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Opera&onal	
  Excellence	
  
Ge#ng	
  the	
  most	
  out	
  of	
  your	
  Lean	
  Six	
  Sigma	
  programs	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Agenda/Objec&ves	
  
•  Why	
  a	
  new	
  approach	
  is	
  necessary	
  
•  How	
  to	
  diagnose	
  the	
  real	
  problem	
  
•  Three	
  things	
  you	
  can	
  do	
  to	
  get	
  the	
  most	
  out	
  of	
  
your	
  LSS	
  Programs	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.1)	
  AlixPartners	
  Survey2)	
  2010	
  Accenture	
  Survey	
  
A	
  new	
  approach	
  is	
  necessary	
  
•  OperaKonal	
  excellence	
  is	
  more	
  important	
  than	
  
ever	
  –	
  customers	
  demand	
  it!	
  
–  Increased	
  compeKKon	
  driving	
  decreased	
  
margins	
  
–  ExpectaKons	
  of	
  customers,	
  shareholders,	
  and	
  
society	
  are	
  higher	
  than	
  ever	
  
–  News	
  of	
  poor	
  performance	
  travels	
  far	
  and	
  fast	
  
•  TradiKonal	
  approaches	
  are	
  not	
  achieving	
  
expected	
  results	
  
–  Only	
  31%	
  of	
  companies	
  were	
  able	
  to	
  achieve	
  
the	
  results	
  promised	
  by	
  LSS	
  pracKoners1	
  
–  58%	
  of	
  execuKves	
  report	
  conKnuous	
  
improvement	
  programs	
  produced	
  minimal	
  
financial	
  impact2	
  
Consider	
  the	
  case	
  of	
  	
  
1-­‐800-­‐Flowers	
  
Leadership	
  engagement	
  is	
  oFen	
  blamed,	
  but	
  is	
  that	
  
the	
  real	
  reason?	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
The	
  world	
  has	
  changed!	
  
Volume	
  
Cost	
  
Pre-­‐Industrial	
  Age	
  
“Individual	
  producKvity”	
  
Dominated	
  by	
  
variable	
  costs	
  
Volume	
  
Industrial	
  Age	
  
“Economies	
  of	
  Scale”	
  
Dominated	
  by	
  
fixed	
  costs	
  
Complexity	
  
Post-­‐Industrial	
  Age	
  
“Complexity”	
  
Dominated	
  by	
  
complexity	
  costs	
  
	
  	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 5	
  
TECHNOLOGY	
  IS	
  MORE	
  COMPLEX	
  	
   PRODUCTS	
  AND	
  SERVICES	
  MORE	
  COMPLEX	
  
PROCESSES	
  MORE	
  COMPLEX	
   ORGANIZATIONS	
  	
  MORE	
  COMPLEX	
  
REGULATIONS	
  MORE	
  COMPLEX	
  
MARKETS	
  MORE	
  COMPLEX	
  
Complexity	
  is	
  stretching	
  the	
  capabili&es	
  of	
  
most	
  companies	
  
X
X
X
X
X
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 6	
  
Many	
  companies	
  are	
  passing	
  a	
  complexity	
  threshold	
  
VALUE	
  
(diminishing	
  
returns)	
  
COST	
  &	
  RISK	
  
(exponenKal	
  growth)	
  
Level	
  of	
  complexity	
  
you	
  can	
  support	
  
$	
  
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Complexity	
  
Opera'onal	
  risk	
  grows	
  exponen'ally	
  with	
  complexity	
  
Few	
  companies	
  
are	
  s'll	
  here	
  
Many	
  companies	
  
are	
  here	
  
An	
  increasing	
  number	
  
of	
  companies	
  are	
  here	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 7	
  
Tradi&onal	
  approaches	
  to	
  Opera&onal	
  Excellence	
  are	
  
not	
  effec&ve	
  in	
  the	
  face	
  of	
  complexity	
  
•  They	
  do	
  not	
  address	
  strategy,	
  which	
  is	
  oen	
  the	
  
source	
  of	
  complexity	
  
•  They	
  take	
  a	
  “Bo_om-­‐up”	
  approach	
  to	
  improving	
  
results	
  
•  They	
  can	
  actually	
  add	
  more	
  complexity	
  
•  They	
  seek	
  to	
  improve	
  before	
  establishing	
  control	
  
•  Complex	
  environments	
  require	
  a	
  different	
  
approach	
  to	
  leadership	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Complexity	
  arises	
  from	
  the	
  interac&ons	
  between	
  
products,	
  processes,	
  and	
  the	
  organiza&on	
  
•  Complexity	
  is	
  a	
  cube	
  
funcKon—as	
  it	
  increases	
  on	
  
one	
  axis,	
  it	
  mulKplies	
  across	
  
the	
  others	
  
•  TradiKonal	
  approaches	
  
address	
  individual	
  processes
—not	
  interacKons	
  between	
  
product,	
  process,	
  and	
  
organizaKon	
  
	
  	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 9	
  
	
  
Example:	
  The	
  impact	
  of	
  product	
  por^olio	
  complexity	
  
on	
  process	
  complexity	
  	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
Tradi&onal	
  approaches	
  typically	
  employ	
  a	
  “Boaom-­‐
up”	
  approach,	
  which	
  doesn’t	
  address	
  complexity	
  
Bo=om-­‐up	
  approach:	
  Improving	
  one	
  process	
  at	
  a	
  6me	
  
Top-­‐down	
  approach:	
  Start	
  with	
  a	
  framework	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 11	
  
The	
  typical	
  response	
  is	
  to	
  add	
  even	
  more	
  complexity,	
  
which	
  compounds	
  the	
  problem	
  
Complexity	
  
increases	
  
Poor	
  
execuKon	
  
Loss	
  of	
  
process	
  
control	
  
Poor	
  
business	
  
results	
  
More	
  
people	
  &	
  
processes	
  
Vicious	
  	
  
Complexity	
  Cycle	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
Tradi&onal	
  approaches	
  aren’t	
  effec&ve	
  in	
  the	
  face	
  of	
  
complexity	
  
•  TradiKonal	
  approaches	
  a_empt	
  to	
  
improve	
  processes	
  	
  before	
  
establishing	
  control:	
  
–  Controls	
  for	
  individual	
  processes	
  are	
  
created,	
  but	
  the	
  underlying	
  system	
  
necessary	
  for	
  sustainment	
  is	
  not	
  
–  Results	
  in	
  improving	
  processes	
  
without	
  knowing	
  their	
  real	
  
capability	
  
•  Establishing	
  control	
  is	
  the	
  necessary	
  
first	
  step:	
  
–  	
  Ensures	
  sustainment	
  
–  Oen	
  produces	
  greater	
  
performance	
  improvements	
  faster	
  
and	
  with	
  fewer	
  resources	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Agenda/Objec&ves	
  
•  Why	
  a	
  new	
  approach	
  is	
  necessary	
  
•  How	
  to	
  diagnose	
  the	
  real	
  problem	
  
•  Three	
  things	
  you	
  can	
  do	
  to	
  get	
  the	
  most	
  out	
  of	
  
your	
  LSS	
  Programs	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
	
  	
  
Defining	
  Opera&onal	
  Excellence	
  –	
  the	
  oFen	
  
overlooked	
  first	
  step	
  
Leadership	
  Alignment	
  
Consistent	
  Messaging	
  
Employees	
  Understand	
  
Clear	
  Roles	
  and	
  
ResponsibiliKes	
  
Increased	
  Commitment	
  
•  Leaders	
  must	
  be	
  united	
  and	
  share	
  a	
  common	
  vision	
  
•  If	
  leaders	
  aren’t	
  aligned,	
  messages	
  won’t	
  be	
  clear	
  and	
  
consistent	
  
•  Unclear	
  and	
  inconsistent	
  messages	
  impede	
  employee’s	
  
understanding	
  	
  
•  If	
  employees	
  don’t	
  understand	
  vision,	
  they	
  will	
  spend	
  
Kme	
  trying	
  to	
  define	
  their	
  roles	
  
•  In	
  the	
  face	
  of	
  ambiguity,	
  many	
  employees	
  take	
  a	
  “wait	
  
and	
  see”	
  stance	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
	
  	
  
15	
  
Common	
  defini&ons	
  of	
  Opera&onal	
  Excellence	
  are	
  
vague	
  and	
  lack	
  the	
  ability	
  to	
  be	
  measured	
  
•  “Each	
  and	
  every	
  employee	
  can	
  see	
  the	
  flow	
  of	
  value	
  to	
  the	
  customer,	
  and	
  fix	
  that	
  flow	
  before	
  it	
  
breaks	
  down.”SM	
  	
  -­‐	
  InsKtute	
  for	
  OperaKonal	
  Excellence	
  
	
  
•  Opera6onal	
  Excellence	
  is	
  a	
  philosophy	
  of	
  leadership,	
  teamwork	
  and	
  problem	
  solving	
  resul6ng	
  in	
  
con6nuous	
  improvement	
  throughout	
  the	
  organiza6on	
  by	
  focusing	
  on	
  the	
  needs	
  of	
  the	
  customer,	
  
empowering	
  employees,	
  and	
  op6mizing	
  exis6ng	
  ac6vi6es	
  in	
  the	
  process.	
  -­‐	
  Wikipedia	
  	
  	
  
•  A	
  philosophy	
  of	
  the	
  workplace	
  where	
  problem-­‐solving,	
  teamwork,	
  and	
  leadership	
  results	
  in	
  the	
  
ongoing	
  improvement	
  in	
  an	
  organiza6on.	
  	
  The	
  process	
  involves	
  focusing	
  on	
  the	
  customers’	
  needs,	
  
keeping	
  the	
  employees	
  posi6ve	
  and	
  empowered,	
  and	
  con6nually	
  improving	
  the	
  current	
  ac6vi6es	
  
in	
  the	
  workplace.	
  	
  -­‐	
  The	
  Business	
  DicKonary	
  
•  “The	
  leveraging	
  of	
  the	
  disciplines	
  of	
  Lean,	
  Six-­‐Sigma	
  and	
  Leadership	
  as	
  key	
  to	
  any	
  Con6nuous	
  
Improvement	
  ini6a6ve	
  –	
  towards	
  the	
  increase	
  in	
  performance	
  of	
  both	
  individuals	
  and	
  the	
  
companies	
  for	
  whom	
  they	
  work	
  and	
  resul6ng	
  an	
  indelible	
  and	
  posi6ve	
  impact	
  on	
  stakeholder	
  
value.”	
  –	
  LinkedIn	
  OperaKonal	
  Excellence	
  Group	
  
These	
  definiKons	
  contain	
  components	
  of	
  the	
  systems	
  and	
  culture	
  necessary	
  to	
  achieve	
  
OperaKonal	
  Excellence,	
  but	
  because	
  they	
  lack	
  the	
  ability	
  to	
  be	
  measured,	
  they	
  are	
  not	
  
useful	
  for	
  understanding	
  how	
  to	
  achieve	
  OperaKonal	
  Excellence,	
  or	
  why	
  it	
  is	
  important.	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Opera&onal	
  Excellence	
  delivers	
  industry	
  leading	
  
performance	
  across	
  7	
  Value	
  Drivers	
  
Given	
  two	
  companies	
  with	
  similar	
  strategies,	
  the	
  one	
  that	
  executes	
  be_er	
  will	
  
have	
  be_er	
  performance	
  across	
  all	
  7	
  Value	
  Drivers.	
  
	
  	
  
Sound
Strategy
Operational
Excellence
Leading
Performance
7	
  Value	
  Drivers	
  
1. Safety	
  
2. Environment	
  
3. Compliance	
  
4. Quality	
  
5. Produc&vity	
  
6. Yield	
  	
  
7. Cost	
  
Strategy	
  
1. Product	
  por^olio	
  
2. Markets	
  served	
  
3. Distribu&on	
  channels	
  
4. Price	
  point	
  
5. Level	
  of	
  service	
  
6. Partnerships	
  
7. Opera&ng	
  model	
  
Opera'onal	
  
excellence	
  is	
  the	
  
execu'on	
  of	
  the	
  
business	
  strategy	
  
more	
  consistently	
  
and	
  reliably	
  than	
  the	
  
compe66on.	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Agenda/Objec&ves	
  
•  Why	
  a	
  new	
  approach	
  is	
  necessary	
  
•  How	
  to	
  diagnose	
  the	
  real	
  problem	
  
•  Three	
  things	
  you	
  can	
  do	
  to	
  get	
  the	
  most	
  out	
  of	
  
your	
  LSS	
  Programs	
  
1.  Address	
  non-­‐value	
  added	
  complexity	
  that	
  
arises	
  from	
  your	
  strategy	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Technology	
  
Strategic	
  
intent	
  
Value	
  chain	
  
processes	
  
Culture	
  
Structure	
  
and	
  
authority	
  
People	
  	
  
	
  	
  
Sound	
  strategy	
  requires	
  aligning	
  decisions	
  to	
  
allocate	
  resources	
  consistent	
  with	
  strategic	
  intent	
  
Make	
  strategic	
  decisions	
  
consistent	
  with	
  intent	
  
1.  Value	
  discipline	
  
–  Product	
  innovator	
  
–  Customer	
  inKmate	
  
–  Low	
  cost	
  
2.  Markets	
  to	
  parKcipate	
  in	
  
–  Local	
  
–  Global	
  
3.  Value	
  chain	
  
–  VerKcally	
  integrated	
  
–  Single	
  segment	
  
Processes	
  and	
  Culture	
  must	
  
support	
  the	
  strategy	
  
Technology,	
  organizaKonal	
  structure,	
  
and	
  people	
  capabiliKes	
  must	
  support	
  
the	
  processes	
  and	
  culture	
  
Strategic	
  Intent	
   Components	
  of	
  the	
  Opera&ng	
  Model	
  
Aligning	
  the	
  OperaKng	
  Model	
  to	
  the	
  strategy	
  isn’t	
  enough.	
  	
  We	
  must	
  also	
  implement	
  
the	
  management	
  system	
  processes	
  necessary	
  to	
  execute	
  the	
  OperaKng	
  Model.	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Agenda/Objec&ves	
  
•  Why	
  a	
  new	
  approach	
  is	
  necessary	
  
•  How	
  to	
  diagnose	
  the	
  real	
  problem	
  
•  Three	
  things	
  you	
  can	
  do	
  to	
  get	
  the	
  most	
  out	
  of	
  
your	
  LSS	
  Programs	
  
1.  Address	
  non-­‐value	
  added	
  complexity	
  that	
  
arises	
  from	
  your	
  strategy	
  
2.  Simplify	
  and	
  standardize	
  your	
  Management	
  
System	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
Opera&onal	
  Excellence	
  is	
  a	
  func&on	
  of	
  the	
  
management	
  system	
  &	
  culture	
  
Effective
management
processes
and
procedures
Culture of
Operational
Discipline
Operational
Excellence
Understanding	
  this	
  rela&onship	
  helps	
  cut	
  through	
  complexity	
  to	
  
quickly	
  iden&fy	
  the	
  real	
  problem	
  from	
  the	
  “top—down”	
  	
  
Sound
Strategy
Operational
Excellence
Leading
Performance
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 21	
  
Understanding	
  the	
  different	
  types	
  of	
  processes	
  is	
  an	
  
important	
  first	
  step	
  
Acquire
raw
materials
Convert	
  to	
  
finished	
  
good
Store
finished
goods
Distribute
finished
goods
Collect
payment
Procedures
Roles	
  and	
  ResponsibiliKes	
  
Training
Risk	
  IdenKficaKon
A	
  	
  Management	
  System	
  
Process	
  or	
  Key	
  Control	
  is	
  a	
  
process	
  whose	
  primary	
  
purpose	
  is	
  to	
  ensure	
  
effecKve	
  execuKon	
  of	
  a	
  value	
  
chain	
  process	
  
Applied	
  across	
  
each	
  phase	
  of	
  
the	
  End-­‐to-­‐End	
  
Value	
  Chain	
  
The	
  End-­‐to-­‐End	
  Value	
  Chain	
  
represents	
  the	
  core	
  acKviKes	
  
a	
  firm	
  performs	
  to	
  deliver	
  
value	
  to	
  its	
  customers	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 22	
  
The	
  founda&ons	
  of	
  an	
  Opera&onal	
  Excellence	
  
Management	
  System	
  
Key	
  Value	
  
Drivers	
  
OE	
  is	
  defined	
  by	
  
measurable	
  business	
  
performance	
  across	
  
specific	
  value	
  drivers	
  
	
  	
  
Safety	
  
Environment	
  
Compliance	
  
Quality	
  
Produc&vity	
  
Yield	
  	
  
Cost	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
The	
  4	
  Sources	
  of	
  Risk	
  
Equipment	
  Processes	
  People	
  Inputs	
  
Acted	
  on	
  
by	
  
To	
  	
  
produce	
  
Finished	
  
Goods/	
  
Services	
  
The	
  OperaKon	
  
•  Any	
  failure	
  of	
  the	
  operaKon	
  to	
  produce	
  a	
  good	
  or	
  service	
  that	
  meets	
  
the	
  customers	
  requirements	
  is	
  a	
  result	
  of	
  1	
  of	
  4	
  sources:	
  
1.  A	
  person	
  failed	
  to	
  do	
  what	
  they	
  were	
  expected	
  to	
  do.	
  
2.  A	
  process	
  failed	
  to	
  perform	
  as	
  expected	
  
3.  A	
  piece	
  of	
  equipment	
  failed	
  to	
  perform	
  as	
  expected	
  
4.  Un-­‐managed	
  change	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 24	
  
The	
  founda&ons	
  of	
  an	
  Opera&onal	
  Excellence	
  
Management	
  System	
  
Key	
  Value	
  
Drivers	
  
Four	
  
Sources	
  of	
  
Risk	
  
OE	
  is	
  defined	
  by	
  
measurable	
  business	
  
performance	
  across	
  
specific	
  value	
  drivers	
  
There	
  are	
  only	
  four	
  
sources	
  of	
  risk	
  for	
  failure	
  
to	
  perform	
  against	
  the	
  
value	
  drivers	
  
	
  	
  
Safety	
  
Environment	
  
Compliance	
  
Quality	
  
Produc&vity	
  
Yield	
  	
  
Cost	
  
People	
  
Processes	
  
Equipment	
  
Change	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Each	
  source	
  of	
  risk	
  can	
  be	
  analyzed	
  for	
  the	
  key	
  causes	
  
of	
  failure	
  
	
  	
  
People	
  
Unaware	
  of	
  
expectaKon	
  
Unable	
  to	
  perform	
  as	
  
expected	
  
Chooses	
  not	
  to	
  perform	
  
as	
  expected	
  
ExpectaKons	
  don’t	
  exist	
  
ExpectaKons	
  not	
  
communicated	
  
ExpectaKons	
  not	
  
enforced	
  
Lack	
  of	
  knowledge	
  
Lack	
  of	
  talent	
  
Lack	
  of	
  virtue	
  
Wrong	
  incenKve	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
	
  	
  
26	
  
Each	
  source	
  of	
  risk	
  can	
  be	
  analyzed	
  for	
  the	
  key	
  causes	
  
of	
  failure	
  
Equipment	
  
Inadequate	
  Design	
  
Unplanned	
  Failure	
  
Improper	
  OperaKons	
  
Inadequate	
  
Maintenance	
  Strategy	
  
Inadequate	
  execuKon	
  of	
  
Maintenance	
  Strategy	
  
Personnel	
  not	
  allocated	
  
People	
  
Process	
  
Insufficient	
  tools/
materials	
  
People	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
	
  	
  
27	
  
Each	
  source	
  of	
  risk	
  can	
  be	
  analyzed	
  for	
  the	
  key	
  causes	
  
of	
  failure	
  
Process	
  
Process	
  is	
  not	
  capable	
  
Process	
  not	
  in	
  control	
  
OperaKng	
  limits	
  not	
  
defined	
  
People	
  
Equipment	
  
Change	
  
MOC	
  process	
  not	
  
capable	
  
MOC	
  process	
  not	
  
followed	
  
People	
  
Change	
  not	
  idenKfied	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
The	
  founda&ons	
  of	
  an	
  Opera&onal	
  Excellence	
  
Management	
  System	
  
Key	
  Value	
  
Drivers	
  
Four	
  
Sources	
  of	
  
Risk	
  
Common	
  
Causes	
  of	
  
Failure	
  
OE	
  is	
  defined	
  by	
  
measurable	
  business	
  
performance	
  across	
  
specific	
  value	
  drivers	
  
There	
  are	
  only	
  four	
  
sources	
  of	
  risk	
  for	
  failure	
  
to	
  perform	
  against	
  the	
  
value	
  drivers	
  
The	
  four	
  sources	
  of	
  risk	
  
tend	
  to	
  fail	
  for	
  the	
  same	
  
reasons	
  regardless	
  of	
  
the	
  type	
  of	
  operaKon	
  
	
  	
  
Examples	
  
ExpectaKons	
  don’t	
  
exist	
  
Lack	
  of	
  knowledge	
  
Wrong	
  incenKves	
  
Equipment	
  not	
  capable	
  
Personnel	
  not	
  allocated	
  
Process	
  not	
  capable	
  
MOC	
  inadequate	
  
Safety	
  
Environment	
  
Compliance	
  
Quality	
  
Produc&vity	
  
Yield	
  	
  
Cost	
  
People	
  
Processes	
  
Equipment	
  
Change	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
If	
  the	
  causes	
  of	
  failure	
  are	
  consistent	
  across	
  various	
  
opera&ons,	
  the	
  necessary	
  set	
  of	
  Key	
  Controls	
  is	
  as	
  well	
  
People	
  
Unaware	
  of	
  
expectaKon	
  
Unable	
  to	
  perform	
  as	
  
expected	
  
Chooses	
  not	
  to	
  perform	
  
as	
  expected	
  
ExpectaKons	
  don’t	
  exist	
  
ExpectaKons	
  not	
  
communicated	
  
ExpectaKons	
  not	
  
enforced	
  
Lack	
  of	
  knowledge	
  
Lack	
  of	
  talent	
  
Lack	
  of	
  virtue	
  
Wrong	
  incenKve	
  
Ops/maintenance	
  procedures/
policies/standard	
  work	
  
Core	
  communicaKon	
  strategy	
  
Audits/assessments,	
  org	
  structure,	
  
performance	
  management	
  
Training/cerKficaKon	
  	
  
SelecKon	
  process	
  
Culture,	
  selecKon	
  process	
  
CompensaKon	
  strategy,	
  performance	
  
management	
  
Key	
  Controls	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
	
  	
  
30	
  
If	
  the	
  causes	
  of	
  failure	
  are	
  consistent	
  across	
  various	
  
opera&ons,	
  the	
  necessary	
  set	
  of	
  Key	
  Controls	
  is	
  as	
  well	
  
Equipment	
  
Inadequate	
  Design	
  
Unplanned	
  Failure	
  
Improper	
  OperaKons	
  
Inadequate	
  
Maintenance	
  Strategy	
  
Inadequate	
  execuKon	
  of	
  
Maintenance	
  Strategy	
  
Personnel	
  not	
  allocated	
  
People	
  
Equipment	
  
Insufficient	
  tools/
materials	
  
People	
  
CriKcality	
  Ranking,	
  FMEA,	
  RCM	
  
Engineering	
  Disciplines	
  
Gatekeeping,	
  Scheduling	
  
Planning,	
  Parts	
  Ki#ng,	
  Parts	
  
Strategy	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
	
  	
  
31	
  
If	
  the	
  causes	
  of	
  failure	
  are	
  consistent	
  across	
  various	
  
opera&ons,	
  the	
  necessary	
  set	
  of	
  Key	
  Controls	
  is	
  as	
  well	
  
Process	
  
Process	
  is	
  not	
  capable	
  
Process	
  is	
  not	
  in	
  control	
  
OperaKng	
  limits	
  not	
  
defined	
  
People	
  
Process	
  
Change	
  
MOC	
  process	
  not	
  
capable	
  
MOC	
  process	
  not	
  
followed	
   People	
  
Process	
  Engineering	
  (LEAN	
  Six	
  Sigma	
  
Tools)	
  
Process	
  FMEA,	
  Process	
  Control	
  Plan	
  
Management	
  of	
  Change	
  Program	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 32	
  
The	
  founda&ons	
  of	
  an	
  Opera&onal	
  Excellence	
  
Management	
  System	
  
Key	
  Value	
  
Drivers	
  
Four	
  
Sources	
  of	
  
Risk	
  
Common	
  
Causes	
  of	
  
Failure	
  
Specific	
  Key	
  
Controls	
  
OE	
  is	
  defined	
  by	
  
measurable	
  business	
  
performance	
  across	
  
specific	
  value	
  drivers	
  
There	
  are	
  only	
  four	
  
sources	
  of	
  risk	
  for	
  failure	
  
to	
  perform	
  against	
  the	
  
value	
  drivers	
  
The	
  four	
  sources	
  of	
  risk	
  
tend	
  to	
  fail	
  for	
  the	
  same	
  
reasons	
  regardless	
  of	
  
the	
  type	
  of	
  operaKon	
  
The	
  set	
  of	
  Key	
  Controls	
  
necessary	
  to	
  prevent	
  
failures	
  is	
  also	
  the	
  	
  same	
  
	
  	
  
Examples	
  
Vision/Procedures	
  
Training/CerKficaKon	
  
Performance	
  Mgmt	
  
Engineering	
  Disciplines	
  
Planning/Scheduling	
  
Design	
  for	
  Six	
  Sigma	
  
MOC	
  Process	
  
Culture	
  
OrganizaKon	
  Structure	
  
Process	
  Control	
  Plan	
  
FMEA	
  
Examples	
  
ExpectaKons	
  don’t	
  
exist	
  
Lack	
  of	
  knowledge	
  
Wrong	
  incenKves	
  
Equipment	
  not	
  capable	
  
Personnel	
  not	
  allocated	
  
Process	
  not	
  capable	
  
MOC	
  inadequate	
  
Safety	
  
Environment	
  
Compliance	
  
Quality	
  
Produc&vity	
  
Yield	
  	
  
Cost	
  
People	
  
Processes	
  
Equipment	
  
Change	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
	
  
	
  
Management	
  System	
  processes	
  can	
  be	
  grouped	
  into	
  
Elements	
  to	
  reduce	
  complexity	
  
Risk	
  
IdenKficaKon	
  
Process	
  
Hazard	
  
Analysis	
  
Failure	
  Modes	
  
Effects	
  
Analysis	
  
Risk	
  Registers	
  
The	
  value	
  of	
  the	
  7	
  Elements	
  
•  Easier	
  for	
  people	
  to	
  remember	
  
than	
  all	
  key	
  controls	
  
•  More	
  efficient	
  to	
  organize	
  around	
  
•  Creates	
  common	
  language	
  	
  that	
  
facilitates	
  learning:	
  
–  Between	
  management	
  and	
  
employees	
  
–  Between	
  leaders	
  
–  From	
  site	
  to	
  site	
  
•  Encourages	
  systems	
  thinking	
  
–  Ensures	
  proacKve	
  management	
  of	
  risk	
  
in	
  development	
  of	
  new	
  systems	
  
–  Used	
  in	
  root	
  cause	
  analysis,	
  problems	
  
aren’t	
  seen	
  in	
  isolaKon	
  	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
The	
  7	
  essen&al	
  Elements	
  of	
  an	
  Opera&onal	
  Excellence	
  
Management	
  System	
  
Leadership	
  
Employee	
  accountability	
  
Risk	
  idenKficaKon	
  
Risk	
  miKgaKon	
  
Knowledge	
  sharing	
  
Management	
  of	
  change	
  
ConKnuous	
  improvement	
  
Leaders	
  arKculate	
  a	
  clear	
  vision	
  of	
  OperaKonal	
  Excellence	
  
and	
  create	
  a	
  culture	
  of	
  OperaKonal	
  Discipline	
  
Processes	
  are	
  in	
  place	
  to	
  ensure	
  employee’s	
  	
  are	
  properly	
  
incenKvized	
  and	
  know	
  what	
  they	
  are	
  accountable	
  
Risks	
  are	
  idenKfied	
  ,	
  assessed	
  ,	
  and	
  prioriKzed	
  for	
  processes	
  
and	
  equipment	
  
Controls	
  are	
  put	
  in	
  place	
  to	
  miKgate	
  the	
  idenKfied	
  risks	
  
CommunicaKon	
  and	
  training	
  systems	
  are	
  in	
  place	
  to	
  share	
  
knowledge	
  about	
  the	
  risks	
  and	
  their	
  controls	
  
Processes	
  are	
  in	
  place	
  to	
  management	
  changes	
  of	
  people,	
  
processes,	
  and	
  equipment	
  
All	
  processes	
  are	
  measured,	
  verified,	
  and	
  conKnuously	
  
improved	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 35	
  
The	
  founda&ons	
  of	
  an	
  Opera&onal	
  Excellence	
  
Management	
  System	
  
Key	
  Value	
  
Drivers	
  
Four	
  
Sources	
  of	
  
Risk	
  
Common	
  
Causes	
  of	
  
Failure	
  
Specific	
  Key	
  
Controls	
  
OEMS	
  
Elements	
  
OE	
  is	
  defined	
  by	
  
measurable	
  business	
  
performance	
  across	
  
specific	
  value	
  drivers	
  
There	
  are	
  only	
  four	
  
sources	
  of	
  risk	
  for	
  failure	
  
to	
  perform	
  against	
  the	
  
value	
  drivers	
  
The	
  four	
  sources	
  of	
  risk	
  
tend	
  to	
  fail	
  for	
  the	
  same	
  
reasons	
  regardless	
  of	
  
the	
  type	
  of	
  operaKon	
  
The	
  set	
  of	
  Key	
  Controls	
  
necessary	
  to	
  prevent	
  
failures	
  is	
  also	
  the	
  	
  same	
  
Key	
  controls	
  are	
  
organized	
  into	
  	
  
Elements	
  to	
  facilitate	
  
implementaKon	
  and	
  
management	
  	
  
	
  	
  
Examples	
  
Vision/Procedures	
  
Training/CerKficaKon	
  
Performance	
  Mgmt	
  
Engineering	
  Disciplines	
  
Planning/Scheduling	
  
Design	
  for	
  Six	
  Sigma	
  
MOC	
  Process	
  
Culture	
  
OrganizaKon	
  Structure	
  
Process	
  Control	
  Plan	
  
FMEA	
  
Examples	
  
ExpectaKons	
  don’t	
  
exist	
  
Lack	
  of	
  knowledge	
  
Wrong	
  incenKves	
  
Equipment	
  not	
  capable	
  
Personnel	
  not	
  allocated	
  
Process	
  not	
  capable	
  
MOC	
  inadequate	
  
Leadership	
  
Employee	
  Accountability	
  
Risk	
  ID	
  
Risk	
  Mi&ga&on	
  
Knowledge	
  Sharing	
  
Management	
  of	
  Change	
  
Con&nuous	
  Improvement	
  
Safety	
  
Environment	
  
Compliance	
  
Quality	
  
Produc&vity	
  
Yield	
  	
  
Cost	
  
People	
  
Processes	
  
Equipment	
  
Change	
  
There	
  is	
  an	
  “order”	
  to	
  implementa&on	
  
Leadership	
  
Employee	
  accountability	
  
Risk	
  iden&fica&on	
  
Risk	
  control	
  
Knowledge	
  sharing	
  
Management	
  of	
  change	
  
Con&nuous	
  improvement	
  
Commi_ed	
  leadership	
  is	
  the	
  foundaKon	
  
Employees	
  must	
  know	
  their	
  accountabiliKes	
  
Once	
  leaders	
  and	
  employees	
  are	
  commi_ed	
  to	
  
prevenKng	
  risks,	
  idenKfying	
  them	
  creates	
  value	
  
Risks	
  must	
  be	
  idenKfied	
  and	
  assessed	
  before	
  they	
  can	
  
be	
  controlled	
  
Controls	
  must	
  be	
  in	
  place	
  before	
  employees	
  can	
  be	
  
trained	
  on	
  them	
  
Processes	
  must	
  be	
  clearly	
  defined	
  and	
  controlled	
  
before	
  change	
  can	
  be	
  managed	
  
Assessing	
  a	
  process	
  that	
  is	
  known	
  to	
  be	
  out	
  of	
  control	
  
oen	
  creates	
  li_le	
  value	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Agenda/Objec&ves	
  
•  Why	
  a	
  new	
  approach	
  is	
  necessary	
  
•  How	
  to	
  diagnose	
  the	
  real	
  problem	
  
•  Three	
  things	
  you	
  can	
  do	
  to	
  get	
  the	
  most	
  out	
  of	
  
your	
  LSS	
  Programs	
  
1.  Address	
  non-­‐value	
  added	
  complexity	
  that	
  
arises	
  from	
  your	
  strategy	
  
2.  Simplify	
  and	
  standardize	
  your	
  Management	
  
System	
  
3.  Leverage	
  culture	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
Opera&onal	
  Discipline	
  is	
  necessary	
  to	
  achieve	
  
Opera&onal	
  Excellence	
  
Effective
processes
and
procedures
Culture of
Operational
Discipline
Operational
Excellence
A	
  robust	
  OEMS	
  alone	
  will	
  not	
  lead	
  to	
  Opera&onal	
  Excellence;	
  
Opera&onal	
  Discipline	
  –	
  doing	
  the	
  right	
  thing,	
  the	
  right	
  way,	
  
every	
  &me	
  –	
  is	
  also	
  needed	
  
Sound
Strategy
Operational
Excellence
Leading
Performance
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
   39	
  
Complex	
  opera&ng	
  environments	
  require	
  a	
  different	
  
approach	
  to	
  Leadership	
  
•  In	
  complex	
  operaKons,	
  leaders	
  can’t	
  possibly	
  idenKfy	
  all	
  the	
  situaKons	
  
that	
  an	
  employee	
  will	
  face.	
  
•  A_empKng	
  to	
  create	
  a	
  laundry	
  list	
  of	
  rules	
  or	
  tasks	
  will	
  not	
  cover	
  every	
  
possible	
  situaKon.	
  
•  By	
  idenKfying	
  the	
  fundamental	
  behaviors	
  of	
  an	
  OperaKonal	
  Disciplined	
  
organizaKon,	
  we	
  can	
  create	
  a	
  framework	
  that	
  helps	
  employees	
  determine	
  
how	
  they	
  should	
  behave	
  in	
  a	
  given	
  situaKon.	
  
U.S.	
  Nuclear	
  Navy—A	
  High	
  Reliability	
  OrganizaKon	
  (HRO)	
  
‒  Remarkably	
  low	
  number	
  of	
  mishaps	
  
‒  Highly	
  complex	
  and	
  inherently	
  hazardous	
  tasks	
  
‒  Consistently	
  over	
  a	
  sustained	
  period	
  of	
  Kme	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 40	
  
At	
  an	
  operator	
  level,	
  safe	
  and	
  reliable	
  opera&on	
  rests	
  
on	
  the	
  “Pillars	
  of	
  the	
  Program”…	
  	
  
•  Integrity	
  
•  Level	
  of	
  Knowledge	
  
•  Ques&oning	
  Artude	
  
•  Formality	
  
•  Forceful	
  Watch	
  Team	
  Backup	
  
REACTOR	
  SAFETY	
  &	
  
CONTINUITY	
  OF	
  POWER	
  
LEVEL	
  OF	
  KNOWLEDGE	
  
FORMALITY	
  
QUESTIONING	
  ATTITUDE	
  
FORCEFUL	
  BACKUP	
  
INTEGRITY	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
  
The	
  “Pillars”	
  of	
  Opera&onal	
  Discipline	
  
•  Integrity.	
  	
  Be	
  reliable.	
  	
  Do	
  what	
  you	
  say	
  you	
  are	
  going	
  to	
  do,	
  compleKng	
  every	
  task	
  the	
  right	
  way,	
  
every	
  Kme,	
  even	
  if	
  no	
  one	
  is	
  watching.	
  
•  Level	
  of	
  Knowledge.	
  	
  Understand	
  not	
  just	
  what	
  you	
  do,	
  but	
  why	
  you	
  do	
  it.	
  	
  ConKnually	
  seek	
  
greater	
  knowledge	
  about	
  the	
  systems,	
  processes,	
  and	
  hazards	
  in	
  and	
  around	
  your	
  workplace.	
  
•  Ques&oning	
  Artude.	
  	
  Constantly	
  ask	
  yourself	
  what	
  could	
  go	
  wrong.	
  	
  Check	
  for	
  out-­‐of-­‐the-­‐
ordinary	
  and	
  learn	
  to	
  anKcipate	
  potenKal	
  problems.	
  	
  Don’t	
  assume	
  things	
  are	
  okay—verify.	
  	
  
•  Formality.	
  Treat	
  your	
  workplace	
  and	
  your	
  role	
  with	
  respect,	
  recognizing	
  the	
  seriousness	
  of	
  what	
  
we	
  do	
  and	
  your	
  role	
  in	
  that	
  as	
  a	
  privileged	
  trust	
  and	
  part	
  of	
  something	
  bigger.Follow	
  authorized	
  
procedures	
  and	
  expect	
  the	
  same	
  from	
  others.	
  	
  Do	
  not	
  take	
  or	
  tolerate	
  shortcuts.	
  	
  If	
  you	
  think	
  of	
  
a	
  be_er	
  way,	
  follow	
  authorized	
  processes	
  to	
  review	
  and	
  improve	
  the	
  procedures.	
  
•  Forceful	
  Watch	
  Team	
  Backup.	
  	
  Backup	
  your	
  co-­‐workers	
  by	
  looking	
  out	
  for	
  what	
  they	
  may	
  have	
  
missed,	
  and	
  expect	
  the	
  same	
  in	
  return.	
  	
  Have	
  the	
  courage	
  to	
  care,	
  intervening	
  even	
  when	
  it	
  
makes	
  you	
  uncomfortable.	
  	
  If	
  you	
  see	
  an	
  issue,	
  own	
  it.	
  	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc. 42	
  
Leaders	
  need	
  to	
  understand	
  basic	
  concepts	
  related	
  
to	
  culture	
  and	
  human	
  behavior	
  
•  Leaders	
  play	
  an	
  essen&al	
  role	
  in	
  
shaping	
  culture	
  and	
  changing	
  
behaviors	
  
•  A	
  recent	
  Booz	
  &	
  Company	
  study1	
  
revealed	
  that	
  48%	
  of	
  execuKves	
  
“think,	
  other	
  than	
  communica6ons	
  
and	
  leadership	
  alignment,	
  they	
  do	
  
not	
  have	
  the	
  capabili'es	
  to	
  
effec'vely	
  deliver	
  change”	
  
•  Understanding	
  what	
  culture	
  is,	
  and	
  
why	
  people	
  behave	
  in	
  a	
  given	
  way,	
  
will	
  help	
  leaders	
  be_er	
  understand	
  
how	
  to	
  lead	
  the	
  change	
  
•  Leaders	
  
–  Cannot	
  force	
  people	
  to	
  change	
  beliefs	
  
–  Cannot	
  force	
  people	
  to	
  change	
  behaviors	
  
–  Can	
  change	
  the	
  consequences	
  
Beliefs
Behaviours
Consequences
influence	
  result	
  in	
  
reinforce	
  or	
  undermine	
  
Culture	
  is	
  the	
  shared	
  
beliefs	
  of	
  the	
  group	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.	
  	
   43	
  
4	
  Steps	
  for	
  crea&ng	
  a	
  culture	
  of	
  Opera&onal	
  Discipline	
  
•  Need	
  for	
  the	
  Pillars	
  
•  DefiniKon	
  of	
  the	
  
Pillars	
  
•  Approach	
  for	
  
implementaKon	
  
Align	
  Leadership	
  on	
  
the	
  Pillars	
  
Create	
  the	
  
Case	
  for	
  
Change	
  
Internalize	
  the	
  
Fundamentals	
  
Embed	
  in	
  
Management	
  
System	
  
Processes	
  
•  Use	
  case	
  study	
  like	
  
Deepwater	
  Horizon	
  
to	
  make	
  case	
  for	
  
change	
  
•  Create	
  a	
  sense	
  of	
  
discomfort	
  
•  One-­‐on-­‐one	
  
conversaKons	
  
between	
  leaders	
  and	
  
employees	
  using	
  
right/wrong	
  
framework	
  to	
  
discuss	
  behaviors	
  
•  Leader	
  interacKons	
  
on	
  the	
  shop	
  floor	
  
•  New	
  hire	
  selecKon	
  
•  OrientaKon/training	
  
•  Incident	
  
invesKgaKon	
  
•  Performance	
  
Management	
  
Crea&ng	
  a	
  culture	
  of	
  Opera&onal	
  Discipline	
  must	
  start	
  at	
  the	
  very	
  
top	
  of	
  the	
  organiza&on!	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Summary	
  
•  A	
  new	
  approach	
  is	
  required	
  due	
  to	
  complexity	
  
•  First	
  Step:	
  Diagnose	
  the	
  problem	
  using	
  a	
  “Top-­‐down”	
  approach	
  
–  Is	
  it	
  strategy,	
  management	
  system,	
  or	
  culture	
  
•  Address	
  non-­‐value	
  added	
  complexity	
  that	
  arises	
  from	
  your	
  strategy	
  
•  UKlize	
  the	
  7	
  Element	
  OEMS	
  to	
  break	
  the	
  vicious	
  complexity	
  cycle	
  and	
  
regain	
  control	
  
•  Remember	
  that	
  there	
  is	
  an	
  “order”	
  to	
  things	
  
•  Define	
  and	
  create	
  a	
  culture	
  of	
  OperaKonal	
  Discipline	
  
Reducing	
  complexity	
  and	
  regaining	
  control	
  of	
  your	
  opera&on	
  
will	
  revitalize	
  your	
  Lean	
  and	
  Six	
  Sigma	
  Programs	
  
Wilson	
  Perumal	
  &	
  Company,	
  Inc.
Email:	
  cseifert@wilsonperumal.com	
  
cpseifer@gmail.com	
  
On	
  the	
  Web:	
  	
  www.wilsonperumal.com	
  
Blog:	
  www.wilsonperumal.com/blog	
  
Twi_er:	
  @cpseifer	
  	
  	
  
@Wilson_Perumal	
  
LinkedIn:	
  h_p://www.linkedin.com/in/christopherseifert	
  
h_p://linkd.in/10BnH1i	
  	
  
Phone:	
  	
  	
  
(972)	
  800-­‐3618	
  
(972)	
  716-­‐3930	
  
Contact	
  Informa&on	
  

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Operational Excellence: Getting the most out of your Lean and Six Sigma programs

  • 1. Opera&onal  Excellence   Ge#ng  the  most  out  of  your  Lean  Six  Sigma  programs  
  • 2. Wilson  Perumal  &  Company,  Inc. Agenda/Objec&ves   •  Why  a  new  approach  is  necessary   •  How  to  diagnose  the  real  problem   •  Three  things  you  can  do  to  get  the  most  out  of   your  LSS  Programs  
  • 3. Wilson  Perumal  &  Company,  Inc.1)  AlixPartners  Survey2)  2010  Accenture  Survey   A  new  approach  is  necessary   •  OperaKonal  excellence  is  more  important  than   ever  –  customers  demand  it!   –  Increased  compeKKon  driving  decreased   margins   –  ExpectaKons  of  customers,  shareholders,  and   society  are  higher  than  ever   –  News  of  poor  performance  travels  far  and  fast   •  TradiKonal  approaches  are  not  achieving   expected  results   –  Only  31%  of  companies  were  able  to  achieve   the  results  promised  by  LSS  pracKoners1   –  58%  of  execuKves  report  conKnuous   improvement  programs  produced  minimal   financial  impact2   Consider  the  case  of     1-­‐800-­‐Flowers   Leadership  engagement  is  oFen  blamed,  but  is  that   the  real  reason?  
  • 4. Wilson  Perumal  &  Company,  Inc. The  world  has  changed!   Volume   Cost   Pre-­‐Industrial  Age   “Individual  producKvity”   Dominated  by   variable  costs   Volume   Industrial  Age   “Economies  of  Scale”   Dominated  by   fixed  costs   Complexity   Post-­‐Industrial  Age   “Complexity”   Dominated  by   complexity  costs      
  • 5. Wilson  Perumal  &  Company,  Inc. 5   TECHNOLOGY  IS  MORE  COMPLEX     PRODUCTS  AND  SERVICES  MORE  COMPLEX   PROCESSES  MORE  COMPLEX   ORGANIZATIONS    MORE  COMPLEX   REGULATIONS  MORE  COMPLEX   MARKETS  MORE  COMPLEX   Complexity  is  stretching  the  capabili&es  of   most  companies   X X X X X
  • 6. Wilson  Perumal  &  Company,  Inc. 6   Many  companies  are  passing  a  complexity  threshold   VALUE   (diminishing   returns)   COST  &  RISK   (exponenKal  growth)   Level  of  complexity   you  can  support   $   #Items #links 1 0 2 1 3 3 4 6 5 10 … 10 45 Complexity   Opera'onal  risk  grows  exponen'ally  with  complexity   Few  companies   are  s'll  here   Many  companies   are  here   An  increasing  number   of  companies  are  here  
  • 7. Wilson  Perumal  &  Company,  Inc. 7   Tradi&onal  approaches  to  Opera&onal  Excellence  are   not  effec&ve  in  the  face  of  complexity   •  They  do  not  address  strategy,  which  is  oen  the   source  of  complexity   •  They  take  a  “Bo_om-­‐up”  approach  to  improving   results   •  They  can  actually  add  more  complexity   •  They  seek  to  improve  before  establishing  control   •  Complex  environments  require  a  different   approach  to  leadership  
  • 8. Wilson  Perumal  &  Company,  Inc. Complexity  arises  from  the  interac&ons  between   products,  processes,  and  the  organiza&on   •  Complexity  is  a  cube   funcKon—as  it  increases  on   one  axis,  it  mulKplies  across   the  others   •  TradiKonal  approaches   address  individual  processes —not  interacKons  between   product,  process,  and   organizaKon      
  • 9. Wilson  Perumal  &  Company,  Inc. 9     Example:  The  impact  of  product  por^olio  complexity   on  process  complexity    
  • 10. Wilson  Perumal  &  Company,  Inc.     Tradi&onal  approaches  typically  employ  a  “Boaom-­‐ up”  approach,  which  doesn’t  address  complexity   Bo=om-­‐up  approach:  Improving  one  process  at  a  6me   Top-­‐down  approach:  Start  with  a  framework  
  • 11. Wilson  Perumal  &  Company,  Inc. 11   The  typical  response  is  to  add  even  more  complexity,   which  compounds  the  problem   Complexity   increases   Poor   execuKon   Loss  of   process   control   Poor   business   results   More   people  &   processes   Vicious     Complexity  Cycle  
  • 12. Wilson  Perumal  &  Company,  Inc.     Tradi&onal  approaches  aren’t  effec&ve  in  the  face  of   complexity   •  TradiKonal  approaches  a_empt  to   improve  processes    before   establishing  control:   –  Controls  for  individual  processes  are   created,  but  the  underlying  system   necessary  for  sustainment  is  not   –  Results  in  improving  processes   without  knowing  their  real   capability   •  Establishing  control  is  the  necessary   first  step:   –   Ensures  sustainment   –  Oen  produces  greater   performance  improvements  faster   and  with  fewer  resources  
  • 13. Wilson  Perumal  &  Company,  Inc. Agenda/Objec&ves   •  Why  a  new  approach  is  necessary   •  How  to  diagnose  the  real  problem   •  Three  things  you  can  do  to  get  the  most  out  of   your  LSS  Programs  
  • 14. Wilson  Perumal  &  Company,  Inc.     Defining  Opera&onal  Excellence  –  the  oFen   overlooked  first  step   Leadership  Alignment   Consistent  Messaging   Employees  Understand   Clear  Roles  and   ResponsibiliKes   Increased  Commitment   •  Leaders  must  be  united  and  share  a  common  vision   •  If  leaders  aren’t  aligned,  messages  won’t  be  clear  and   consistent   •  Unclear  and  inconsistent  messages  impede  employee’s   understanding     •  If  employees  don’t  understand  vision,  they  will  spend   Kme  trying  to  define  their  roles   •  In  the  face  of  ambiguity,  many  employees  take  a  “wait   and  see”  stance  
  • 15. Wilson  Perumal  &  Company,  Inc.     15   Common  defini&ons  of  Opera&onal  Excellence  are   vague  and  lack  the  ability  to  be  measured   •  “Each  and  every  employee  can  see  the  flow  of  value  to  the  customer,  and  fix  that  flow  before  it   breaks  down.”SM    -­‐  InsKtute  for  OperaKonal  Excellence     •  Opera6onal  Excellence  is  a  philosophy  of  leadership,  teamwork  and  problem  solving  resul6ng  in   con6nuous  improvement  throughout  the  organiza6on  by  focusing  on  the  needs  of  the  customer,   empowering  employees,  and  op6mizing  exis6ng  ac6vi6es  in  the  process.  -­‐  Wikipedia       •  A  philosophy  of  the  workplace  where  problem-­‐solving,  teamwork,  and  leadership  results  in  the   ongoing  improvement  in  an  organiza6on.    The  process  involves  focusing  on  the  customers’  needs,   keeping  the  employees  posi6ve  and  empowered,  and  con6nually  improving  the  current  ac6vi6es   in  the  workplace.    -­‐  The  Business  DicKonary   •  “The  leveraging  of  the  disciplines  of  Lean,  Six-­‐Sigma  and  Leadership  as  key  to  any  Con6nuous   Improvement  ini6a6ve  –  towards  the  increase  in  performance  of  both  individuals  and  the   companies  for  whom  they  work  and  resul6ng  an  indelible  and  posi6ve  impact  on  stakeholder   value.”  –  LinkedIn  OperaKonal  Excellence  Group   These  definiKons  contain  components  of  the  systems  and  culture  necessary  to  achieve   OperaKonal  Excellence,  but  because  they  lack  the  ability  to  be  measured,  they  are  not   useful  for  understanding  how  to  achieve  OperaKonal  Excellence,  or  why  it  is  important.  
  • 16. Wilson  Perumal  &  Company,  Inc. Opera&onal  Excellence  delivers  industry  leading   performance  across  7  Value  Drivers   Given  two  companies  with  similar  strategies,  the  one  that  executes  be_er  will   have  be_er  performance  across  all  7  Value  Drivers.       Sound Strategy Operational Excellence Leading Performance 7  Value  Drivers   1. Safety   2. Environment   3. Compliance   4. Quality   5. Produc&vity   6. Yield     7. Cost   Strategy   1. Product  por^olio   2. Markets  served   3. Distribu&on  channels   4. Price  point   5. Level  of  service   6. Partnerships   7. Opera&ng  model   Opera'onal   excellence  is  the   execu'on  of  the   business  strategy   more  consistently   and  reliably  than  the   compe66on.  
  • 17. Wilson  Perumal  &  Company,  Inc. Agenda/Objec&ves   •  Why  a  new  approach  is  necessary   •  How  to  diagnose  the  real  problem   •  Three  things  you  can  do  to  get  the  most  out  of   your  LSS  Programs   1.  Address  non-­‐value  added  complexity  that   arises  from  your  strategy  
  • 18. Wilson  Perumal  &  Company,  Inc. Technology   Strategic   intent   Value  chain   processes   Culture   Structure   and   authority   People         Sound  strategy  requires  aligning  decisions  to   allocate  resources  consistent  with  strategic  intent   Make  strategic  decisions   consistent  with  intent   1.  Value  discipline   –  Product  innovator   –  Customer  inKmate   –  Low  cost   2.  Markets  to  parKcipate  in   –  Local   –  Global   3.  Value  chain   –  VerKcally  integrated   –  Single  segment   Processes  and  Culture  must   support  the  strategy   Technology,  organizaKonal  structure,   and  people  capabiliKes  must  support   the  processes  and  culture   Strategic  Intent   Components  of  the  Opera&ng  Model   Aligning  the  OperaKng  Model  to  the  strategy  isn’t  enough.    We  must  also  implement   the  management  system  processes  necessary  to  execute  the  OperaKng  Model.  
  • 19. Wilson  Perumal  &  Company,  Inc. Agenda/Objec&ves   •  Why  a  new  approach  is  necessary   •  How  to  diagnose  the  real  problem   •  Three  things  you  can  do  to  get  the  most  out  of   your  LSS  Programs   1.  Address  non-­‐value  added  complexity  that   arises  from  your  strategy   2.  Simplify  and  standardize  your  Management   System  
  • 20. Wilson  Perumal  &  Company,  Inc.     Opera&onal  Excellence  is  a  func&on  of  the   management  system  &  culture   Effective management processes and procedures Culture of Operational Discipline Operational Excellence Understanding  this  rela&onship  helps  cut  through  complexity  to   quickly  iden&fy  the  real  problem  from  the  “top—down”     Sound Strategy Operational Excellence Leading Performance
  • 21. Wilson  Perumal  &  Company,  Inc. 21   Understanding  the  different  types  of  processes  is  an   important  first  step   Acquire raw materials Convert  to   finished   good Store finished goods Distribute finished goods Collect payment Procedures Roles  and  ResponsibiliKes   Training Risk  IdenKficaKon A    Management  System   Process  or  Key  Control  is  a   process  whose  primary   purpose  is  to  ensure   effecKve  execuKon  of  a  value   chain  process   Applied  across   each  phase  of   the  End-­‐to-­‐End   Value  Chain   The  End-­‐to-­‐End  Value  Chain   represents  the  core  acKviKes   a  firm  performs  to  deliver   value  to  its  customers  
  • 22. Wilson  Perumal  &  Company,  Inc. 22   The  founda&ons  of  an  Opera&onal  Excellence   Management  System   Key  Value   Drivers   OE  is  defined  by   measurable  business   performance  across   specific  value  drivers       Safety   Environment   Compliance   Quality   Produc&vity   Yield     Cost  
  • 23. Wilson  Perumal  &  Company,  Inc.     The  4  Sources  of  Risk   Equipment  Processes  People  Inputs   Acted  on   by   To     produce   Finished   Goods/   Services   The  OperaKon   •  Any  failure  of  the  operaKon  to  produce  a  good  or  service  that  meets   the  customers  requirements  is  a  result  of  1  of  4  sources:   1.  A  person  failed  to  do  what  they  were  expected  to  do.   2.  A  process  failed  to  perform  as  expected   3.  A  piece  of  equipment  failed  to  perform  as  expected   4.  Un-­‐managed  change  
  • 24. Wilson  Perumal  &  Company,  Inc. 24   The  founda&ons  of  an  Opera&onal  Excellence   Management  System   Key  Value   Drivers   Four   Sources  of   Risk   OE  is  defined  by   measurable  business   performance  across   specific  value  drivers   There  are  only  four   sources  of  risk  for  failure   to  perform  against  the   value  drivers       Safety   Environment   Compliance   Quality   Produc&vity   Yield     Cost   People   Processes   Equipment   Change  
  • 25. Wilson  Perumal  &  Company,  Inc. Each  source  of  risk  can  be  analyzed  for  the  key  causes   of  failure       People   Unaware  of   expectaKon   Unable  to  perform  as   expected   Chooses  not  to  perform   as  expected   ExpectaKons  don’t  exist   ExpectaKons  not   communicated   ExpectaKons  not   enforced   Lack  of  knowledge   Lack  of  talent   Lack  of  virtue   Wrong  incenKve  
  • 26. Wilson  Perumal  &  Company,  Inc.     26   Each  source  of  risk  can  be  analyzed  for  the  key  causes   of  failure   Equipment   Inadequate  Design   Unplanned  Failure   Improper  OperaKons   Inadequate   Maintenance  Strategy   Inadequate  execuKon  of   Maintenance  Strategy   Personnel  not  allocated   People   Process   Insufficient  tools/ materials   People  
  • 27. Wilson  Perumal  &  Company,  Inc.     27   Each  source  of  risk  can  be  analyzed  for  the  key  causes   of  failure   Process   Process  is  not  capable   Process  not  in  control   OperaKng  limits  not   defined   People   Equipment   Change   MOC  process  not   capable   MOC  process  not   followed   People   Change  not  idenKfied  
  • 28. Wilson  Perumal  &  Company,  Inc. The  founda&ons  of  an  Opera&onal  Excellence   Management  System   Key  Value   Drivers   Four   Sources  of   Risk   Common   Causes  of   Failure   OE  is  defined  by   measurable  business   performance  across   specific  value  drivers   There  are  only  four   sources  of  risk  for  failure   to  perform  against  the   value  drivers   The  four  sources  of  risk   tend  to  fail  for  the  same   reasons  regardless  of   the  type  of  operaKon       Examples   ExpectaKons  don’t   exist   Lack  of  knowledge   Wrong  incenKves   Equipment  not  capable   Personnel  not  allocated   Process  not  capable   MOC  inadequate   Safety   Environment   Compliance   Quality   Produc&vity   Yield     Cost   People   Processes   Equipment   Change  
  • 29. Wilson  Perumal  &  Company,  Inc.     If  the  causes  of  failure  are  consistent  across  various   opera&ons,  the  necessary  set  of  Key  Controls  is  as  well   People   Unaware  of   expectaKon   Unable  to  perform  as   expected   Chooses  not  to  perform   as  expected   ExpectaKons  don’t  exist   ExpectaKons  not   communicated   ExpectaKons  not   enforced   Lack  of  knowledge   Lack  of  talent   Lack  of  virtue   Wrong  incenKve   Ops/maintenance  procedures/ policies/standard  work   Core  communicaKon  strategy   Audits/assessments,  org  structure,   performance  management   Training/cerKficaKon     SelecKon  process   Culture,  selecKon  process   CompensaKon  strategy,  performance   management   Key  Controls  
  • 30. Wilson  Perumal  &  Company,  Inc.     30   If  the  causes  of  failure  are  consistent  across  various   opera&ons,  the  necessary  set  of  Key  Controls  is  as  well   Equipment   Inadequate  Design   Unplanned  Failure   Improper  OperaKons   Inadequate   Maintenance  Strategy   Inadequate  execuKon  of   Maintenance  Strategy   Personnel  not  allocated   People   Equipment   Insufficient  tools/ materials   People   CriKcality  Ranking,  FMEA,  RCM   Engineering  Disciplines   Gatekeeping,  Scheduling   Planning,  Parts  Ki#ng,  Parts   Strategy  
  • 31. Wilson  Perumal  &  Company,  Inc.     31   If  the  causes  of  failure  are  consistent  across  various   opera&ons,  the  necessary  set  of  Key  Controls  is  as  well   Process   Process  is  not  capable   Process  is  not  in  control   OperaKng  limits  not   defined   People   Process   Change   MOC  process  not   capable   MOC  process  not   followed   People   Process  Engineering  (LEAN  Six  Sigma   Tools)   Process  FMEA,  Process  Control  Plan   Management  of  Change  Program  
  • 32. Wilson  Perumal  &  Company,  Inc. 32   The  founda&ons  of  an  Opera&onal  Excellence   Management  System   Key  Value   Drivers   Four   Sources  of   Risk   Common   Causes  of   Failure   Specific  Key   Controls   OE  is  defined  by   measurable  business   performance  across   specific  value  drivers   There  are  only  four   sources  of  risk  for  failure   to  perform  against  the   value  drivers   The  four  sources  of  risk   tend  to  fail  for  the  same   reasons  regardless  of   the  type  of  operaKon   The  set  of  Key  Controls   necessary  to  prevent   failures  is  also  the    same       Examples   Vision/Procedures   Training/CerKficaKon   Performance  Mgmt   Engineering  Disciplines   Planning/Scheduling   Design  for  Six  Sigma   MOC  Process   Culture   OrganizaKon  Structure   Process  Control  Plan   FMEA   Examples   ExpectaKons  don’t   exist   Lack  of  knowledge   Wrong  incenKves   Equipment  not  capable   Personnel  not  allocated   Process  not  capable   MOC  inadequate   Safety   Environment   Compliance   Quality   Produc&vity   Yield     Cost   People   Processes   Equipment   Change  
  • 33. Wilson  Perumal  &  Company,  Inc.     Management  System  processes  can  be  grouped  into   Elements  to  reduce  complexity   Risk   IdenKficaKon   Process   Hazard   Analysis   Failure  Modes   Effects   Analysis   Risk  Registers   The  value  of  the  7  Elements   •  Easier  for  people  to  remember   than  all  key  controls   •  More  efficient  to  organize  around   •  Creates  common  language    that   facilitates  learning:   –  Between  management  and   employees   –  Between  leaders   –  From  site  to  site   •  Encourages  systems  thinking   –  Ensures  proacKve  management  of  risk   in  development  of  new  systems   –  Used  in  root  cause  analysis,  problems   aren’t  seen  in  isolaKon    
  • 34. Wilson  Perumal  &  Company,  Inc.     The  7  essen&al  Elements  of  an  Opera&onal  Excellence   Management  System   Leadership   Employee  accountability   Risk  idenKficaKon   Risk  miKgaKon   Knowledge  sharing   Management  of  change   ConKnuous  improvement   Leaders  arKculate  a  clear  vision  of  OperaKonal  Excellence   and  create  a  culture  of  OperaKonal  Discipline   Processes  are  in  place  to  ensure  employee’s    are  properly   incenKvized  and  know  what  they  are  accountable   Risks  are  idenKfied  ,  assessed  ,  and  prioriKzed  for  processes   and  equipment   Controls  are  put  in  place  to  miKgate  the  idenKfied  risks   CommunicaKon  and  training  systems  are  in  place  to  share   knowledge  about  the  risks  and  their  controls   Processes  are  in  place  to  management  changes  of  people,   processes,  and  equipment   All  processes  are  measured,  verified,  and  conKnuously   improved  
  • 35. Wilson  Perumal  &  Company,  Inc. 35   The  founda&ons  of  an  Opera&onal  Excellence   Management  System   Key  Value   Drivers   Four   Sources  of   Risk   Common   Causes  of   Failure   Specific  Key   Controls   OEMS   Elements   OE  is  defined  by   measurable  business   performance  across   specific  value  drivers   There  are  only  four   sources  of  risk  for  failure   to  perform  against  the   value  drivers   The  four  sources  of  risk   tend  to  fail  for  the  same   reasons  regardless  of   the  type  of  operaKon   The  set  of  Key  Controls   necessary  to  prevent   failures  is  also  the    same   Key  controls  are   organized  into     Elements  to  facilitate   implementaKon  and   management         Examples   Vision/Procedures   Training/CerKficaKon   Performance  Mgmt   Engineering  Disciplines   Planning/Scheduling   Design  for  Six  Sigma   MOC  Process   Culture   OrganizaKon  Structure   Process  Control  Plan   FMEA   Examples   ExpectaKons  don’t   exist   Lack  of  knowledge   Wrong  incenKves   Equipment  not  capable   Personnel  not  allocated   Process  not  capable   MOC  inadequate   Leadership   Employee  Accountability   Risk  ID   Risk  Mi&ga&on   Knowledge  Sharing   Management  of  Change   Con&nuous  Improvement   Safety   Environment   Compliance   Quality   Produc&vity   Yield     Cost   People   Processes   Equipment   Change  
  • 36. There  is  an  “order”  to  implementa&on   Leadership   Employee  accountability   Risk  iden&fica&on   Risk  control   Knowledge  sharing   Management  of  change   Con&nuous  improvement   Commi_ed  leadership  is  the  foundaKon   Employees  must  know  their  accountabiliKes   Once  leaders  and  employees  are  commi_ed  to   prevenKng  risks,  idenKfying  them  creates  value   Risks  must  be  idenKfied  and  assessed  before  they  can   be  controlled   Controls  must  be  in  place  before  employees  can  be   trained  on  them   Processes  must  be  clearly  defined  and  controlled   before  change  can  be  managed   Assessing  a  process  that  is  known  to  be  out  of  control   oen  creates  li_le  value  
  • 37. Wilson  Perumal  &  Company,  Inc. Agenda/Objec&ves   •  Why  a  new  approach  is  necessary   •  How  to  diagnose  the  real  problem   •  Three  things  you  can  do  to  get  the  most  out  of   your  LSS  Programs   1.  Address  non-­‐value  added  complexity  that   arises  from  your  strategy   2.  Simplify  and  standardize  your  Management   System   3.  Leverage  culture  
  • 38. Wilson  Perumal  &  Company,  Inc.     Opera&onal  Discipline  is  necessary  to  achieve   Opera&onal  Excellence   Effective processes and procedures Culture of Operational Discipline Operational Excellence A  robust  OEMS  alone  will  not  lead  to  Opera&onal  Excellence;   Opera&onal  Discipline  –  doing  the  right  thing,  the  right  way,   every  &me  –  is  also  needed   Sound Strategy Operational Excellence Leading Performance
  • 39. Wilson  Perumal  &  Company,  Inc.     39   Complex  opera&ng  environments  require  a  different   approach  to  Leadership   •  In  complex  operaKons,  leaders  can’t  possibly  idenKfy  all  the  situaKons   that  an  employee  will  face.   •  A_empKng  to  create  a  laundry  list  of  rules  or  tasks  will  not  cover  every   possible  situaKon.   •  By  idenKfying  the  fundamental  behaviors  of  an  OperaKonal  Disciplined   organizaKon,  we  can  create  a  framework  that  helps  employees  determine   how  they  should  behave  in  a  given  situaKon.   U.S.  Nuclear  Navy—A  High  Reliability  OrganizaKon  (HRO)   ‒  Remarkably  low  number  of  mishaps   ‒  Highly  complex  and  inherently  hazardous  tasks   ‒  Consistently  over  a  sustained  period  of  Kme  
  • 40. Wilson  Perumal  &  Company,  Inc. 40   At  an  operator  level,  safe  and  reliable  opera&on  rests   on  the  “Pillars  of  the  Program”…     •  Integrity   •  Level  of  Knowledge   •  Ques&oning  Artude   •  Formality   •  Forceful  Watch  Team  Backup   REACTOR  SAFETY  &   CONTINUITY  OF  POWER   LEVEL  OF  KNOWLEDGE   FORMALITY   QUESTIONING  ATTITUDE   FORCEFUL  BACKUP   INTEGRITY  
  • 41. Wilson  Perumal  &  Company,  Inc.     The  “Pillars”  of  Opera&onal  Discipline   •  Integrity.    Be  reliable.    Do  what  you  say  you  are  going  to  do,  compleKng  every  task  the  right  way,   every  Kme,  even  if  no  one  is  watching.   •  Level  of  Knowledge.    Understand  not  just  what  you  do,  but  why  you  do  it.    ConKnually  seek   greater  knowledge  about  the  systems,  processes,  and  hazards  in  and  around  your  workplace.   •  Ques&oning  Artude.    Constantly  ask  yourself  what  could  go  wrong.    Check  for  out-­‐of-­‐the-­‐ ordinary  and  learn  to  anKcipate  potenKal  problems.    Don’t  assume  things  are  okay—verify.     •  Formality.  Treat  your  workplace  and  your  role  with  respect,  recognizing  the  seriousness  of  what   we  do  and  your  role  in  that  as  a  privileged  trust  and  part  of  something  bigger.Follow  authorized   procedures  and  expect  the  same  from  others.    Do  not  take  or  tolerate  shortcuts.    If  you  think  of   a  be_er  way,  follow  authorized  processes  to  review  and  improve  the  procedures.   •  Forceful  Watch  Team  Backup.    Backup  your  co-­‐workers  by  looking  out  for  what  they  may  have   missed,  and  expect  the  same  in  return.    Have  the  courage  to  care,  intervening  even  when  it   makes  you  uncomfortable.    If  you  see  an  issue,  own  it.    
  • 42. Wilson  Perumal  &  Company,  Inc. 42   Leaders  need  to  understand  basic  concepts  related   to  culture  and  human  behavior   •  Leaders  play  an  essen&al  role  in   shaping  culture  and  changing   behaviors   •  A  recent  Booz  &  Company  study1   revealed  that  48%  of  execuKves   “think,  other  than  communica6ons   and  leadership  alignment,  they  do   not  have  the  capabili'es  to   effec'vely  deliver  change”   •  Understanding  what  culture  is,  and   why  people  behave  in  a  given  way,   will  help  leaders  be_er  understand   how  to  lead  the  change   •  Leaders   –  Cannot  force  people  to  change  beliefs   –  Cannot  force  people  to  change  behaviors   –  Can  change  the  consequences   Beliefs Behaviours Consequences influence  result  in   reinforce  or  undermine   Culture  is  the  shared   beliefs  of  the  group  
  • 43. Wilson  Perumal  &  Company,  Inc.     43   4  Steps  for  crea&ng  a  culture  of  Opera&onal  Discipline   •  Need  for  the  Pillars   •  DefiniKon  of  the   Pillars   •  Approach  for   implementaKon   Align  Leadership  on   the  Pillars   Create  the   Case  for   Change   Internalize  the   Fundamentals   Embed  in   Management   System   Processes   •  Use  case  study  like   Deepwater  Horizon   to  make  case  for   change   •  Create  a  sense  of   discomfort   •  One-­‐on-­‐one   conversaKons   between  leaders  and   employees  using   right/wrong   framework  to   discuss  behaviors   •  Leader  interacKons   on  the  shop  floor   •  New  hire  selecKon   •  OrientaKon/training   •  Incident   invesKgaKon   •  Performance   Management   Crea&ng  a  culture  of  Opera&onal  Discipline  must  start  at  the  very   top  of  the  organiza&on!  
  • 44. Wilson  Perumal  &  Company,  Inc. Summary   •  A  new  approach  is  required  due  to  complexity   •  First  Step:  Diagnose  the  problem  using  a  “Top-­‐down”  approach   –  Is  it  strategy,  management  system,  or  culture   •  Address  non-­‐value  added  complexity  that  arises  from  your  strategy   •  UKlize  the  7  Element  OEMS  to  break  the  vicious  complexity  cycle  and   regain  control   •  Remember  that  there  is  an  “order”  to  things   •  Define  and  create  a  culture  of  OperaKonal  Discipline   Reducing  complexity  and  regaining  control  of  your  opera&on   will  revitalize  your  Lean  and  Six  Sigma  Programs  
  • 45. Wilson  Perumal  &  Company,  Inc. Email:  cseifert@wilsonperumal.com   cpseifer@gmail.com   On  the  Web:    www.wilsonperumal.com   Blog:  www.wilsonperumal.com/blog   Twi_er:  @cpseifer       @Wilson_Perumal   LinkedIn:  h_p://www.linkedin.com/in/christopherseifert   h_p://linkd.in/10BnH1i     Phone:       (972)  800-­‐3618   (972)  716-­‐3930   Contact  Informa&on