Operations Management Systems: Stripping Out The Complexity
As operations become more complex it is evermore important that companies are planning, executing and operating with greater reliability.
The need to have clearly defined roles, apportioned accountability and expectations for how the company is to be managed become increasingly vital. The further away that senior leadership separates from day-to-day operations the more the onus for communication of core objectives is heightened.
This is where the Operational Management System (OMS) is supposed to come in to play, suturing and marrying together the collection of processes, expectations and requirements for the successful and holistic management of a business.
In this analysis piece, we speak with Chris Seifert, Partner - Operational Excellence Practice at Wilson Perumal & Company about the design, implementation and minimizing the density of these all-encompassing frameworks.
Complexity is one of the biggest battles to be waged on the process excellent front, according to Chris Seifert: "One of the main sources of complexity within large organisations is the divergence in management and operational protocol of different parts of the same business. Often standards become anything but standard, and the processes that are in place for how the business is managed deviate so much that sharing information, working together and coordination becomes difficult."
This can happen as a company grows organically and is even more pronounced when mergers and acquisitions are involved. A business is an evolving entity, constantly flexing between expansion and triage. As the body corporate develops, it is necessary that your OMS bends in unison to accommodate these changes. To make this as efficient a possible, it will demand thorough and periodic review.
LEVELS OF REVIEW FOR OMS
According to Seifert, there are three fundamental types of review for OMS: self assessment, internal auditing and third party auditing.
"A facet that should be designed into every management system, where the operational or business unit has the opportunity to assess its own performance."
The pitfall of the self-assessment process comes with inexperience. If an organisation has not implemented a management system before, then self-assessment will not be effective as there is no frame of reference for whether a project is going well or badly.
Here’s an example: you go to a guy who’s never seen a soccer match, you describe the game to him and tell him how to play. He runs around "playing" but he’s never seen a professional do it. You say: "Well, how are you doing? He says: "Oh, I’m pretty good at it!" Then if he sees a professional, he’d say: "Well, you know what? I guess I’m not really that good!"
On internal audits:
"These are a vital monitoring tool for the health and functionality of an organisation and will take place at least every three years. Audit teams assess each unit’s processes independently, inspecting them in terms of standards and regulatory requirements to rate each process."
On third party audit:
"Less common than the other two types of review - this involves the contracting in of an external consultant to inspect the management system, give feedback on its design and efficacy and offer suggestions for enhancements.
THE COMMON BUT WORST CASE SCENARIO
In the main, OMS review will unearth major complications in the early implementation stage. Self-assessments will come back with positive feedback: the standards and requirements that have been written are being complied with by business units and everything is ticking over smoothly.
"When the first round of audits is being conducted, the cracks will begin to show," says Seifert "usually revealing that a system that has been in place for three years is not fit-for-purpose.
"Self-assessments carried out by individuals with no frame of reference were unreliable as sounding boards for progress. In reality, units weren’t meeting the requirements of the OMS at all and there is a long laundry list of audit findings to prove it.
"The audit report makes its way up to top management and then the recriminations start.. There will definitely be a shake up of some kind, maybe heads will roll, and then the external auditors will be called in to compile a damage report and suggest a framework for repairs."
According to Seifert, the mood of the Board of Directors is often somewhere between dissatisfaction and fury. What they thought before was plain sailing is actually a perfect storm. Years and millions wasted, and then the stress and strain of a companywide overhaul to boot. Not the best place to be in….
HOW TO GET IT RIGHT
So, that is normally what an OMS review will show. Fortunately, all of these attackers can be headed off at the pass with some easily-installable processes and behaviours. Seifert points to three easy fixes:
Involve the fly-on-the-wall early:
Instead of contracting in an external pair of eyes and ears as the weapon of last resort against a failing OMS, include this resource at the beginning of the process. "Having an experienced practitioner in place to help run self-assessments and provide business units with a reasonable set of expectations will result in a more realistic self-audit. This will act to mitigate those systemic problems that become noticed in year three."
Conduct annual reviews:
A management system should follow an in-built annual cycle with continuous inspection and evaluation of the gaps that need to be filled and shortfalls that need to be addressed. "Yearly self-assessments will help stave off the problems that could come down the pike, the sooner you get into that annual cycle and the sooner people understand it, the better the self-assessment should start year and continue. I guess what I’m advocating is that a lot of times people wait until after the first audit cycle to get help when they really ought to be getting help, even in those initial self-assessments."
Make sure that review is part of your culture:
Those companies that are recognised as the standard-bearers of OMS systems in the oil and gas industry, the likes of ExxonMobil and Chevron, have decades of OMS development and implementation under their belts, but Seifert also contents that they stand out from the crowd in another all-important way: "They also have in common a clear vision of they way they do business, and a strong and responsive corporate culture. You can spend aeons working on processes, procedures and standards but if it is not part of the culture of your company to follow documented procedures and standards, then you won’t get operational excellence and this will have been time and effort spent in vain."