Many energy companies are responding to the low price of oil by cutting costs and focusing on operational excellence. While this sounds good, the term “operational excellence” is translated many different ways.
BusinessDictionary.com defines operational excellence as “a philosophy of the workplace where problem solving, teamwork, and leadership results in the ongoing improvement in an organization. The process involves focusing on the customers’ needs, keeping the employees positive and empowered, and continually improving the current activities in the workplace.”
There is confusion over the true meaning of attaining operational excellence in the energy industry. A quick look at the top five energy companies’ web sites reveals significant inconsistencies in the definition.
So what does it mean? And, more importantly, why is operational excellence important?
Trenegy defines operational excellence as: Aligning critical business processes, systems and organizational capabilities to focus the company on its core mission and outpace the competition.
This simple definition has a lot of hidden complexity. Executives typically have differing views on what outpacing the competition means. And most companies do not have processes in place to ensure continuous improvement. Worse, there is little data collected to measure and benchmark performance.
Attaining operational excellence is important to energy companies given the current economic outlook. A correctly implemented operational excellence program will allow a company to efficiently and effectively serve and retain customers with the desired margins.
Basically, continuously improving what makes an energy company money, until the organization is considered consistently the best.
So where should an energy company focus?
Energy companies can focus on continuous improvement in the following areas to achieve operational excellence:
- Safety with a focus on injury free and incident free operations. Injury free operations ensure the welfare of employees and anyone else involved in daily operations. By involving these people in our business, we agree to send them home in as good or better shape than they arrived. Incident free operations ensure that those infrequent events that can have catastrophic results never happen.
- Reliability such that operations are running when as required. Companies who focus on built-in quality and maintenance will ensure reliability. Reliability is measured in uptime, the time business is operating toward what makes money.
- Major Project Execution ensures a company’s growth. It is important to retool or build upon the business through major projects – but only if properly managed to drive financial returns. Successful project execution is comprised selecting the right projects and executing flawlessly to plan.
- Efficiency is doing what makes you money better, faster, and at a lower cost than your competition.
While it sounds easy to focus on safety, reliability, major project execution and efficiency, creating a successful operational excellence program is a bit like building a house. Starting with safety as the foundation and ending with efficiency as the roof.
This article is the first in a series of articles that will clearly define operational excellence, explain the importance to energy companies, and identify the key components. The next four articles will explain how to build an effective operational excellence program, much like building a house. In the end, the house becomes an operational excellence management system which should keep a company safe and out of the storms of financial pain.
Trenegy helps organizations manage any element of the operational excellence spectrum using a proprietary methodology. Stay tuned for future articles on operational excellence.