Why Dedicated Operations Management Is Essential
Operations management is an element of every business, whether it is one person or 100,000 people. However, not every organization, especially small and/or growing ones, put sufficient effort and resources into managing their operations. Resources dedicated to this essential facet of running a business can generate substantial returns in terms of efficiency and productivity.
What Is Operations Management?
Operations management is the aspect of management concerned with the oversight, planning, and control of processes related to day-to-day operations and producing goods and services. In essence, operations management is running the parts of your business that generate value for your customers. This makes it worth taking a close look at how you can improve this part of your organization.
Exactly what is involved in managing operations depends on the business. However, it is always focused on producing goods and/or services, particularly when a scientific and thoughtful approach is taken to efficiency and effectiveness.
- Production Processes: The main part of overseeing operations is managing the production process. This is planning how the company will create goods or services, how logistics will support production, how resources will be allocated and other similar management processes.
- Metrics and Measurement: Operations management as we know it today is rooted in scientific management during the industrial revolution. Planning, tracking and analyzing metrics and key performance indicators is an essential element. This aspect helps managers identify where their processes and people are inefficient and/or ineffective.
- Quality Assurance: An important element of measurement of operations is quality assurance. This is ensuring that products and services delivered to customers meet reasonable expectations and are consistent with the brand’s image. This is a particularly difficult area for growing companies.
- Personnel Management: This is the oversight of the people who work in the company’s day-to-day operations. Efficiently organizing people, ensuring effective communication and managing organizational knowledge all play roles in operations management.
These are just some of the elements of operations management. Of course, as every company does different things and provides value in unique ways, each organization’s operations has its own unique elements and priorities.
Why Is Operations Management Important?
In many organizations, operations are one of the three most significant functions, the other two being finance and marketing. Basically, a company needs to sell itself, fund itself and create value for its customers. One may even argue that without the operations department, all other activities of the business are irrelevant because there would be nothing to sell.
However, the importance of operations management goes beyond this. These are some of the reasons why this area of management should be prioritized:
- Producing goods and services is a costly but necessary aspect of running a business. On many teams, it is the department with the highest budget.
- According to the Ramanujan College of Management, around half of all jobs around the world are in operations. This means a substantial number of any company’s human resources are dedicated to producing goods and services.
- In all organizations, inefficiencies and waste naturally occur. Unchecked, these can have a dramatic impact on profitability.
In short, the operations of a company represents a major investment. This department often holds or utilizes the majority of assets owned by the organization. The complexity and breadth of operations mean that there are many ways productivity can be hindered.
This is precisely why operations management is such an important function. It presents opportunities to increase efficiency and effectiveness in the most substantial division of the organization. Even minor cost savings can have major impacts when multiplied by the scope of operations.
Furthermore, the operations team is concerned with quality assurance and customer satisfaction. Therefore, it presents opportunities to increase revenues and enhance marketing efforts by delivering greater value to customers.
All organizations should have at least some resources dedicated to operations management to help ensure the highest profitability possible. This doesn’t need to be a large team. It can be a single individual, even part-time. However, company operations is important enough to deserve a serious focus.
Who Is Involved in Operations Management?
In medium-to-large organizations, operations are often overseen by a chief operating officer or similar top-level executive. Often, this individual is seen as the second-in-command to the chief executive officer. This relationship reflects the importance of operations management.
The chief operating officer may be charged with a variety of duties. These can include process improvement, overseeing important projects, enhancing communication and other such functions. In many organizations, the chief operating officer handles a combination of all the elements of operations.
Many organizations also have various managers that oversee specific elements of the business’ operations. These can include production, supply chain, purchasing, quality assurance, facilities, and materials managers. Each of these roles helps to ensure that inputs are effectively and efficiently converted into outputs for sale.
Operations research is also an important element. It is a more theory-focused function than the other managers. These team members measure results and use that data to help identify the most optimal application of resources. Typically, only medium and large businesses employ dedicated operations, research analysts. However, this type of work should be a concern even for small teams.
Additionally, there may be various supervisors involved in production and other operations functions. Exactly who and how many people are involved in operations management depends on the size of the company and how complex its day-to-day operations are. In a small company, there may be a single operations manager. In large companies, there may be hundreds or even thousands.
Not all operations managers need to be full-time members of the company’s team. Many organizations leverage consultants to enhance their operations. This can be in a managerial role, acting as a part-time chief operating officer or operations manager. It can also be in a process improvement role, helping to identify inefficiencies and create innovative solutions to address them.
How Can You Improve Operations Management?
Perhaps the simplest and most significant step any organization can take to improve operations management is to hire personnel who are dedicated to it. This can be a full-time manager or an outside consultant. Simply having people who are focused on this aspect of your business will quickly result in identifying and addressing inefficiencies.
Another way that operations can be improved is to simplify the processes that produce the company’s goods and services. The more complex production processes are, the more likely there are to be faults. Ideally, production should only be as complicated as it has to be in order to create high-quality goods and services.
As you evaluate your processes, you may learn that you don’t have the clearly defined practices you thought you did. Many growing businesses, especially those that are still small, find that as they have grown, their production is less predictable than ideal. This is the result of shifting from individual knowledge driving production to organization knowledge driving it.
Creating and codifying predictable and consistent production practices is an essential step to improving operations. After all, if you are inconsistent, no amount of process improvement will help because the processes are different depending on who you talk to.
Implementing better measurement is another helpful approach to increasing efficiency and improving profitability. If you are already collecting metrics on operations, try auditing those performance indicators. Determine what important data is being left out. Similarly, identify what information you are collecting that is not helpful. Use this insight to improve your measurement systems.
Addressing small issues can often lead to significant improvements. Seemingly minor issues may be having major effects on your operations by causing bottlenecks and other such broader issues. Better yet, those small problems are often relatively easy to fix.
Finally, try to reduce movement as much as possible. Try to avoid resources and people needing to jump from place to place or function to function during the production process. The more complex the path of inputs through your operations, the more likely you are to have inefficiencies and errors.
What Are the Keys to Effective Operations Management?
The operations division can be the source of significant business success when managed well. The size, complexity, and impact of operations mean that even modest improvements can have dramatic results. Of course, planning to improve is significantly easier than actually doing so. Following these keys to success will help to turn intent into impact:
- Manage Risk Without Avoiding It: Risk management is an element of operations. It is important to develop robust policies and practices that can withstand some unexpected events. However, innovation in operations is also important. Being completely risk-averse will often lead to falling behind and may even prevent the robust operations you seek. Balance is essential.
- Understand Industry Trends: As your industry changes and the needs of your market evolve, your operations management team needs to be abreast of these trends. You don’t need to chase every fad, but at least understanding what is currently happening will help you make the right choices for your business.
- Accept and Learn From Mistakes: Getting things right with operations means making some changes. Sometimes these changes will prove to be missteps. Mistakes happen and should not only be tolerated but actively accepted and leveraged as learning opportunities. Letting yourself and your operations management team make mistakes is sometimes a pathway to success.
- Use Technology: Many organizations’ operations are hindered by outdated technology. While constantly changing systems is far from optimal, it can be helpful to have a flexible strategy that can allow your team to embrace new tools. Getting in the habit of being thoughtful about whether changes and upgrades could help is beneficial.
- Integrate With Organizational Goals: Operations and organization goals should complement each other. If your operations aren’t supporting the greater strategy, it is an issue. Similarly, if your strategic goals are at odds with the realities of your operations, you will struggle to achieve them.
- Stay Adaptable: One of the most challenging aspects of operations management is keeping things adaptable. It can take serious expertise and effort to devise operating policies and practices that can stay flexible. However, the benefits of that adaptability are worth the time and effort necessary to foster it.
- Keeping Questioning: There is no answer for operational success that will be the right choice forever. Always question the assumptions that drive your business’ operations. For example, evaluating your purchasing, you may realize you are overpaying for the materials for your production process. An outside perspective can be invaluable for this.
Following these keys to success will help to ensure that your operations are managed efficiently and effectively both now and in the future. As with other areas of business leadership, operations management is as much about the management team’s traits as it is policy.
Operations managers who push for more while being realistic with their goals are always looking for ways to be better, and who support and empower their people will tend to succeed. Additionally, managers who emphasize consistency and quality tend to fit operations well.
What Options Do Small Businesses Have?
There is a lot that businesses can do to improve their operations and increase their profitability. However, achieving these results often requires dedicated personnel and resources. For small businesses, having even a single dedicated operations manager may be difficult.
Similarly, growing organizations may need an outside perspective to help them to fine-tune their operations as they expand. These challenges can be difficult to navigate. The answer in many cases is a business consultant.
A fractional operations manager or chief operating officer can help provide that necessary oversight without the investment and commitment of a full-time team member. Furthermore, a consultant can provide an outside perspective. Getting help with improving your operations management does not require hiring a full team of managers; sometimes an outside solution is the best option.