Sherman begins by first addressing the fact that the majority of businesses today are in an extremely defensive posture as a result of the recent decline of the economy. With many organizations having eliminated staff, froze salaries, cut hours, reduced overtime, and cut back services, the general solution to managing business during the recession has been to reduce workforce and freeze spending in order to cope and hopefully come out on top. Sherman believes that near-term solutions like these will ultimately have a negative impact in the long-term. He suggests that reducing costs and headcount will likely cause organizations to enter into an endless cycle of quality issues and declining revenues, while at the same time leading to future pressure to reduce costs again and again. A more effective solution, according to Sherman, is to implement operational change. As Sherman states, “Rather than solely focusing on reducing costs and headcount, operational change is needed to unlock performance and create real and sustainable value for an organization. Operational change means looking within to change and improve business processes in order to save money.” More basic than applying process improvement methodologies such as Six Sigma, lean or ISO 9000 standards, operational change is equally effective for both small businesses and large corporations regardless of industry. Operational change is essentially looking at your organization from the inside and identifying and improving core operational processes in order to obtain the same or an improved level of service or output with lest cost.
In order to achieve operational change, Sherman offers four management principles that when implemented will help to unlock performance within your organization. These principals cannot be applied overnight but rather must be implemented layer by layer systematically in order to benefit fully from them. Sherman’s four principals are as follows:
Layer 1 – STANDARDIZATION
Although standardization is sometimes viewed as a deterrent to innovation, it plays a critical role in streamlining operations and initializing the implementation of operational change. Seemingly an obvious principle, many large companies have just begun to apply standardization in order to foster a consistent customer experience and reduce operating costs. Standardization should be applied to areas of operation where there are inconsistencies within processes that directly increase cost.
Layer 2 – INTEGRATION
Integration is the second principal involved in executing operational change. Having systems and processes in place that can accommodate any new product, regulation change or new growth will ultimately lower costs and save time. Having to manage work-arounds and one-offs becomes tedious and costly. The ideal operation should consist of a seamlessly interlinked set of systems and processes to support the full customer life cycle from sales to billing to delivery to customer service.
Layer 3 – CENTRALIZATION
The third principal is centralization, which Sherman defines as removing redundancies and achieving economies of scale. More simply put, centralization implies organizations performing like functions in fewer locations with fewer suppliers or venders. Some typical operational functions that centralization can be applied to are advertising, accounting, purchasing, human resources, information technology and legal.
Layer 4 – OPTIMIZATION
Upon completion of implementing the processes of standardization, integration and centralization, your organization should have experienced some transformational challenges. At this point it is important to optimize performance in order to maximize value. To achieve sustainability, continually streamlining systems and processes is imperative and applying proven process improvement methodologies such as Six Sigma and lean can be effective at this point.
Implementing operational change through Sherman’s four management principles offers one approach to improving an organization’s level of service and output and ultimately increasing the quality of their products and customer experiences. A web-based Quality Management System like the one offered by Intelex Technologies in conjunction with the implementation of operational change will provide any organization a comprehensive and easy to implement solution for tracking, monitoring and reporting all quality issues throughout the transformation process and beyond.