Carlo Materazzo, Head of World Class Manufacturing, FCA Fiat Chrysler Automobiles [BIT: FCA]

In this brief article, I would like to focus on the importance of Operational Excellence and the best set of competitive managerial practices to obtain that.

MBA programs teach the importance of creating and sustaining a distinctive strategic position to do something different in the industry where each firm competes. While doing the right things is crucial, it is not enough to guarantee success. Each company must do things exceptionally well and strive for Operational Excellence to pave the path to a sustainable advantage against competitors.

M. Porter is mostly dedicating his academic life to the focus of better identifying the difference between strategy and operational effectiveness, showing the key influential role of the strategist within a team. However, in my humble opinion, I think that basic and simple managerial competencies are both more important and harder to imitate than Porter depicted. I firmly believe that Operational Excellence is a key complement to the most brilliant strategy to contend success in the competition field because of areas such as data analytics, decision-making process based on evidence rather than guts and company culture based upon collaboration among people. These practices are essential to be successful in industries reigned by uncertainty and volatility.

I have covered several operational roles in my manufacturing organization, from managing factories with more than 7,500 employees to be responsible for the entire global production system of my corporation: now, I am responsible for the performance control of manufacturing in North America. In this journey, the most important lesson I learned is how important basic practices are with pursuing excellence in operations, and how hard it is to implement them well consistently. I believe that the main reasons why management overlooks basic practices are:

• the lack of understanding that better processes are needed,
• the lack of skills to adopt better ways of managing processes,

• the lack of trust that new processes will bring better performances.

These hindrances are difficult to overcome, leading to more hardship in implementing basics. Without building the awareness, competences, and most importantly, the consensus among the leaders, success won’t be achieved on a sustainable form.

Without building the awareness, competences, and most importantly, the consensus among the leaders, success won’t be achieved on a sustainable form.

In my experience as the leader of a large team, I experienced firsthand how important it is to enhance communication with the people, simplifying complex concepts to make them more comprehensible. Keeping things simple is an important attribute of a leader, but, sometimes it hides dangers that can undermine the effectiveness of management: simple is often correlated to simplistic when, in fact, it is the complete opposite. A profound understanding of the business priority is required to translate it into tactical, operational priorities. If management does not understand the connection between strategy and tactic, the execution becomes simplistic and does not affect the bottom line of the company. Thus, my basic areas on core managerial practices to enhance Operational Excellence are:

1. Talent Management
2. Target and Performance Control
3. Operation Management

1. TALENT MANAGEMENT

In my opinion, this area is comprised of five key aspects: identification of high potentials, career and succession planning, training, networking, and retention. Surely, pushing the mindset of talents at the highest-level to stretched goals and developing their capabilities are keys to success. However, understanding the value proposition of these employees and consequently defining the system to increase loyal behaviors and their retention is often overlooked. This creates constant drainage of talented resources and consequent losses of opportunity to pursue excellence in operations.

2. TARGET AND PERFORMANCE CONTROL

The right choice of targets and their connection to strategy are the first crucial basic steps to build an effective operational model. Then, targets must be tracked through the proper panel of indicators. Results must be discussed, and any deviations from the expectations must lead to consequences and reactions to recover from the missing targets. 

Nevertheless, management must not be obsessed with the number: this obsession can sink the best strategy when metrics become surrogated and do not tie to the priority dictated by the business.

3. OPERATION MANAGEMENT

In my experience, this area requires the application of Lean Techniques, supported by the management awareness of the importance of that. In FCA, we have been adopting a production system named World Class Manufacturing (WCM) since 2005, which targets the elimination of all types of waste. Through the adoption of the best lean methodologies and tools, it drives the continuous improvement in safety, quality, and cost with the full engagement of all the employees. WCM’s distinctive feature is its focus on quantifying the sources of waste within the production process and leveraging the data-driven prioritization of projects by a methodology called Cost Deployment. Moreover, WCM differs from traditional production systems as it is not only focused on compliance to production standards, but also involves Knowledge, People Development, Leadership, World Class Targets, Best Practices, Competency Network, Innovation, and Organizational Structure backed up by a robust audit system that spawns a healthy competition and sharing toward the ideal state of manufacturing.

To conclude this brief overview of the Operational Excellence, my final recommendation is reminding readers of the key importance of team-working. Nowadays, competition sets a fierce playground for firms, which must face very complex business problems to be successful. Complex problems require very skilled individuals with complementary specialties that must work in the same team. Thus, working together in a collaborative environment is the most important aptitude within a winning organization. And to achieve this condition, the leaders must be aware that their role of the social architects to build this aptitude within a company is one of the keys to flawlessly executing a brilliant strategy.