Strategic Operations Management Features - Essay Example

Prye, Byll and Runne(PBR) Strategic Operations Management assignment 2008-09 Other features or characteristics an OS should have in order to beeffective. Success factors for developing and implementing OS. One of the descriptions of what operations strategy is one that describes it as "The decisions which shape the long-term capabilities of the company's operations and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources" (Slack, p17) The word on-going implies that the market is dynamic and ever changing. An operations strategy developed therefore will not strait -jacket operations and prevent it from responding to such changes and adapting itself to changing needs. New business opportunities may emerge that may require a quick response from the operations management. Hayes (p 10) says that operations role is bigger than that of just implementer of strategy. It is here that new ideas emerge, new knowledge, capabilities and learnings are getting acquired. New strategies are often arising even as one is being implemented. Emergent sense of what the strategy should be will come from the experiences and feedback from its operating staff based on which mid course strategy corrections could be done. An operations strategy is never complete without an appropriate implementation plan. The viability of strategy depends crucially on the manner of its implementation; a sound implementation can salvage poor strategy and best of strategies can be wrecked by bad implementation (Bettley et al). For this the plan must be clearly articulated, along with a monitoring plan. It will clearly communicate to the operations team the rationale behind the plan, the role of different functions, linkage between functional goals and strategy, clarity on concepts like market qualifiers and market winners and also the tradeoffs assumed. It will clearly communicate the start, timelines outcomes and the action needed by each function. It will be clear about resource allocation and plans for filling in gaps (for example new training in customer handling, training for use of new IT technology, etc). For instance the strategy may call for greater outsourcing instead of manufacturing which may mean smaller budgets and dash hopes of expansion for the manufacturing department. The rationale behind this will need to be clearly communicated. Finally it will have a clear implementation agenda on when to start, where to start, the pace of implementation, how it will be coordinated and by whom. For the operations strategy to be successful, it would need to be a collaborative effort. OS should not follow a top-down approach alone; it should be predominantly bottom-up. For one it would help in drawing upon the knowledge and experience of the operations team. It will also be a sure method of communicating to the operations team the business strategy the organisation is following. It will be the surest way to ensure appropriateness of the strategy because operations manager will be able to see the fit better than anyone else and come out with gaps and shortcomings of the resources to meet the strategy. This approach would also ensure the ease and speed of implementation as much of the details of the plan are already considerably internalised by the operations team. Sadler (2000) says that a suitable planning process involving busy managers who are highly focussed on operations and a facilitator would greatly increase the chance of success of implementation of operations strategy. Friend (p 247) says that strategy so developed has to be communicated to the operations team in a way that they will take ownership of the implementation. Developing and communicating the plan will avoid "organisational myopia", i.e., inability to see between their own functional departments. It will also avoid unwanted grouse some functional personal may develop because they feel that their department has been neglected. Friend also says that a process developed in a collaborative manner will motivate employees, as they will know where and how to contribute for its success. More importantly they will be encouraged to give good feedback. Finally an appropriate monitoring system, one that tracks the progress of the implementation of the strategy and more importantly the impact the strategy has on the outcomes, is an important requirement for the success of the operations strategy. This will help in timely spotting of emergent strategies and taking appropriate action. How is PBR's operational performance monitored and controlled Provide a brief account of the case and its performance in the market, their approach to understand and analyse the market and set their capabilities to fit the market requirement, and how they monitor and control their performance PBR does not seem to be following any of the three generic strategies described by Porter for getting a competitive edge. It is not following any specific cost leadership policy (even while participating in government tenders it does not go beyond a point in lowering its price); it does not have a product/service differentiation as it offers the same kind of services offered by others; it does not have any focus in terms of focusing on specific segment of the market. All though the company claims it offers a variety of services; its main offering is audit operation. It growth mainly comes from acquisitions, it does not actively canvas for business (excepting participating in tenders). The market is not sensitive to cost as audit costs for companies are a very small percentage of their total cost. However orders which are finalized based on tenders (government jobs) are based on lowest price. However the entire market does not seem to be competing based on price. All competitors have the same range of products and service offerings. Very often its client demands speed in completing orders. This PBR does through drawing upon other branches, head office for additional capacity (man power). There does seem to be trade-offs between speed of completion and upholding professional standards/ norms required for doing the job. PBR measurements and controls are related to its own performance and the performance of the staff related to the jobs, functions they do. Manpower analysis, variance, staff assessment, collections would give a good measure of internal controls but do not seem to be having any measurement indices to measure their performance in relation to their competitors in the market. They have a professionals standards committee which sort of does a post delivery quality control check. As a matter of fact PBR does not have any bench-mark or industry standards to compare its service with its competitors for any parameter. To some extent it tries to be different from its competitor by having a core value of building relationships with clients, even though it does not exactly define what it means by this. On analyzing, these could be trust, dependability, professional competence and reputation (brand image). The parameters for measurements of these and the methods are vague like feeling good, ear to the ground, ability to sell staff to its clients. It tries to build this competency through training its employees in managing client relationships effectively. Whether this is an exclusive inimitable competitive edge is not clear, as its competitors also could be doing the same. In the business they are in it would be not very difficult to retain their client base, as the clients would value continuity in relationship. Therefore as PBC rightly believes, management of client relationship is crucial for retaining customers, while brand/reputation is used for growth. What seem to be the weaknesses in PBR's systems The performance of PBR is below analysed from the point of view of performance requirements as expected by its clients (customers) in terms of quality, cost, speed, flexibility and dependability. Quality: Quality of service means whether the audit report it submits will stand the professional scrutiny and standards set up by statutory requirement. Any failure here will affect the professional standing of the company and would mean loss of reputation seriously affecting its business. PBR ensures this by means of selecting the team that will do it. It employs qualified professionals and tries to attract better quality people by means of projecting an image of friendly organisation, but not as a better paymaster. It makes sure that its auditors use latest software and auditing tools. Since it believes in maintaining customer relationship, it trains its people specifically in acquiring the skills. It measures the performance of the audit done, though in the post audit stage, through its professional standards committee. Cost: Since the organisation hierarchy is flat, there are little overheads. The human resource costs are more or less similar to competition. It minimizes cost by keeping utilization high. The company uses tools like variance analysis, manpower utilization to measure these. This is done at the branch level by the partner as well as at the head office level. Cost comparisons with competitors are not done as company believes others are charging more or less the same. Moreover since these are compared to budgeted figures given by the branch, there is no incentive to the branch to go beyond what is projected in the budget. Cost for auditing is not a crucial issue for the consumer as it forms only small part of its overall expenses. It is a less important objective for PBR. Dependability: Very often clients want the auditing to be completed on tight schedules. PBC is very often required to meet customers' expectations. Required persons for the job may not be always available at the branch, so it augments its "capacity" by asking for help from head office and other branches. Professional requirements of auditing demands that quality of audit is important, because many other institutions like banks, shareholders depend upon it for their own decisions. Professional judgment is often called for by the auditing team for balancing the two objectives of completing audit on time and quality. Timely completion of job is measured at branch level as an individual performance by PBC during its biannual assessment process. No benchmarks or market comparisons are made. Customers view this as very important and timely completion all the time will be a winner objective for PBR. Flexibility PBR is focused on only a few main products related to audit, even though it claims it has a mandate to offer other services (consultancy, business investigations etc). It has not focused on new innovative offerings, because it has not explored and tried to exploit this segment of the market. Currently it would be seen as not important objective, but potentially could be turned to a winner objective. Identify the improvement priorities for PBR using the importance-performance matrix. The performance -importance matrix for PBR would look as follows. This is based on the Slack performance importance matrix (Slack 1994) nine point scale. The rating is as follows: PERFORMANCE IMPORTANT MATRIX FOR PBR P Based on the customer perception of performance indicators the following conclusions can be drawn: Quality of audit is a must and customers view this as a necessary deliverable from audit firms. The service provided by PBR must be acceptable as a well done audit providing the appropriate information about the company as per standard practices of accounting. There are statutory norms to be observed. These reports are used by PBR's customers for providing information to statutory authorities and their financiers. PBR seems to be performing this at levels of standards at par with its competitors. This would be a winner objective for PBC Cost is not a high priority in the minds of the customers, as it is a very small expense for them. More over there is little difference in the market for this service in terms of cost. PBC once again charges fees which are not far from different from what its competitors charge for such service. For PBR it will fit in as a less important objective. Dependability mainly means delivery of service on time. This is a demand placed by its customers very often, i.e., completion of audit at short notice and within short time, without sacrificing quality. This is one of the key element by which PBR maintains its high level of good customer relationships. Here again it seems to be at par with its competitors. This will be the order winning objective for PBR. Flexibility: At present it looks that PBR has been focusing only on audit services as product offering in the market. It has not attempted to develop its other services capabilities as products to its customers. Customers probably view PBR and its competitors only as one service provider. Its potential capacity to offer other services seems to have ignored. PBR has not fared any worse or better than its customers on this. Currently it would be seen as not important objective, but potentially could be turned to a winner objective. What emerges from this is that PBR has been following the general practices of the market and has been led by them, instead of attempting to lead the market. It has laid a lot of importance on what it calls customer relationships. But it does not seem to have any specific performance measurement system to define, measure and compare this aspect. It has also not realized its full potential of its capacity to offer wider range of services than what it has been. It runs a tight organisation but it is not clear about its comparative performance with respect to competitors on utilization of manpower. What steps would you recommend PBR to take PBR would need to start thinking in terms of strengthening its position in the market by being different from its competitors. Typically, it has long term relationships with its clients and understands their business well. It has a potential to offer wider range of services (management and financial consultancy, mergers acquisitions, fund management, fund rising) to its customers. By beginning to do this, it will be freed from the constraint market imposes on price. It will be able to offer percentage based fees for all these which would be substantially larger than its present income. By doing so, it will offer better career growth and opportunities for its employees. It will be able to pay them more and be able to attract the best in the industry, which will further fuel their growth. By doing this it will open further avenues for increasing its client base. It is highly likely that its competitors will begin to think along the same lines, so it is urgent PBR acts on this. PBR should also develop a performance measurement system which views its performance against market expectations and its competitors. Specific criteria for measuring customer relationships levels will have to be evolved and used in the future. Appendix Bettley,Allison et al , Operations Management , A Strategic Approach, Sage Publication Friend Graham and Zehle Stephen, Guide to Business planning 2004, Published by The Economist Hayes RH, DM Upton - Operations Management: A Strategic Approach, 2005 - books.google.com, www. is.ba.ttu.edu/faculty/ch02, accessed 20 December 2008 Sadler I, Process of strategic operations planning process improved by Action research. I Sadler. School of Management, Victoria University of T. Australia http://ftp.informatik.rwth-aachen.de/Publications/CEUR-WS/Vol-72/088%20Sadler%20Operations.pdf, accessed 21 December 2008 Slack, Nigel, The Importance-Performance Matrix as a Determinant of Improvement Priority Warwick Business School, UK, International Journal of Operations & Production Management, Vol. 14 No. 5, 1994, pp. 59-75. MCB University Press, 0144-3577 Slack Nigel, Lewis Michael, Operations Strategy Published by Financial Times Prentice Hall, 2001 7 Read More