What Is Operational Excellence? Definitions, Tips, and Best Practices Revealed

Last Updated On Optimize Operations

Achieving operational excellence is an organizational journey, but sometimes it can feel like a never-ending quest for hidden treasure.

Conquer your operational roadblocks that are wasting time, energy, and resources with our playbook, “The Ultimate Operations Management Strategy for Frontline Workforces.”

Operational excellence is an essential strategy to sustain growth while staying ahead of the competition.

But in reality, it’s a vague concept that leaves many of us looking like:

say what gif

Let’s uncover the principles of operational excellence are and why it’s important. Then we’ll look at a couple of operational excellence examples showing how companies address it on their own terms.

What Is Operational Excellence?

When looking for a definition of operational excellence, you’ll be hard-pressed to find a consistent answer. We like how Business Dictionary describes what is operational excellence best:

“A philosophy of the workplace where problem-solving, teamwork, and leadership results in the continous improvement in an organization. The process involves focusing on the customers’ needs, keeping the employees positive and empowered, and continually improving the current activities in the workplace.”

Overall excellence leads to next-level performance because your operational house is in order. In truth, your operational excellence meaning can be whatever your company decides it is.

Many believe the core principles of operational excellence mean performing better than your peers through growing revenue and lowering costs. It’s also a mentality deeply ingrained in your company culture that empowers your workforce for continuous improvement.

According to BTOES (Business Transformation & Operational Excellence):

“Companies in pursuit of operational excellence do two things significantly differently than other companies: they manage their business and operational processes systematically and invest in developing the right culture.”

What Are the Operational Goals?

Operational excellence is based on methodologies such as Six Sigma, Lean Management, Kaizen, and the Shingo Model. Each method has its own set of core principles to help guide your decisions.

That said, it’s best practice to establish clear goals when implementing any new process or program in your business. Established goals makes it easier to capture your ROI. 

Let’s look at what are the operational goals types to consider when building your plan.

1. Operational-Oriented Goals

Operational goals focus on enhancing company productivity and improving product or service quality. Goal examples are increasing safety measures and enhancing product or service flexibility.

2. Financial-Oriented Goals

Finance goals aim to improve financial metrics. These continuous improvements are the result of better operations, stronger customer relationships and better value to the customer. They often come as a result of growing profits, cutting costs, and generating free cash flow.

3.  People-Oriented Goals

Finally, people-oriented goals concentrate on workforce and cultural efforts that play a critical role in making an organization operationally excellent. Examples include growing employee engagement in operational excellence efforts, increasing skill training, and maximizing employee productivity.

Why Does Operational Excellence Matter?

Striving for operational excellence impacts almost every industry, including manufacturing, healthcare, technology, construction, etc. This is because it focuses on improving processes and systems.

So, what are the benefits of operational excellence, and how can you achieve them?

Let’s say a company’s first step to achieving operational excellence is transforming itself into a lean operations management organization. 

Which of the following attributes is not for lean operations?

  1. Overproduction of products
  2. Frequent employee downtime
  3. Consistent inventory excess
  4. All of the above

So, which of the following attributes is not for lean​ operations? The answer: D. All of the above. 

With the lean management method, companies benefit from waste elimination, operating expense reduction, and profit growth.

There are plenty of other benefits that impact the organization outside of operational metric improvement, including:

  • Improved teamwork and collaboration
  • A more empowered and productive workforce
  • Better value to the customer and enhanced interactions and service
  • Better and more open communication between organizational levels

How to Achieve Operational Excellence Through Communication?

communication gif

So, now that you have your operational excellence program in place — including your methodology and overarching goals – what next? How do you put the plan to work, and more importantly, how do you ensure sustainable progress?

Start by communicating with your employees and empowering them to find ways to be more efficient in their day-to-day tasks. 

Get started with these five open employee communication tips:

  1. Communicate a clear strategy. This helps employees understand how operational excellence supports overall business objectives and establishes an improved flow of value
  2. Share goals and KPIs. This allows employees to be crystal clear on what they are working to achieve
  3. Use communication tools that reach your workforce. Use mobile communication tools like Beekeeper that give instant access to information
  4. Provide training opportunities. Help employees take operational excellence into their own hands with leadership, process, and problem-solving education
  5. Be open to feedback. Frontline employees are usually the first to know when something can be done better to save time and money

Pro tip: Using Beekeeper surveys and 1:1 or group chats are an easy and quick way to gather frontline employee feedback.

A solid operational excellence strategy  and execution plan are great to have, but it’s your workforce that brings the program to life. You can extend the lifetime of your program by ensuring employees are:

  • Communicated with openly
  • Empowered to make their own decisions and provide feedback
  • Trained to spot operational gaps in need of continuous improvement

Operational Excellence Examples

Operational excellence examples can be found across any industry you look to.

Below are some examples of how companies apply operational excellence to their business models to stay competitive.

Chevron

Chevron operational excellence

Chevron has a long history of putting an operational excellence culture at the forefront of its organization. 

Its Operational Excellence Management System (OEMS), which launched in 2004, outlines a clear set of operational excellence objectives and focus areas. Employees are expected to help manage risks and maintain the safeguards in place that mitigate those risks. 

According to Chevron’s CEO Mike Wirth, OEMS is what sets them apart from their competition: “OE is a competitive advantage in hiring and retaining the best workforce, and vital to building trust with communities and governments.”

IRP Meat and Seafood Co.

IRP Meat and Seafood Co. Worker Holding Fish

IRP Meat and Seafood Co. took its operational efficiency to the next level by transforming its employee communications tools. 

As a business whose customers frequently place “just in time” orders, IRP needed a better way for employees to communicate about customer orders. Since adopting Beekeeper, operations improved by:

  • Creating a streamlined workflow
  • Reducing waste due to order changes
  • Improving on-time deliveries for customers who rely on quick turnarounds

Which Industries Can Benefit from Operational Excellence

Because operational excellence focuses on process, many industries can stand to benefit from a well-thought-out program. However, different industries will look to improve different processes. 

Industries that benefit from operational excellence are:

Manufacturing

The manufacturing industry is no stranger to operational excellence initiatives. As the Fourth Industrial Revolution takes hold, factories are under pressure to enhance productivity, decrease downtime, and cut out waste where they can.

Construction

Similar to Chevron, construction focuses heavily on employee health and safety as a measure of operational excellence success. 

For example, Holcim Switzerland & Italy adopted the Beekeeper employee communication app to enhance operational health and safety communications that could be reached across their distributed workforce.

Healthcare

Like many industries, the healthcare industry is always looking for ways to cut costs while continuing to deliver exceptional patient care

According to McKinsey, acute-care facilities are focusing on lean operations, clinical standardization, and supply utilization to unlock savings and achieve clinical operations excellence.

Operational Excellence Best Practices and Strategies

Achieving operational excellence is no simple matter. It takes a long time to plan your strategy.

When you’re ready to put your operational excellence plan into place, consider these five best practices.

1.  Choose a Methodology That Matches Your Strategy

It’s best to start your operational excellence journey with a method that helps you achieve your goals as efficiently as possible.

The methodology you select, such as Lean Management, Six Sigma, and Kaizen methods, will be based on your focus area. 

For example, if you’re looking to cut waste in your factory, you might go with Lean Management. If you’re looking to enhance the customer experience, you might consider Six Sigma.  

Either way, start with a solid foundation by knowing exactly what it is you’d like to address and selecting the method that will help you get there.

2.  Define Your Goals

Then, outline what it is you want to achieve – both with broad goals and specific KPIs that will measure your success.

For example, if you’d like to enhance the customer experience with a more knowledgeable workforce, set a goal for the amount of training employees should go through to understand the products and services better.

3.  Get Employees Onboard As Soon As Possible

Don’t forget, your employees are the ones that will put your strategy to work to achieve operational excellence. Bringing them into the conversation as soon as possible is an important step.

To start, consider including employees that are the most impacted by any of the changes in the strategy process. Those employees can give you real-time insight into the problems the company is facing and why. They can also share their own ideas of how to address certain problems in the operational excellence program.

4.  Communicate, Communicate, Communicate

As with any organizational change, communication is key to achieving operational excellence.

First, make sure to communicate the essential aspects of the program, such as the mission, goals, and KPIs, to those impacted.That way they have the full view of what your organization is trying to achieve. Then, provide an open feedback channel so employees, managers, and leaders can stay in close contact throughout the process.

5.  Remember Operational Excellence Is Continuous

Unlike other corporate initiatives, operational excellence doesn’t stop once it’s achieved. It requires constant communication, continuous improvements, and workforce engagement to sustain growth and keep your company ahead of the competitive curve.

Ready to drive operational efficiency with a digital workplace? Download our playbook, “The Ultimate Operations Management Strategy for Frontline Workforces” to get started!

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