Why Operational Excellence Control Is Moving To Business Units

Business people using laptops connected to a centralized server

Conventional wisdom tells us that control of transformational programs like Operational Excellence should be rooted in one centralized department to ensure consistency across the enterprise. But surprisingly, according to the 4th Biennial State of the Industry Report from PEX Network, the trend is moving away from that. The results show business units and departments are taking over.

Organizational structures are a bit like the fashion industry – something that’s trendy one day can go completely out of style. That’s what seems to be happening in today’s companies when it comes to Operational Excellence responsibilities.

The recent PEX Network State of the Industry Report reveals some clues about where responsibility is moving.

“Practitioners were polled to find out which departments are responsible for process and operational excellence / improvement / transformation. Just under a quarter (24.6%) said that their own process improvement department was in charge, which represents a 4.2% drop from figures in the 2013 Biennial Report. Key trends which are very apparent based on our results is that over the last two years there has been an 11.1% drop with Operations being the department responsible for such programs. Interestingly, the biggest boost of departmental power and responsibility was with Individual Business Units and Departments, with 15.8% of respondent votes. This represents a 209.8% surge from the 2013/14 figures.”

Given the speed at which companies must respond to the ever changing business landscape, this is no real surprise. Here are three reasons why this may be occurring.

1. Faster Response Times

Smaller groups can make decisions quicker rather than trying to go through layers of organizational bureaucracy to get it done. Allowing a business unit head to approve a decision instead of requiring approval from another department or the C-Suite allows them to respond to the needs of the marketplace which can mean the difference between keeping a competitive edge or not.

2. Different Needs

Different business units have different needs. Sales and marketing would certainly not have the same needs as Operations. And the timing would surely be different too. With department heads in control, changes can be made to accommodate their schedules rather than a schedule that’s shared with others.

3. Technology Changes

With a smaller range of choices to keep tabs on, business units can assess technology changes to determine whether they’re necessary or not without having to rely on another group to find the time to fit an assessment into an overloaded schedule. Plus it keeps the authority for the decision closer to the people who are impacted by any change that occurs. That can make a big difference when it comes to change management.

It’s understandable that companies would consider moving the responsibility for Operational Excellence to departments or business units. But there’s a downside too. Decentralization has some pitfalls that can derail a business quickly if not taken into consideration.

  • Duplication of EffortIt’s important that there’s a method for communication between business units. A regular meeting schedule where all parties get together to discuss strategy and tactics can help the company avoid duplication of effort that can occur when decision making is delegated to a department level.
  • Corporate TrackingIt’s easy to lose sight of what’s going on in the company when things are not controlled at the top or by a single responsible business unit. Setting up a method, such as a dashboard, to track all results at the business unit level, rolled up for a corporate view can help everyone see the entire picture.

You may also like:

Posted in Operational Excellence | Tagged , ,