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Operational Assessment
Design for Operational Excellence™ - 80 best practices in the achievement of Operational Excellence in financial services
1. Strategy and Planning »
2. Service Differentiation »
3. Cost Optimisation »
4. Risk Mitigation »
5. Measurement and Management Information »
6. Continuous Improvement »
7. Process Management »
8. Capability and Skills »
1. Strategy and Planning
Businesses which are genuinely focused on achieving Operational Excellence will ensure that this focus is consistently demonstrated in both strategic intent and tactical execution. The primary operational objective for the business is to achieve best execution of service, at optimal cost, with warrantable levels of risk. Many businesses will focus on one or more of these for a period of time, but will then shift attention as circumstances dictate. This often leads to a lack of balance across the three factors.
These strategic priorities will be cascaded throughout the organisation so that individuals have clear and measurable objectives for each of these imperatives, with specifically targeted operating plans by which they are directly managed and rewarded. The business achieves a balance between infrequent major transformational change and regular continuous activity to improve the business’ performance, without “initiative overload” and with the active and direct support of the business’ leadership.
2. Service Differentiation
An operationally excellent business promotes best execution as its principal delivery objective. Such a business will have a clear definition of which service factors differentiate it in its market and these will be clearly understood and embodied by all constituencies within the company.
The best businesses exhibit an unerring focus on the customer. They recognise that retention of the customers they serve well is better for their business than a constant need for new customer acquisition. These businesses also recognise that the capability to deliver consistency and predictability in service performance is greatly enhanced by process standardisation rather than complexity or multiplicity of offering.
3. Cost Optimisation
The majority of companies operating in the financial services sector regard their management of costs as ‘active’, but this is not always representative of the true situation. In operationally excellent companies, cost reduction is an ongoing business-as-usual activity and not a one-off programme, with an operational strategy that is singularly focused on the creation and maintenance of "operating leverage" across the business, thus achieving "more for less".
An operationally excellent business constantly assesses what is contributing value or representing non-value-added activity in its operations and processes. In addition to the increased efficiency and capacity created by reducing waste in operational units and processes, the business will exhibit rigorous financial discipline across all units. Leading organisations will also make best use of opportunities to rationalise, centralise and share operational services to maximise economies of scale, and to relocate or outsource operations for maximum economic benefit.
4. Risk Mitigation
Financial businesses must attempt to secure the right balance between reward generation and risk assumption in constantly changing markets. All therefore need to accept some risk in order to get paid. Ongoing success ultimately depends on continuously being able to determine and manage warrantable levels of risk across diverse regulatory environments and complex operational requirements.
To achieve this, full transparency and clear accountability across all operational processes in the organisation are required. The best exponents demonstrate complete oversight end-to-end, without any gaps or duplication in coverage. The resultant control environment mitigates and prevents breaches and losses, rather than reacting after the fact, and is fully effective without negatively impacting service delivery or cost performance.
5. Measurement and Management Information
A business cannot function without effective measures of performance. Excellent companies ensure that every process is measured and monitored specifically in relation to "critical to quality" requirements. This means that all key performance indicators are relevant, are directly aligned to the specific needs of the customers or stakeholders, whether external or internal, and are thus measuring only those elements which are critical to the recipients’ evaluation of the outcome.
The best performing businesses in this area will have re-designed their portfolio of measures and other key performance indicators to ensure that they are all customer centric and are regularly reviewed against clearly defined specifications, addressing both service and compliance requirements.
6. Continuous Improvement
The ability to improve a business on a continuous basis is an essential capability for operationally excellent companies. This enables a business to differentiate itself competitively on an ongoing basis.
Success in this area requires an aspiration to achieve self-sufficiency, with the capability to execute effective and sustainable change without the need for external support. In reaching this objective, operationally excellent companies are able to refinance their ongoing operations through continuously improved performance and productivity.
7. Process Management
Businesses which "manage by process" regard the achievement of process excellence as a core strategic capability with the opportunity of providing them with a strong basis for competitive differentiation. Such businesses consider their core processes to be strategic assets.
Their organisational structure will be aligned to the direct management of core processes throughout the business, irrespective of other functional or departmental hierarchies and matrices. This allows management a holistic view and complete transparency across the business, giving them the ability to make more informed decisions in the ongoing management of service, cost and risk. Best practice businesses have clearly defined process architectures with end-to-end process ownership allocated within the management structure.
8. Capability and Skills
Businesses aiming to achieve operational excellence in a sustainable and cost-efficient manner need to invest in the long-term capability and skills of their people. Leading companies are continually investing in their employees to ensure that they can not only execute best practice operational management, but can also deliver change and process improvement within and across their businesses.
Companies leading the field in this respect will ensure that they rotate their highest potential employees and highest calibre managers to engage in the delivery of cross-functional change initiatives before promoting them back into operational management and business leadership roles.
For more information, or to arrange an assessment of your organisation, please get in touch with your usual Venturehaus contact, or send an email to: info@venturehaus.com »
