By Simone Cimiluca-Radzins, CPA
What sets great companies apart? Operational excellence.
Although operational excellence is sometimes hard to quantify and measure, it’s easy to identify when a company is not operating at its full potential. From disgruntled employees, to product backlogs and missed re-order points, operational disfunction hurts a business. There are four main pillars to operational excellence: Strategy, People, Process, and Technology.
These four pillars are intrinsically related and must be equally strong and resilient for a company to maintain sustained success.
Operational Excellence: Strategy
Does your Company have a strategy? It is essential that your business defines both a short- and long-term strategy and strategic roadmap. This short-term and long-term strategy cannot be done overnight. Some things to consider include outside market forces, company revenue and profit goals, market share, product development, and launches.
Additionally, all key stakeholders need to be involved in defining strategy. This should include department heads in Finance, Operations, Marketing, Sales, and Human Resources. These stakeholders need to be assigned clearly defined tasks to ensure the company is on track towards its strategy. It is essential that there are monthly/quarterly meetings dedicated to strategy.
Lastly, Be nimble. Strategy changes. Add in the ever-changing cannabis regulatory environment and you might need to shift strategy, which is okay!
Operational Excellence: People
How are your people working towards the mission of your company? Do they understand their roles and responsibilities? Are they motivated? Are they working as efficiently and effectively as they should be? How we treat our people leads to the success of our companies.
A workforce that understands their purpose in the company and is driven to exceed expectations, is critical to building operational excellence in your business.
Some things you can do ensure your people pillar is working:
- Define roles and responsibilities for all employees
- Develop and monitor Key Performance Indicators (KPIs) that relate to employee job roles and responsibilities
- Engage using performance reviews, Performance Development Plans, and Performance Improvement Plans
- Instill a culture that allows for employee participation (Tone starts at the Top)
- Ask for upward feedback
Operational Excellence: Process
If you can’t define you’re process, you don’t know what you’re doing. Efficient companies have designed, developed, and tested out their core business processes. Process means Standard Operating Procedures (SOPs); however, SOPs for all business processes. This means a breakdown of Cash, Accounts Receivable, Other Receivables, Inventory, Fixed Assets, Procurement and Payables, Payroll, Human Resources, etc.
To illustrate how you begin to define a process, here are some questions below:
- What is your revenue process?
- What due-diligence do you perform on your customers?
- How are sales orders approved?
- Who needs to approve sales?
- How are credit memos handled?
- What is your inventory management process?
- How is your inventory processed?
- How are goods ordered?
- Who can approve the order?
- What happens if an order is inaccurate?
Business processes require documentation and a buy-in from all key stakeholders. Just like everything, they need to be tested and monitored.
Operational Excellence: Technology
Technology has created a whole new digital marketplace, allowing us to connect with one another in ways never thought possible. Technology is your competitive advantage! However, if technology isn’t working for you, it could be crippling your business. When thinking about technology, here are some the major things to think about:
- How is technology helping you make better business decisions?
- How is technology making the process more efficient?
- Is technology making the process more inefficient? Why?
- What risks are associated with the technology you use? Risks can include being offline for a long period of time, such as the Amazon failure that happened recently, which can cost companies millions of dollars.
- Are user access rights appropriate for the technology that you utilize?
The Pillars to Operational Excellence
Operational excellence doesn’t come over night, nor does it come after years of hard work. Operational excellence evolves when a business has a strong operational framework which includes strategy, strong people and people development, defined and strong internal processes, as well as technology.