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Operational excellence can be a differentiating factor in the success or failure of a business. Why then do so many companies ignore it? PHOTO: Thomas Leth-Olsen

What differentiates companies that build a track record of consistent, long-term growth, from the thousands that fail each year or are gobbled up by more successful competitors?

Surprising findings reported in a recent Harvard Business Review article titled “Why Do We Undervalue Competent Management?” indicate that operational excellence appears to be a real and sustainable basis for long-term success.

Based on their research, the authors of the HBR article say, “Firms with strong managerial processes perform significantly better on high-level metrics such as productivity, profitability, growth, and longevity.”

Operational Excellence Isn't Easy

If those experts are on point with their analysis, their conclusion raises a question: Why doesn’t everyone focus on this issue and demand operational excellence?

The short answer is that it’s actually nowhere near as easy as it would appear. Many companies, across a range of industries, find the goals of effective execution and efficient business process management (BPM) to be among their biggest challenges. The authors of the HBR article report that their research indicates that organizations that lag in these areas share these two common failings:

  • They don’t see the problem at all — they have a more optimistic perception of their management processes than is warranted.
  • They overestimate the investment needed to improve processes, and they underestimate the return on this investment.

The reality is that management complacency and overestimation of operational performance are business-killers, particularly when you have competitors that successfully prioritize operational excellence.

Process Management Is More Than a ‘Nice to Have’

Perhaps this is also a differentiator of high-performing leaders: They don’t consider effective process management to be a “nice to have” concept, but instead see it as a fundamental investment for long-term success.

Knowing this, what can you do about it?

First, take some time for self-reflection and challenge your confidence in your beliefs by coming up with honest answers to questions like these:

  • How would the wider team perceive our leadership’s commitment to operational excellence? What evidence is there of their unwavering support for this goal?
  • What do our customers and our employees really think of how we operate?
  • How dependent is our operational capability on certain key individuals?
  • How effectively have we responded to market swings and competitive changes?
  • How are process changes anticipated, implemented and communicated?
  • What have we invested in operational excellence — in terms of capabilities, tools and incentives for teams?

The HBR authors’ research clearly shows that operational excellence begins at the top, with the CEO. Leaders who focused on internal processes ran higher-performing enterprises than those who focused primarily on external issues.

Communicate and Commit to Strong Managerial Processes

As leaders in all business segments begin to focus on their goals and priorities for 2018, it’s an excellent time to think about how to invest in operational excellence. Here are some steps to take:

  • Communicate your commitment to operational excellence. Figure out what it takes to make it clear that the members of the leadership team are prepared to “walk the talk.”
  • Empower process owners to drive operational excellence in their scope of operations.
  • Invest in tools, such as a process knowledge platform, that will enable all team members to participate in an ongoing process improvement conversation.
  • Provide a governance and communication structure to sustain the effort. Make it part of your organizational culture, not a one-off project.

The HBR article illustrates that high-performing companies leverage their operational capabilities to sustain their advantage into the long term. They are more agile than their competitors and more responsive to markets and customers, and they continually reinvent themselves. Their decisions to invest in managerial processes — sometimes with no immediate benefit in sight — drive growth, productivity, profitability and longevity.

The organizations that will succeed in 2018 and beyond will be those that focus on making sure, as the HBR article puts it, that “operational effectiveness is truly part of the organization’s DNA.”