United States African Development Foundation

Business Plan Development:

Managing Operations for Growth
March 13, 2007
FastTrac® GrowthVentureTM Modules
 Agenda

1
6
Operations
MIS
Management

2
5
Competitive
6 Sigma
Advantage

3
4
Process
Systems
Flow
Operations 1
 Key Operational Questions

• What are the operational systems needed to

support my business now and as it grows?
• How will I measure success?
• What performance standards and controls will I
use to ensure success?
 The Operational Goal

• of operations are systems and processes that keep

information moving through the business and provide
structure for those doing the work.
• Operations are the things you and your team do on a daily
basis to make your business run.
• Operations implement the strategy and planning that
supports business growth and development.
• The goal is to make the business work so smoothly that you
can spend very little time on daily issues and can work more
strategically on the business.
• Not the same as an operations manual!
• Should support the strategy.
 Operational Plan: What to do?

• Assess current operations effectiveness and efficiency

• Standardize
• Measure
(Beware: You get what you measure!)
Focus on:
• Systems
• Processes
• Procedures
• Policies
• Standards
Competitive Advantage
 Core Competence

Can the way you manage operations

become a core competence and provide your
organization with a competitive advantage?
 Core Competencies
Example

Proctor & Gamble: Superb marketing-distribution

skills and R&D capabilities in five core technologies -
fats, oils, skin chemistry, surfactants, emulsifiers
 Core Operational Competence:
An African Example

• Example
¾ZZ2 – Fresh tomato producer
¾Largest producer in Southern hemisphere
¾Yield up to 140 ton Ha
¾Compete on quality fruit and shelf life
¾Process: picking, handling, transport, cold chain, hygiene,
packaging, distribution.
¾Increase shelf life at room temperature from 1 week to 3 months
¾Price premium of 30 – 50%
¾Truck life expectancy 4,000,000 miles
Organization Structure
 Impact of Structure on Processes,
Teamwork, Knowledge Dissemination 1

Traditional Functional CEO

Structure

Marketing &
Operations Finance HR IT Administration
Sales

Shortcomings:
• Silos
• Isolation
• Teamwork constricted to functionality
• Lack of cross fertilization
• Poor inter departmental communication
• Little sense of internal customer orientation
 Impact of Structure on Processes,
Teamwork, Knowledge Dissemination 1

Core Activities
Customer
Purchasing
Acquisition Survey & Project
Customer &
& Design Execution
Logistics
Retention

Support Functions
Finance HR IT Administration

Value added: Workflow made easy

• Cross functional teams • Alignment with strategy
• Knowledge dissemination made easier.
• Richer and more fulfilling work environment • Systems flows have logic
• All knew what was happening in a particular project • People development
• Improved (internal) service levels • Management depth
Process Flow Improvement
 Workflow Improvement
Conceptual workflow

• Live document workflow

• Critique workflow (Everybody involved)

• Refine workflow

• Re-design source documentation

• Obtain consensus

• Implementation
 Standard Times, Forward Planning, Master Scheduling to
Improve Efficiency and Effectiveness

• Standard time defined: It is a realistic estimate of the

time that it takes a person to complete a task (e.g.,
digging a hole).
• Need to make several observations.
• Do not use the average time.
• Man hours required to complete specific volume of work
can be calculated and thus manning levels can be
estimated.
• To reduce cycle time you need to increase manning
levels.
• Used primarily for planning and controlling costs – once
established.
 Observations to Establish Standard Times

Mean

No. of
Observations

50% 50%

10 12 14 16 18 20 22 24 26 28 30
Time in Minutes

Continuous improvement will shift standard to the left

 Process / Line Capacity Balancing

• Ensuring all stages of a process can process the same amount

of work (i.e. has the same capacity).
• Example:

Packaging no
Dicer 1 ton ph 1 x dryer 200Kg constraint
Blancher 1 ton ph in 16 hours

What is the maximum production

Capacity?

Boiler can heat 4 dryers

Systems
 Systems: A Definition

A system is “the way in which things are

done to ensure predictability, efficiency,
control, effectiveness, and accountability.”

In the absence of any systems there is chaos.

A System Example: Meter Reading in Nigeria

An Example of Sequencing

Boston Extension
Hyatt Avenue
Olive Road

Admiralty Road

X
Starting ROUTE
Point
Every following consumption point will be printed on the bill in exactly
The same order as the marketer does his readings / deliveries.
Systems Elements
6 Sigma
 Customers

Being concerned about what your

manager wants is a fact of life in
business!

In high performance
organisations,
what the manager wants is…
To make CUSTOMERS HAPPY!
 Five Laws of Six Sigma
1. Customers are important.
2. Speed, quality and low cost are linked.
3. You need to eliminate variation and
defects, focus on process flow, if you want
to deliver quality, speed and low cost.
4. Data is critical to making sound business
decisions.
5. Teamwork is essential for making the
kinds of improvements that customers will
notice.
 Six Sigma

Delight Improve
Customers Processes

TEAMWORK

VARIATIONS & DEFECTS

PROCESS FLOW
QUALITY

SPEED

DATA AND FACTS

 Quality Defined
• Hotel industry
– 5 star hotel
- Low-priced motel, close to the highway
• Motor vehicles
– Mercedes
– Small car light on fuel, easy to park
• Manufacturing
- Goods delivered in small batches twice
per week
- Meet narrow specifications
 Lessons From 6 Sigma

“… only customers can

define quality!”

“The biggest obstacle is to develop

the awareness that any decision
about a service or product should
start from the CUSTOMER…”
 Customers & 6 Sigma Goals

• Goal: Eliminate anything that does not

meet the customer’s needs!
• Defects = Things that do not meet
customer needs.
 Table Exercise

1. Give examples of how SPEED, QUALITY, and LOW

COST are linked.
2. Identify areas where variation and defect can be
reduced and processes can be improved in USADF or
partner organization.
3. Identify the top five sources of data that need to be
monitored to improve the quality of business decisions
in partner organizations.
4. Identify the areas for improved teamwork that will lead
to improvements that customers will notice.
Management Information
The Single Predictor of Success
Charles Garfield
 MIS MANAGEMENT MODEL
Key performance measures assigned to people!

ACTION

REVIEW

MIS
KPAs
KPIs
 Key Performance Areas and
Key Performance Indicators

• Linked to the VALUE that a position should add

to an organization.
• 3-5 key OUTPUTS expected of position.
• Outputs UNIQUE.
• MEASUREMENT is integral to KPAs.
• Measure performance against GOAL.
• Measurements exceed NUMBER of KPAs.
• Not all KPIs measured with same FREQUENCY.
 USE and IMPACT OF
KPAs and KPIs
Order
Roles
Promotion
Clarified

Disciplinary
Process Accountability/
KPAs Responsibility
KPIs
Team
Development Management
Information
Training &
Development Performance
Management
 Example of KPAs and KPIs

Position: Accountant

Done By: Date: 25 January 2006

Key Performance Area What Measured How Measured? Freq. Target
Ensure effective fund utilization Funds received Value
Funds disbursed Value W
Funds retired Value W
Cost over runs No. & Value W
Fund collection + deposit No. & Value W
Communication on fund collection Copies forwarded W
Ensure effective stock management Stock Holding Value Plan/Actual M 100%
Stock issuing Value Plan/Actual W
Redundant Stock Value Plan/Actual M
Wrong spec stock value Plan/Actual W
Improve systems and controls Process improvement Plan/Actual W
No. of skills/knowledge Plan/Actual W
evaluations
Train financial skills No. of training sessions Plan/Actual W
No. of trainees Plan/Actual W
Manage KPA's of subordinates KPI's MIS W
 Example of a Position’s MIS Document

WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5 MONTHLY

No. Key Performance Indicators Plan Actual Plan Actual Plan Actual Plan Actual Plan Actual Plan Actual

FINANCE
1 Total Petty Cash on Hand by week close (Sat)

3 - Port Harcourt

4 - Ughelli

6 - Asaba

7 - Telecommunications

8 Total Disbursement for the Week

9 - Engineering & Project Execution

10 - Project Acquisition

11 - Logistics

12 - Finance

13 - Administration (Head Office)

14 - Ughelli

15 - Asaba

16 - Telecommunications

17 Value of Issued Cheques

How Often Should You Measure Performance?
Principle of Short Interval Control

How Often Should Performance be

Measured? Plan
Performance

Deviation
ti on
d uc
tP
ro Actual
s
Lo Performance

Control Point
Time
 MIS Flow

Managing Director

Action Plan
Weekly
Company
Document
Performance + Generated In COO
Report Review Meeting

COO Weekly Review

Project Acquisition Project Implementation Finance Logistics & Asset Management

HOD HOD’s HOD HOD

HOD Action Plan HOD HOD Action Plan HOD

Action Plan Action Plan
Weekly/ Document Weekly/ Weekly/ Document Weekly/
Document Document
Monthly From HOD Monthly Monthly From HOD Monthly
From HOD From HOD
Performance Review Performance Performance Review Performance
Review Review
Report Meeting Report Report Meeting Report Meeting
Meeting
 Management Information Flow

Less Detail
MIS dependent on info
TEAM A from B,C,D,E,F,G

MIS dependent on
TEAM TEAM info from F,G
B C

Plenty TEAM TEAM TEAM TEAM

Detail D E F G
RECORDING CONTENT OF REVIEW
MEETINGS

Challenge Action Who When

Sales targets not 1. Establish sales targets per area, MB 22-5
met. per supervisor, per sales person.
2. Implement systems and review JW 31-5
meetings at all levels.
3. Report weekly progress against JW 31-5
targets.
 Table Exercise

• Prepare the KPAs and KPIs for the following positions:

- Business development officer
- CEO of a partner organization
- Country representative
- Consultant at a partner organization

• Use the document provided on the last page of the hand out.