. If any of the organisation's Key Business Processes are sufficiently 'broken' to warrant being 'process reengineered' (ie from the ground up!) during the planning period (typically 3 years), then the organisation must incorporate these reengineering priorities in the Strategic Plan. This is because reengineering projects are so fundamental that they are strategic in their nature and impact.
This can be achieved readily via the following simple planning methodology reflecting the four 'perspectives' of Kaplan and Norton's 'Balanced Scorecard'(1).
The Strategic Plan is developed from the top down using a 1-page graphical format - headed by the organisation's long term, customer-oriented Vision statement.
The Finance Objective is first identified, consistent with the organisation's Vision for the planning period.
The Customer Objective(s) come next since customers are the source of the organisation's revenue that governs 'Finance' success. Customer Objectives usually address what Products / Services (new or existing) are destined for what Markets (existing or new).
The Process Objective comes next since the Key Business (value-adding) Processes deliver the organisation's goods or services to its Customers. All that needs to be done here in this simplified approach for SMEs is to identify the agreed highest priority Key Business Processes that must be reengineered (from scratch) over the planning period. By reengineering only 1-2 such processes per annum, excessive change management challenges can be avoided, while at the same time ensuring that no Key Business Process is ever allowed to get more than about 7 years out of date. Best practice suggests that every Key Business Process should be reengineered once every 7 years for competitive advantage!
Finally, the People & Infrastructure Objectives are formulated to enable the organisation's processes to be brilliant. People and infrastructure (eg IT infrastructure; factory or office accommodation) form the foundation of the Strategic Plan. This final 'People & Infrastructure' perspective can be used to address anything strategic which does not fall within one of the other three perspectives above it in the 1-page Strategic Plan.
There are several important features of this simple, direct approach to developing the organisation's 1-page (graphical) Strategic Plan:
The 'Finance' perspective is at the top because financial performance is the ultimate lag indicator for the organisation. If 'Finance' is not healthy, the organisation cannot invest properly in any of the other three perspectives.
The arrows connecting the Objectives are pivotal to the logical 'cause and effect' flow of the diagram - from the bottom (causes) to the top (effects). The lower layers of the diagram are thus prerequisites for the organisation to achieve the 'Finance' Objective(s) and hence the overall Vision.
If the Strategic Plan is to be easy for all employees to memorise (to enable day-to-day decision-making!) and keep current via monthly monitoring and review, it should contain no more than 7 (total) Objectives.
Every Objective should be about fundamental change - not about the status quo. For example, no Objective should begin with the words: "Continue to... "
Every 'layer' should contain at least 1 Objective so that the overall Strategic Plan has no logical omissions. For example, a Strategic Plan with 5 'Finance' Objectives but no Objectives in any of the other 3 layers cannot be implemented readily. Such a Strategic Plan would be naïve - akin to "an emperor without any clothes".
The 'bullet points' for the 'Process' layer simply reflect the top priority Level 1 process reengineering candidates from the organisation's agreed 1-page Process Model! To avoid over-burdening the organisation, a maximum of 1-2 process reengineering projects should be planned and executed per annum for a 3-year planning period. Ideally, every Key Business Process should be reengineered every 7 years to prevent it getting out of date.
Every Objective must be measurable via at least one (and preferably only one) KPI which should be monitored regularly to track progressive achievement of that Objective.
For each Objective, typically 6-8 Actions should be formulated and scheduled to achieve that Objective in full by the end of the planning period. Individuals should be assigned to lead (ie project-manage) each Action and an Objective Manager should also be assigned to report regularly on overall progress of the Actions and on the respective 'achievement' KPI.
For a large SME organisation, the same language and format should be used for 'cascading' the corporate Strategic Plan to all Divisions, Departments etc. This greatly simplifies the process of ensuring strategic alignment and getting employee buy-in to the overall shared strategic direction.
MASTER STEP #2: PROCESS DESIGN & IMPROVEMENT
Why is Process Design & Improvement such an important part of business excellence?
It all starts with a simple and comprehensive definition of a "process"... a sequence of activities that converts some form of input into some form of output for some customer (internal or external). Given this broad definition, it follows that all work is therefore done through processes.
Furthermore, it follows that every organisation doing work is already executing a vast range of processes.
An organisation's current processes may be described in a variety of ways. For example, some processes may be well designed - others poorly designed. Some may be well documented, and others poorly documented. Still others may be totally ad-hoc, whereas others may be carefully orchestrated. The point is that if any organisation wishes to be excellent, then it must first agree on what are its most important processes. Next it must ensure that these key processes are designed properly and then improved in order to be as healthy as possible.
In summary, proactive Process Design & Improvement is a critical competency for any organisation aspiring to business excellence. An organisation can "get by" without proactive and professional Process Design & Improvement tools and techniques (most do!), but it will never be excellent.