It happens all the time.
You prepare for a Board meeting, excited to discuss the big, strategic, revenue-generating initiatives that you are working on.
But as soon as you step into the room, the Board takes you to task for failures in your basic operational performance— raising points like sub-optimal service delivery, compromised client information, and generic breaks in your company’s day-to-day processes.
I know it seems unfair, but here’s the thing… While I am generally on the side of the CEO, I have to take the board’s side on this point. Significant operational failures can create unexpected service interruptions, damage a company’s reputation, and lead to lost customers, revenue, and market share.
In short: The Board is correct to raise these operational issues when they are being neglected. They are the CEO’s responsibility to take care of. And the CEO can prevent each of them by attending to their responsibility with the correct approach.
Step One: Make Operations a Priority
At a fundamental level, a CEO will only prevent operational failures when they make doing so a true priority. Too often, CEOs allocate all of their attention on visible things like sales, market strategy, and top-line growth, and treat operations as a less critical element of their job.
But even though these are critical factors, they do not encompass a CEO’s entire job, nor do they represent the CEO’s only levers to improve their bottom-line financial performance. Properly monitored operations often lead to substantially enhanced profitability through improved internal efficiency and customer experience.
Even more important, a tight focus on operations also prevents expensive problems. The cost of poor operational management can be significant. A bank with an efficiency ratio over 60% is not operationally effective, and will suffer a big hit to their Market Cap. A distribution company with poor inventory control will have excess capital invested, and likely have excess warehouse space.
To make the shift to assigning greater priority to your operations, first ask yourself— “What is it costing me to ignore my operations?”
Step Two: Perform Effective Operational Assessments
A CEO who truly prioritizes their operations will exhibit a few qualities. They will know each of their processes in detail. They will not just expect their processes to operate properly; they will actively inspect them. And they will perform these inspections through regular operational reviews.
If a CEO is unsure if they are performing these reviews, and if they are performing them effectively, they must ask themselves:
- “Am I performing end-to-end process & manufacturing reviews that continuously monitor activities and ensure precision service delivery?”
- “Is my Management Information System (MIS) fully integrated, in order to capture issues before they enter a crisis state?”
- “How many of my MIS systems do not even align with the processes that they are expected to monitor?”
- “Do my auditors perform real risk-based review programs tied to the operation’s functions, and which are backed up by my integrated MIS?”
- “Are there checks and balances integrated into the overall process to make sure the assessment process itself operates reliably?”
To avoid any operational surprises, it is critical to establish and maintain regular, reliable, and complete systems that continuously assess many dimensions of performance.
Step Three: Find the Right Operational Assessment Partner
Ultimately, operational assessments are time-consuming, labor-intensive, and highly technical. It is challenging to establish the correct monitoring systems, and there is an art to connecting-the-dots to regularly produce meaningful performance insights. CEOs must prioritize this work, but they must also recognize when it is best to bring in the experts to ensure the success of their program.
After reading this article you now have a better sense of what it takes to establish and perform effective operational assessments. So before you begin this initiative, you can now ask yourself, and provide an informed answer, to one question— “Can I do all of this on my own?”
At LoBue, we have nearly 40 years of experience designing, performing, and providing insights on effective operational assessments. Monitoring and improving operational performance are so foundational to our firm, that we have woven it into all of our services, in particular:
Performance Management: We will establish systems to continuously monitor your performance, alert you to dips, and provide insights on how to fix them. We will combine big-data analytics, global benchmarks, and our proprietary methodologies into a single bespoke platform.
Operational Due Diligence: We will identify your key opportunities for new growth and greater efficiency. We will find your performance gaps, uncover revenue enhancement opportunities and define a tactical plan to seize your highest-yield opportunities hiding in your day-to-day operational inefficiencies.
To determine if we can provide the correct answer to eliminate your operational issues and to focus your attention (and your Board meetings) on bigger-picture topics, schedule a free consultation.