Chapter 2 Operations Performance
Why is operations performance vital in any organization?
It is no exaggeration to view operations management as being able either to ‘make or break’ any
business – not just because the operations function is large and, in most businesses, represents the
bulk of its assets and the majority of its people, but because the operations function gives the power
to compete by providing the ability to respond to customers and by developing the capabilities that
will keep it ahead of its competitors in the future. But when things go wrong in operations, the
reputational damage can last for years.
When operations do go wrong it can be very obvious (look at the news). One could argue that
‘keeping the show on the road’ rather than exploring chances for improvement is also a failure.
However, do not think that operations management is just about avoiding failure; its contribution to
an organization’s overall success is far greater than that. Operations management can ‘make’ the
organization in several ways:
1. Operations management is concerned with doing things better.
2. Through the continual learning that can come from its improvement activities, operations
management can build the ‘difficult to imitate’ capabilities that can have a significant
strategic impact.
3. Operations management is very much concerned with ‘process’, with how things are done.
And there is a relationship between process and outcome. Good operations management is
the best way to produce good products and services.
How do operations managers try to be, simultaneously, economically viable while being socially and
environmentally responsible? This is why we start our treatment of operations performance at the
‘societal’ level, looking at the ‘triple bottom line’.
Performance at three levels
‘Performance’ is not a straightforward or simple concept. First, it is multi-faceted in the sense that a
single measure can never fully communicate the success, or otherwise, of something as complex as
an operation. Second, performance can be assessed at different levels, from the broad, long-term,
societal level of environmental monitoring, for example, to its more operational-level concerns over
how it improves day-to-day efficiency, or how it serves its individual customers.
Operations can judge its performance at three levels:
1. The broad, societal level, using the idea of the ‘triple bottom line’.
2. The strategic level of how an operation can contribute to the organization’s overall strategy.
3. The operational level, using the five operations ‘performance objectives’.
, How is operations performance judged at a societal level?
The decisions that are made within any operation and the way it goes about its day-to-day activities
will affect a whole variety of ‘stakeholders’.
Stakeholders: the people and groups who have a legitimate interest in the operation’s
activities.
There are internal (the operation’s employees) and external (customers) stakeholders. Some
external stakeholders have a direct commercial relationship with the organization. In non-for-profit
operations, these stakeholder groups can overlap. However, in any kind of organization, it is a
responsibility of the operations function to understand the (sometimes conflicting) objectives of its
stakeholders and set its objectives accordingly.
Why is operations performance vital in any organization?
It is no exaggeration to view operations management as being able either to ‘make or break’ any
business – not just because the operations function is large and, in most businesses, represents the
bulk of its assets and the majority of its people, but because the operations function gives the power
to compete by providing the ability to respond to customers and by developing the capabilities that
will keep it ahead of its competitors in the future. But when things go wrong in operations, the
reputational damage can last for years.
When operations do go wrong it can be very obvious (look at the news). One could argue that
‘keeping the show on the road’ rather than exploring chances for improvement is also a failure.
However, do not think that operations management is just about avoiding failure; its contribution to
an organization’s overall success is far greater than that. Operations management can ‘make’ the
organization in several ways:
1. Operations management is concerned with doing things better.
2. Through the continual learning that can come from its improvement activities, operations
management can build the ‘difficult to imitate’ capabilities that can have a significant
strategic impact.
3. Operations management is very much concerned with ‘process’, with how things are done.
And there is a relationship between process and outcome. Good operations management is
the best way to produce good products and services.
How do operations managers try to be, simultaneously, economically viable while being socially and
environmentally responsible? This is why we start our treatment of operations performance at the
‘societal’ level, looking at the ‘triple bottom line’.
Performance at three levels
‘Performance’ is not a straightforward or simple concept. First, it is multi-faceted in the sense that a
single measure can never fully communicate the success, or otherwise, of something as complex as
an operation. Second, performance can be assessed at different levels, from the broad, long-term,
societal level of environmental monitoring, for example, to its more operational-level concerns over
how it improves day-to-day efficiency, or how it serves its individual customers.
Operations can judge its performance at three levels:
1. The broad, societal level, using the idea of the ‘triple bottom line’.
2. The strategic level of how an operation can contribute to the organization’s overall strategy.
3. The operational level, using the five operations ‘performance objectives’.
, How is operations performance judged at a societal level?
The decisions that are made within any operation and the way it goes about its day-to-day activities
will affect a whole variety of ‘stakeholders’.
Stakeholders: the people and groups who have a legitimate interest in the operation’s
activities.
There are internal (the operation’s employees) and external (customers) stakeholders. Some
external stakeholders have a direct commercial relationship with the organization. In non-for-profit
operations, these stakeholder groups can overlap. However, in any kind of organization, it is a
responsibility of the operations function to understand the (sometimes conflicting) objectives of its
stakeholders and set its objectives accordingly.
