Posts Tagged ‘operations management’

Inherent conflict between projects and operations might be called white-collar cage wrestling. Participants are focused, strong, and may carry the belief – winning means dominance of their approach. Who’s right? They both are. What is at stake is delivery of a product that performs well and is sustainable. This is especially true when the deliverable goes into production as an ongoing process or tangible deliverable produced in quantity. There is a solution to this tension, but first examination of the underlying causes will help in crafting that solution.

What Is Success?

Projects bring about change – that is why they exist. So, success is defined by bringing about some transformation.

Operations go in the other direction. Success is defined by stability. Specifically, stable reproduction of the desired process or product.

From a somewhat oversimplified perspective the situation can be restated as: Six sigma can be highly relevant in production while having little or no application in executing the project.

Is There a Middle Ground?

Can a compromise be reached? A better question might be, “Is compromise needed?” The answer is, ”No.” Taking a page from the Software Engineering Institute’s Taxonomy of Operational Risks a solution can be found. A very robust list of categories provides a framework for guiding projects in a way that leads to sound operational performance. Terms such as “usability” and “maintenance processes” are included. The definition of project success includes operational success!

So What’s the Problem?

This all seems well and good, and it is until other realities step in – the introduction of constraints. An example from the auto industry shows this well. In the 1970s the reality of “world cars” was exploding onto the scene. The desire to lower production costs plus move into international markets caused a frenzy of effort that continues to this day. This was compounded by issues commonplace today, e.g., time zone, cultures, metrics, languages, etc. The driving force at the time was the US market.  In the rush to globalize some cars in the US ended up having a mix of metric and standard parts.

Another constraint is the huge appetite for variety in the American market. Designers were pushed to develop new, fresh designs on an almost annual basis. Production and maintainability took a back seat. This led to craziness when it came to maintenance, e.g., having to loosen motor mounts and jack up the engine in order to change the oil. Some companies, such as Jaguar, almost went out of business over these issues. Boeing and Airbus could probably weigh in on this topic, too.

A Broader Solution

What shows when stepping back and looking at the situation is poor governance. The tension and animosity that can exist between project managers and operations managers may simply be a reflection of failure at the top.

Balancing the constraints is the responsibilities of senior management. It’s why there are the extra zeroes in senior management’s paycheck. This has been well stated in the career guidance book, “What Color Is Your Parachute?

To let the tension simply roll downhill to the operations and project managers can reflect poor risk and quality management if not an abrogation of responsibility.

If experiencing high tension and severe challenges then the pathway out includes looking up for direction rather than preparing for the next peer-to-peer fight.

From the time the idea of a company was developed, those who control the purse strings (finance) and those who manage the income (sales, operations, and marketing) are often adversaries.

A frequent igniter of these tensions is a situation where an operations or business group wants to quickly move forward with a project (XX optimization, for example) which requires a capital investment.

Before approving funding, however, the finance organization must complete its due diligence by quantifying the benefits outlined in the business case. This timing gap often creates a bottleneck and uncertainty about the projects’ implementation and/or timing.

These bottlenecks can be avoided by all stakeholders working together to build a strong, interactive relationship around the project.   Keys to building this relationship are education, communication, and ultimately, including the finance team in your project.  The capacity to master the first two skills will lead to your finance organization becoming a trusted advisor and consistently being invited to serve as an active participant in your strategic initiatives.

Education

It’s a two way street.  With over a dozen years of providing strategic financial support, I have consistently found that education is the first step in building bridges to a better working relationship.  It is as much a necessity for the financial person to understand what the operations groups do, and vice versa.  While working at a for-profit healthcare organization, I held a weekly course for 10 weeks in order to educate the IT infrastructure group management team on the objectives of the finance group and how a working knowledge of finance objectives can add value to the IT organization and help them – and the company overall – to become more successful.  Once the course was completed, the IT management team understood why and how their involvement in budgeting and financial planning is important to the company’s operations, why their participation in the ‘month-end close’ process is crucial to meeting the goals of the company, and also why the building of business cases for all projects is essential for long-term financial planning and overall success.

I have also found that, from the financial team side, learning what the operations groups do, and how they do it, is vital to the success of a financial analyst.  By fostering an active relationship with my ‘customer’ – the operations team – and understanding how they manage IT facilities, call centers, or manage hardware environments, I was consistently able to develop a better relationship with these supported groups – and we always celebrated our successes together.

Communication

This begins with the education phase and continues to build a foundation of trust.  Once the financial representation and the operations groups understand what the other does, it becomes easier to support the others’ efforts.  The key to effective financial communications is to remain consistent with operational or business partner requirements, and to be cognizant of the execution of new requirements and their execution. Make no mistake – the execution of these objectives can be difficult at times; this means the month-end close process must run the same way each month, and the systems of the budget process are changed as little as possible each year.  The information required to develop a business case is the same, regardless of the project.  In the event any strategic change does occurs,  any corresponding  changes in financial requirements need to be carefully considered and communicated so as to not to compound further disruption to the organization. Once consistency is achieved, the analyst and the group he or she supports can get to real work, the work of optimizing the business and reaching the ultimate goals of the company:  profitability, social goals, etc. This is the trusted advisor stage.

The trusted advisor

This is the ultimate goal of the financial representative, and where the fun begins.  As an analyst, I remember my colleagues consistently stating that the most boring part of their job was the “regular” work.  My experience is, once you have a system in place for achieving positive results in a routine activity such as the month-end close, that task often becomes mundane. For a corporate finance person, the interesting work is that which includes participation leading to realizing corporate goals.  Ways in which the financial analyst can participate in this process include performing lease vs. buy analyses for new equipment and software purchases, finding savings within a project, conduct audits to make sure the company is ‘getting what it pays for’ from each of the many vendors and service providers, and also establishing metrics and key performance indictors (KPIs) to put dollar figures on operational measurements and use this information to make key business decisions, etc.  Serving as a trusted advisor to the operations management team can be exceptionally rewarding; it allows an analyst to be creative and to develop solutions that help to both ensure a successful project and contribute to the company reaching its goals.

Achieving the role of trusted advisor and building that relationship between finance and the operations groups is important to the success of the entire organization.  The more adversarial the relationship, the more difficult it becomes to complete the work – both the monotonous (yet necessary) work and the creative solution work.  Once these barriers are eliminated – from either the operational or financial end (or both) – all jobs become easier, more efficient, and much more rewarding to each employee.  Motivated employees will not get excited about doing the same job every day. To them, variety and professional growth are the spices of life, and job functions in all areas of the company become more efficient when the relations between all groups within the company are high