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Perspectives on Management Operations From cost generator to strategic asset By Maureen H. Hunter, Ph.D., and Linda DelPonte, CPCU Many agencies are pursuing aggressive growth goals. Whether the plan is to grow organically or through acquisition, or a combination of the two, operational functions are an essential part of achieving and sustaining growth. Functions that fall under the “operations” umbrella vary across agencies. In general, operations includes customer service, human resources (HR), information technology (IT), and finance. These functions usually are viewed as cost centers because they do not generate revenue. We believe that it is more appropriate to look at operations as a strategic asset, i.e., something that contributes to the attainment of the organization’s vision and the achievement of its strategic goals. As an asset, it creates more value than it costs. From this perspective, operational functions in most organizations are quite a bargain. Growth expands an organization’s reach and its possibilities. At the same time, it strains an organization’s people, resources and processes. Without the right people in the right place at the right time with the right tools, the increase in volume and the demands that growth represents will erode the organization’s effectiveness and efficiency. This means that while revenue grows, the cost of sustaining it grows—monetarily and energetically. On the other hand, with the right operational support and preparedness, an organization can anticipate, absorb and adapt to the demands of growth. This approach can ultimately decrease costs associated with supporting an organization’s growth and contribute to greater profitability. Leaders are stewards of their organization’s resources. This includes maximizing the strategic value of operations. We believe this happens when leaders:
We would like to discuss each of these ideas in detail. Engage and align operational people with the organization’s vision and strategic direction. Tremendous organizational energy is generated when there is a clear vision that serves as a common focal point. Each person is able to link his or her actions to the organization’s ability to achieve this vision. In other words, vision and strategic goals become attainable because people translate them into their day-to-day, moment-to-moment actions. One of the primary functions of leaders is to help employees make these links through education and communication. Educating operational staff on the vision means communicating what the vision is and why—on a regular basis. Any time you talk about the organization, you also talk about vision. Any time you meet with operational staff becomes an opportunity to talk about vision and their part in it. Periodic e-mails and articles in company newsletters are also ways to keep the vision front-and-center. Any time an operational group achieves a performance milestone, it is an opportunity to place their work in the context of the vision. Leaders who understand the power of vision constantly seek opportunities—planned and unplanned—to reinforce it. We believe that people want to see themselves as contributors to their organization’s future. Through education and communication, leaders help operational staff internalize the vision and develop a strategic mindset about their role in the organization. However, communication is not just a unilateral action where leaders talk and others listen. It also involves creating opportu-nities to listen and to engage in rich dialogue about how to achieve the vision. Employees at every level have ideas about what works and what doesn’t. More often than not, they appreciate being asked what they think. Leaders who are able to tap into this wisdom can identify and neutralize potential obstacles and barriers. The result is employees who are motivated and committed. Promoting clarity of vision through education and communication is a leadership responsibility that should not be delegated. Instill values of customer service and quality. Operational functions are prime environments for instilling values of customer service and quality. Excellence in these areas directly impacts productivity and profitability. Customer service as a value and a discipline encourages operational functions to clearly define who their customers are (internal and external), what these customers expect, and what it will take to satisfy these expectations. A few organizations are able go beyond satisfaction to delighting their customers by fulfilling needs that customers weren’t aware of. Organizations that look at their internal processes from the perspective of their customers often transform their processes in ways that enhance effectiveness and efficiency. Customer service goes hand-in-hand with a commitment to quality. According to the Strategic Planning Institute, quality is one of the key variables that impacts profitability. A commitment to quality focuses attention on doing things right the first time. It also encourages staff to look for continuous improvement opportunities, i.e., doing things better. Customer service and quality are strategic by nature. If deeply embedded as core values, they force an organization to see itself from an outsider’s perspective while engaging in introspection to identify inefficiencies. Operational functions may or may not have direct contact with external customers, but their work contributes significantly to the perceptions of those customers. Without commitments to customer service and quality, organizations may achieve their vision, but they will have a difficult time sustaining the gains that have been made. Just as leaders champion the vision, they must also model their commitment to customer service and quality. If these values are not important to the leaders, then operational employees are less likely to focus on customer service and quality in their work. Anticipate and manage organizational stress. While growth can be invigor-ating, it also imposes new demands on an organization’s structure, processes, and resources. The term for this is organizational stress. Organizational stress has a significant impact on an agency’s operational functions. For example, customer service has to sustain productivity in the face of the acquisition of new producers and clients and the resulting increase in workload. Information technology (IT) has to ensure that the agency has access to technology that maximizes efficiency and accuracy. Human resources (HR) has to guide the organization in recruiting and “on-boarding” new people while making sure that all other processes are maintained for the growing staff population. When an agency is small and people have been working with each other for a long time, they share a common organizational heritage and know just how things should be done. They communicate in shorthand and intuitively anticipate each other’s needs. Growth disrupts these informal patterns as the level of work within an organization increases. As new people and more efficient processes are introduced, ingrained interaction patterns are disrupted and the level of coordination required between people also increases. This dynamic adds to organizational stress. Organizational stress cannot be avoided because it is a natural byproduct of growth. However, an agency’s leaders can minimize its impact by engaging operational staff in anticipating and preparing for the demands of growth. Include operational expertise and viewpoints in visioning and strategic planning activities. Ram Charan and Larry Bossidy wrote about the gap between aspirations and results in their book Execution: The Discipline of Getting Things Done. They identified the problem as an inability to translate goals into disciplined actions that are executed. The good news for agencies is that employees in operational positions have great execution skills. They are action-oriented and can help leaders translate strategies into tactics and identify obstacles that can hamper success. By seeking operational perspectives before finalizing strategic plans, leaders can ensure that goals are believable, attainable, or not likely to stress the organization to its limits. Conduct an operational planning and review process that is linked to the organization’s strategic plan. Most organizations engage in strategic planning. Operational planning should be part of this process. It involves looking at vision and strategic goals through an operational lens and asking key questions, such as:
The intent is to develop a three- to five-year operational plan that provides a roadmap for growing operational functions as the organization pursues its growth goals. This includes establishing performance benchmarks, staffing plans, training plans, and continuous improvement goals as well as identifying needs for new automated systems. While operational planning helps to establish goals and expectations, an operational review process helps the operational functions examine themselves in terms of how effective they are at meeting their goals and how efficient they are at getting work done and utilizing resources. Annual operational reviews provide an opportunity for operational staff and organizational leaders to take a step back to assess progress with respect to the operational plan. To engage employees in this process, agency owners can begin a review by having their operational staff benchmark their functions and then review their findings with organizational leaders. As stewards of their organization’s resources, agency leaders must be directly involved in operations. We recognize that many organizations have managers responsible for overseeing operational functions. We believe it is important that agency leaders continue to work through these managers as well as maintain direct involvement with operational staff to reinforce their strategic value. * The authors |
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