Operational Excellence. Continuous Improvement. These concepts have been a popular part of business improvement initiatives for decades. While the principles behind operational excellence (OE) are relatively straight forward to apply in a factory, and the benefits equally clear to measure, implementing and measuring operational excellence in a professional services organisation is trickier.
In professional services organisations, where there are limited standardised processes, roles are not always clearly defined, and you can't measure widgets per hour, how do you define and measure the benefits of operational excellence? How do you know if your people and processes are more efficient and effective?
Given costs for professional services firms are largely people related, it makes sense that they often try to measure efficiency through a reduction in FTE. Here's where it gets tricky. It's uncommon to fully remove the activities an entire person through operational excellence.
Instead, you free up an hour per day for this person, a day per month for another person, and someone else gets back 15 minutes per week. While these are improvements that may let the person focus on more value-add work or have better work-life balance, they don't lead to an overall reduction in headcount or cost. Worse, companies find that these small chunks of time quickly get filled up with new work - often with little oversight of whether that new work is valuable.
This is why an operational excellence program can accurately claim to have stopped multiple FTEs of activity, without the organisation seeing any benefit to their bottom line.
How does HR help you address this challenge? To realise the full benefits of operational excellence in a professional services firm, you need to introduce regular reviews of activities, roles, and team structures.
Take this example: You have a 10-person team. They work diligently on operational excellence and improve their processes so that each person saves 1 hour of time per day. Without an HR person, you log that you have saved ~1 FTE of time across the team and celebrate the success of your OE program. Six months later, the business has grown significantly, and the team asks you for an additional resource to keep pace with the increased demand. You can't understand why they need another person - 6 months ago you were celebrating that they had reduced their activity by 50 hours per week! They explain that over the 6 months each person had picked up additional activities that filled their free hour each day, and they have no spare capacity to take on more work. Despite your OE program, costs are once again going up. Worse, no one can clearly articulate which new activities have filled their time - slow creep means that it happened without them really noticing.
Now replay this scenario with an HR person on the OE team. Once again, your 10-person team frees up 1 hour per day, resulting in a savings of 50 hours per week spread across the team. The HR team member sits with the team lead to understand what activities the team is still doing. They work through how those activities can be grouped into roles and the most appropriate level for each of those roles. Not only do they create a team that has 9 FTE, but they also have the opportunity to consider if some of those FTE could actually be more junior than the people currently on the team. By combining new activity groupings to reduce headcount and re-levelling, the team sees an actual reduction in costs. Six months later, when the business has grown significantly, the team has a conversation about the best way to support the additional demand. If they do need to add another person, the company has still had 6 months of savings, and the extra FTE only brings them back to their original headcount.
Operational excellence is a worthy activity on its own, but adding an HR overlay to OE allows organisations to get quantifiable cost savings from activity reduction through restructuring teams and relevelling roles - a step that often gets missed.