An organisation’s competitive advantage and therefore achieve long-term success is driven by two key factors:
Many organisations, when driving a business improvement programme, forget about the management of associated risks, or when implementing risk management do not realise the impact of the controls they put in place on the efficiency of their operations. It also needs to be recognised that both achieving process improvement and managing risk are, to some extent, dependent on factors the organisation can directly influence, namely:
1. Internally between teams and groups
2. Externally between suppliers, clients and other stakeholders
This article is a “thought piece” which explores the interrelationship between these two “Rs” (“Risk Management” and “Resources”) and two “Ps” (“Process” and “Partnerships”).
There is a growing realisation, particularly amongst larger organisations, that Risk Management has much more to offer than simply being a mechanism for regulatory compliance. It supports the effective management of the full cross section of risks the organisation is exposed to (for example operational, financial, reputation, safety and environmental risks) and when handled effectively, Risk Management can contribute significantly to organisational improvement.
Improvement techniques such as Lean and Six Sigma are currently popular in both the public and private sector in supporting the realisation of organisational improvement. When handled well they can help to improve organisational effectiveness but can also unintentionally introduce risks into an organisation or its value chain and because of this there is a growing realisation that the promise of improvement is often far removed from the reality of achievement.
Aligned with the issue of making effective use of Risk Management and ensuring that the Process Improvement activities are applied effectively is the need to develop and manage effective relationships between teams, groups and organisations and also to ensure that the organisation’s resources are effectively deployed.
A recent study has shown that amongst the supply chain of Nissan a large percentage of the organisations surveyed had struggled to realise the benefits from their improvement activities (such as Lean & Six Sigma) and through this had introduced additional risks to the organisation.
The prime reasons stated for the failure to deliver the expected results are shown below grouped into the “R2P2” categories:
1. Failing to allocate sufficient resources to effectively deliver the project
2. Insufficient or inappropriate training
1. Failure to coordinate organisational improvement activities
2. Poor implementation or project management
1. Not gaining the commitment of the staff / partners to engage actively in the process
2. A lack of management support and commitment
1. Poor selection of tools and/or an inappropriate approach
2. A lack of communication
These results correlate with previous work undertaken by the authors in the NHS and the service sector, so although being derived from a manufacturing source also have relevance to the public and service sector.
Sustainable improvement can therefore be shown to be at the meeting point of effective partnership management, process improvement, risk and resource management.
R1: Effective Risk Management
Often an improvement programme will be underway before the risks associated with it are fully explored and this leads to sudden delays, project cost swings and reduced performance.
Also, it is also often forgotten that making improvements in one part of an organisation or supply chain can introduce problems upstream or downstream, or even in a different part of the organisation completely. Understanding the operational impact (risk) of activities across an entire ‘Value Stream’ (or Pathway which is the equivalent term in the NHS) is essential to the success of improvement projects.
Risk management should permeate all aspects of organisational improvement, from looking at the impact of implemented changes on operational performance, to looking at the organisational impact of delays and changes to projects through, for example lost sales, broken relationships and reduced profits.
R2: Effective Resource Management
It almost goes without saying that ensuring that the team has access to the right resources is essential to success, whether these resources are assets, human skill/knowledge, system related or financial. However, having the right resources and deploying them effectively are two different things.
Planning for the right resources to be available is an art-form in itself and brings with it secondary issues of timing and deployment, but the investment in understanding what resources are required both for the improvement programme and its solution, and when they will be required will pay off significantly when it comes to making your improvements stick and your projects successful.
P1: Effective Process Improvement
The implementation of improvement processes such as Lean and Six Sigma (or Concurrent Design for the development of new products and services) often focus heavily on the use of ‘tools’ and ignore the overall process. This leads to isolated areas of activity (or ‘Islands of Excellence’) which have little or no impact on the overall ‘value stream’ and which can actually introduce unacceptable risks to the organisation and degradation in internal and external relationships.
Having a structured improvement approach that focuses on clearly scoping what needs to be achieved and why, and which then reviews the opportunity across an entire ‘value stream’ (considering all the partnerships and resources involved) before moving into action will ensure a more robust improvement that has a longer term and more sustainable impact than just picking off elements ‘piece meal’.
This structure ensures that the team are able to assess how their proposed improvement activities can be effectively introduced without impacting negatively on performance.
In the rush to implement improvements quickly (the ‘magic bullet’) organisations can ‘go for the low hanging fruit’ and in the process pull the whole tree down.
P2: Effective Partnership Management
Improvement programmes often focus heavily on either the technological or process aspects of the activity and although the team are frequently involved they are often neither ‘engaged nor empowered’ to actually deliver the activity. An organisation can implement the programme without consulting with their partners from the beginning.
In addition, a lack of coordination or communication between partners and teams working on different parts of the improvement process, or working within related organisations when working across value chains, leads to conflict, confusion, repetition of activity, increased costs and the risk of missing essential elements or steps.
Often the coordination of cross-partner/team activity is poor or the issues between partners or teams are not addressed until the problems reach such a level that they cannot be resolved because of a fundamental breakdown of trust.
Being clear about who needs to be involved and engaged from the beginning, and what level of authority each will have is essential to preventing downstream problems with relationships.
R2P2 – Improvement Success
What will hopefully have become apparent as we have reviewed R2P2 (Risk Management, Resources, Process Improvement and Partnership Management) is that there is a high level of inter-dependence between them.
Making the Switch to the R2P2
What we have attempted to show is how success in managing effective projects and achieving sustainable organisational improvements relies on the successful combination of Risk Management, Process Improvement, and Partnership working with the Resources. Our top 10 recommendations for achieving organisational success in any improvement programme are:
for achieving organisational success in your improvement programmes.
1. Scope what you are trying to achieve very clearly and identify what risks you might encounter, the partnerships involved, the resources you will need and the actions you will take. Remember effective risk management is about taking risks, not just minimising them.
2. Look at the project or improvement project on the basis of an ‘End to End’ review (using processes like Value Stream Analysis) so that you can identify effective improvement and simultaneously understand the risks and impact of these improvements.
3. From the beginning, engage and inspire people (including partners) to participate in the process and then empower them to do so.
4. Having determined the ‘End to End’ improvements, risks and impact, make a rapid move to action and generate quick wins for all.
5. Remember that sustainable improvement requires a change in behaviour rather than just a change in process – and to achieve a change in behaviour requires management encouragement and support over an extended period.
6. Involving the right people (yours and your partners’) at the right time will ensure the right issues are discussed and the right result achieved.
7. Keep talking to your people and partners – It can be very hard to convince people that you have chosen the “Right Way”, especially if they perceive increased personal risk. When the future is unknown or yet to be experienced people will perceive risks to be greater than they probably are.
8. Deal with breakdowns in relationships and communications early on to prevent problems growing into disasters.
9. Remember – it is better to achieve an 80% improvement now rather than a 100% never – don’t get bogged down by planning for every eventuality, instead review the risks of different solutions and press forward with the best choice you have at the time. Then learn from experience.
10. On your journey toward improvement remember to celebrate success but accept occasional failure!