Following part one in this two-part series about operational excellence (OpEx) in the power industry, Hexagon discusses the value of setting milestones to help reach OpEx goals. In addition, the significance of embracing cultural change, leadership’s crucial role in change management, and how to develop change champions in power organizations is examined, along with technology and how digitalization forms the foundation of sustainable OpEx in power operations.
“Operational excellence is more than just short-term expenditure reduction. It’s about a proven operations management system driven by a culture of continuous improvement,” Todd White, senior vice president of North America Operations at Newmont Goldcorp, said in 2020. “Operating for Excellence means systematically identifying opportunities to improve efficiencies, optimize value, doing things better and smarter, and continuing to challenge the status quo.”
OpEx is a long-term, continuous journey—a holistic approach that delivers seismic impact and value across the organization through constantly pushing the envelope on what can be optimized and how. It sounds simple enough; however, writing about it and executing against it are two different things, and it can feel daunting for even the most adept operation to understand how to approach and embrace the transitions needed to achieve it.
The advantages of pursuing an OpEx strategy are well established: an efficient organization is more competitive, and can flourish with reduced costs and enhanced customer satisfaction. Nonetheless, guiding an entire organization toward a state of excellence is not easy. However, if leadership demonstrates an ongoing commitment to achieving OpEx, employees are more compelled to deliver on levels of engagement, innovation, and maintainable growth.
One of the most effective ways to define a roadmap to OpEx and to overcome these challenges is to establish goals that must be accomplished along the way. These milestones should cover the continuous journey from foundation through principles to methodologies and be taken in tandem with your workforce for efficiency and sustainable long-term success.
Kotter International, an organization that helps Global 5000 company leaders develop the practical skills and implementation methodologies required to lead change in a complex, large-scale business environment, was created and co-founded by Harvard University professor Dr. John Kotter. For over four decades, Dr. Kotter cultivated his observations of numerous leaders and organizations as they worked to transform or execute their change strategies. Based on this research in leading change, he identified and modeled the success factors into a methodology called “The Eight-Step Process for Leading Change.”
Create a Sense of Urgency. Communicate the need for change by creating an environment that the business needs to change “now.” Clearly identify for all employees where company-wide teams need to change existing methods of working to grasp the opportunity to utilize innovative business practices in order to ensure the company delivers real value for its customers and shareholders.
Build a Guiding Coalition. Introduce the concept and enlist change leaders. Employees should be presented with the key concept of OpEx, which is the desire to provide the ultimate value to customers using resources in the most efficient way. The tools to achieve OpEx are important, but starting with the concept itself is essential.
Form a Strategic Vision and Initiatives. With the team, form the vision. Identify how the future will be different from the past and how to make this vision a reality. Reduce top-down thinking by taking a different approach from the traditional structure, where all direction comes from the top of the organization. Frontline staff must be empowered to recognize interruptions in the flow of value and respond with solutions. Upper levels of the hierarchy should manage the strategic direction of the organization and provide the resources that employees need to be successful.
Enlist a Volunteer Army. You will require people to rally around and support these new ways of working. They do not need to be “managers.” They can be people from all levels of the business who know how things work while also seeing areas where things can be changed to make it even better.
Enable Action by Removing Barriers. Removing barriers will help people visualize the flow of value and enable action. One of the primary concerns of OpEx is transparency. If obstacles, process challenges, resource issues, and poorly aligned goals can be clearly seen, they can be dealt with effectively. Many improvement tools allow visual management systems because people process images more quickly than text.
Without a “best practice” standard for both normal and abnormal workflows, there can be no improvement, and a standard operates as a control group for your experiments in improvement. When processes run out of control, it’s important that frontline staff know exactly how to operate. In the words of Taiichi Ohno, founder of the Toyota Production System, “Where there is no standard, there can be no kaizen [a Japanese term meaning “change for the better” or “continuous improvement”].” It is essential for lean working practices.
Generate Short-Term Wins. It’s important for people to recognize incremental progress along the way, and align goals and accountability. The most successful companies have a clear set of business objectives, ensuring that everyone knows how they can best contribute to achieving the most important goals. Performance evaluation is then based, in part, on engagement with improvement work. But start with some short-term “wins,” which will boost the confidence of the team and drive more improvements.
Sustain Acceleration. Build on the early or first successes. Use the credibility of the “project” to drive more changes to existing systems, processes, and policies. Maintain the momentum in the organization by ramping the OpEx project up a gear.
Institute Change. A structure for improvement is crucial. Institute change by establishing a framework for improvement. It should offer a central repository for all improvement opportunities, allow for cross-functional collaboration, and offer active alerts and notifications to ensure that progress never stalls. In addition, the technology used serves as a knowledge bank ensuring that lessons learned by the organization are never lost.
By setting these goals and championing the achievement of each, employees from all levels of the organization can see progress and are assured that fundamental improvement is happening in relation to the strategic roadmap for success, which ultimately leads to an increase in support and buy-in across the company as the journey proceeds.
Although marking the steps of the OpEx journey can lead an organization down a structured path for reaching its destination, it can be a difficult path if the often-overlooked aspect of change management is not embraced throughout the entire journey (especially in regard to transforming a company’s culture). The lack of appropriate implementation toward changing the company culture to one of continuous improvement is one of the most common reasons why many companies fail to implement an OpEx program successfully.
In a recent study by the Business Transformation & Operational Excellence Summit (BTOES), approximately 35% of respondents cited their top critical challenge as executing sustainable OpEx projects, while over half of respondents said that their biggest obstacle in achieving this was squarely around changing and improving the company culture. Many company leaders obviously recognize that reworking culture to match aspirations is an essential part of a successful OpEx journey, but they struggle to make it happen. What options are available to support an organization’s journey to OpEx that embraces a cultural shift and nurtures it into fruition? In short: change management and leadership.
Employing Change Management
For OpEx to be successful in any organization, including those in the power industry, it must understand why it is undergoing change, and that it will not see results overnight. Prosci Research, an authority on change management, positions it as “the application of a structured process and set of tools that are designed to lead the people side of change to achieve the desired business outcome.” And through this application, help individuals impacted by said change to make a successful transition that enables them to engage, adopt, and use it—all the while minimizing resistance.
The “Employee’s Survival Guide to Change: The Complete Guide to Surviving and Thriving During Organizational Change” by Jeffrey M. Hiatt, states that, “Employees no longer respond to ‘Jump’ with ‘How high?’, but rather ‘Why?’. Thus, when a change is introduced into this evolving value system, it is natural for people to question the new initiative and to resist.”
Courtney Reese at Sendero Consulting discussed transformation in a traditionally change-averse industry in the 2020 article “The Times They Are A-Changin’: How Utility Companies Need to Evolve,” and said, “Not all change is created equal.” Reese goes on to say that, typically, there are three types of change:
Developmental. Most traditional project and change management plans address developmental and transitional changes. Developmental changes are the simplest in that they improve upon what an organization is already doing—a work process improvement, for example.
Transitional. Transitional changes replace the current state with a new state. New products or services and system implementations that do not require significant shifts in mindset or behaviors are examples of transitional changes.
Transformational. Transformational changes, however, are the most complex because the future state and current state are drastically different and often involve changes to processes, technology, organizational structure, and people. Additionally, at the onset, the future state is not fully known; rather, it evolves over time, which equates to high levels of uncertainty because it requires operating in the unknown.
By ensuring a shared vision amongst the leadership, demonstrating a commitment to delivering the strategic objectives, defining values, and making decisions, everyone in the organization will engage with the change management process.
Leading from All Levels
Often, businesses cite a lack of leadership understanding and backing as the top critical challenge. Without this, management will not provide the necessary requirements, such as program commitment, financial assets, or employee resources. This is why leadership is absolutely essential in establishing the right organizational structure, culture, focused processes, and change management strategy that will nurture an OpEx environment.
Ultimately, the leadership of an organization is responsible for developing a clear vision of what successful OpEx means for an operation and ensuring that this message is unambiguously communicated across the company. And, if carried out correctly, an aware and empowered workforce can thoughtfully apply appropriately guided steps toward achieving set OpEx goals (with unwavering support from its management). Note that the keyword here is “support.”
Leadership is only one half of the coin to develop and champion change, drilling change into employees will only elevate the level of resistance to it. Every employee is ultimately accountable for their ownership in change management. Change and the management of it, cannot be driven purely from the top; it must exude from every person in the company. In the words of Vince Lombardi (a pro football Hall of Fame coach): “Individual commitment to a group effort—that is what makes a team work, a company work, a society work, a civilization work.”
This strategy is both bedrock and touchstone. It directs all subsequent decision-making and the methodical transmission of this strategy across the business. However, taking care to open channels for consultation and feedback is equally critical to ensure collective adoption.
As Brian Rains, former leader of DuPont Sustainable Solutions’ Operational Excellence Practice, who is now retired, articulates in “The Path to Operational Excellence Through Operational Discipline,” leadership is responsible for defining and communicating the shared values and common purpose, and prioritizing the things that genuinely matter to drive the highest levels of OpEx. The direction needed to support this is delivered to the organization through proper tools, training and employee involvement, clear communication of the rules, open dialogue, and alignment.
According to Todd White in “Goldcorp: Operational excellence done right,” the Goldcorp company follows a “Change Acceleration Process,” based on a model created by General Electric, that involves uncovering opportunities and then leading change effectively, emphasizing how change will impact people. He said: “Our focus is on affecting change at levels of the organization that involve people that are responsible for critical metrics. For instance, a pit supervisor knows that they need to hit a certain target with a shovel. They also need to know that if we’re not doing that, our tons per day mined is going to suffer. We need to get information to these sorts of people to affect tangible positive change, so we are focused on getting the right information to the right people at the right time.”
Changing Through Champions
Since the successful implementation of change is not driven downward through the company by the leadership, how can it resonate throughout the organization? The answer lies in establishing advocates for the OpEx program, from the power plant floor to the executive suite—a critical part of cultural change—as OpEx affects and depends upon staff at every level of the business.
In many ways, a change champion fulfills the role of an evangelist for OpEx. They point the way toward the vision and goal of establishing a thriving company culture, and encourage the behaviors that lead there. They drive the ongoing search for perfection, which, while actually more of a desirable goal than a genuinely obtainable one, leads to continuous improvement as a journey. They also keep the focus on the processes, ensuring that lessons are learned from failure and methods are improved.
As Steffen Weber, former head of Seeds Development Process Management at Syngenta, who now runs a management consulting firm, points out in “Changing and Improving Company Culture—What Is Needed Beyond Continuous Improvement Tools and Methodologies?”, “If you are able to excite your people to manage and optimize their processes, this will not only increase their delivery and show in bottom-line improvement, it will also improve the top-line, as customers care about the How.”
The aim is to establish a company culture where staff seek to do the right thing, every time. This culture, established by the “Five Pillars,” as outlined by Admiral Hyman G. Rickover, known as the “Father of the Nuclear Navy,” consists of values that are used to identify the behaviors expected of each employee and how they support the organization’s mission and outcomes. They are: a questioning attitude, level of knowledge, watch team backup, formality, and integrity. These guiding principles help organizations achieve the successful implementation, adoption, fulfillment, and continuous improvement of an OpEx roadmap.
Prior to the establishment of OpEx programs, industrial sites including power facilities, often relied on inadequate, paper-based tools for the collection and sharing of data, adding preventable risks to procedures such as shift handover and planned shutdowns. Even when software-based solutions for operational processes and procedures such as operations logbooks were introduced, they were often not interoperable with related systems of record-keeping, such as data historians and the computerized maintenance management system (CMMS).
Modern shift operations management software can connect these information sources to shift handover reports, operations logbooks, digital work instructions, and operational orders. This enables safety-critical information to be correctly and routinely presented to operations personnel in real time, helping them to avoid potentially catastrophic incidents.
Configurable operations management software helps with change management because it’s easy to adapt, and new staff or external vendors don’t have to be brought in to manage and operate it. This is just one example of how digitalization can increase efficiency and data insight within the business, and this further drives OpEx. Increased digitalization directly correlates with the success of an overall OpEx initiative, as companies can optimize their ability to make better, faster, and more informed decisions.
Greater data insight allows these organizations to quickly identify small yet vital improvements that can make a big difference to performance. It also provides evidence of progress that in turn builds confidence in the OpEx project across the company. Generating “quick wins” is not the pathway to sustained success in OpEx; however, it can increase stakeholder support to affirm that things are moving in the right direction. This leads to greater trust and buy-in throughout the organization, which sustains the OpEx program. As you move forward, the rest of your team will follow.
—Bob Hooper and Peter Wilson are senior industry consultants with Hexagon, a global leader in digital reality solutions, combining sensor, software, and autonomous technologies.