Driving Growth Through Operational Excellence: Guidance for Executives and Directors
Operational excellence is more than a buzzword—it’s a proven pathway to stronger financial performance, happier customers, and highly engaged employees. While directors with backgrounds in manufacturing or operations may be familiar with the term, others may be less so. So what does operational excellence really mean, and how can a board help its company achieve it without overstepping or overloading its agenda?
Understanding Operational Excellence
Joris Wijpkema, a partner at McKinsey & Company, defines operational excellence as “a consistent approach that drives an organization to achieve its purpose while continuously improving every day.” It’s not a single project or tool; it’s a culture, a mindset, and a series of daily practices embedded in the organization’s DNA.
Tools like Kaizen or Six Sigma are helpful, but operational excellence goes beyond them. It encourages employees and teams to constantly seek improvement, collaborate internally and externally, and take practical steps to turn ideas into results. Success comes not from occasional projects but from a persistent culture of betterment.
Key Areas of Focus
Operational excellence applies to all areas of a business, not just manufacturing or production. Some examples include:
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Finance and Accounting: Streamlining reporting processes for timeliness and accuracy.
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Human Resources: Making hiring processes efficient while maintaining a positive experience.
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Sales and Customer Management: Improving opportunity tracking and client interactions.
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Product Development: Enhancing tools, processes, and decision-making efficiency.
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Billing and Accounts Receivable: Ensuring invoices are clear, timely, and easy for customers to process.
It’s vital to distinguish operational excellence from technology or automation. Automating inefficient processes won’t create real value. Operational excellence is about doing the right things consistently, not just doing things faster.
Benefits for the Organization
When properly implemented, operational excellence delivers wide-ranging benefits:
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Internally: Improved efficiency, reduced costs, optimized use of employee skills, and increased productivity.
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Externally: Faster, higher-quality service or products, greater customer satisfaction, and enhanced supplier collaboration.
Employee engagement is another significant advantage. A culture of operational excellence encourages staff participation, values their insights, and recognizes their contributions, thereby boosting morale and retention. IBM notes that success comes when both management and employees are empowered to drive business outcomes and implement meaningful change.
The Board’s Role
How can boards contribute without micromanaging? Their role depends on the company’s current operational excellence maturity:
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For companies new to operational excellence, Boards can discuss the value of adopting this culture and request an implementation plan from the CEO.
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For companies already pursuing operational excellence, Boards should request regular progress updates, provide constructive feedback, and recognize successes.
The board should set realistic expectations. Operational excellence is a gradual process that involves culture change and careful rollout of supporting processes. Highlighting “quick wins” early can build buy-in across the organization.
Best Practices for Board Oversight
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Request periodic updates on activities and results, ideally at every other board meeting.
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Encourage executives to share examples of impactful improvements and measurable results.
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Monitor employee engagement and recognition related to operational excellence initiatives.
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Provide guidance, advice, and perspective without interfering with day-to-day execution.
By maintaining this balance, boards help ensure that operational excellence drives meaningful results for the company, its employees, customers, and other stakeholders.
Final Thoughts
Operational excellence is not a short-term project—it’s a long-term commitment to continuous improvement and cultural transformation. Boards play a critical governance role, guiding executives through planning, implementation, and ongoing refinement of strategic initiatives. By offering informed oversight and thoughtful guidance, directors can amplify the benefits of operational excellence while keeping the company aligned with its strategic goals.
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Cliff K. Locks, an accomplished mentor and executive coach with extensive experience in board leadership, corporate governance, and strategic guidance, is available for an additional board role as an independent, trusted board member. With a proven track record of supporting company growth and navigating complex challenges, Cliff brings valuable insights and dedicated bandwidth to contribute to a Board of Directors or Board of Advisors. His expertise makes him a vital asset for organizations seeking to enhance governance and make informed, forward-thinking decisions. Let’s talk; here is my calendar.
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