Performance Optimisation in the Hospitality Industry

Performance Optimisation in the Hospitality Industry

Benchmarking

What is Benchmarking

• Benchmarking is an improvement process that is used to identify best practice within a peer group and facilitate it’s incorporation into your organisation.

Why best practice

• Best practice refers to techniques, methods or processes that are more effective at delivering a desired outcome.

• Incorporating best practice into your organization can lead to greater efficiency and effectiveness and a happier customer.

Benefits of Benchmarking

• Benchmarking helps identify the gaps between the organisation that is undertaking the benchmarking assessment and best practice.

• Undertaking benchmarking can lead to improvements being incorporated into processes and systems delivering gains in efficiency and effectiveness

• Benchmarking can help align improvement activity with strategic goals and objectives

The Benchmarking process• Benchmarking has a defined process

1. Identify the process that will be benchmarked – consider what metrics will be measured

2. Measure results in own organization3. Identify a benchmarking partner (look for one with favourable

results or to the metric being measured or known best practice)4. Measure the process5. Analyse the conditions that determine the favourable results6. Determine an action plan to take your organisation to the favourable

results7. Review Benchmarking results and conduct regular reviews with your

peer(s).

Problems with Benchmarking• Problems with benchmarking occur where– Data is not obtained for the process being measured – and

analysis becomes subjective– No peer group/best practice identified (including data

available)– The gap between current state and best practice is

captured but nothing is done about it– Assumed best practice isn't best practice– Benchmarking happens as a one off event and not

reviewed periodically

The importance of data

• In order to measure the gap between the measuring organization and best practice quantifiable measures need to be taken

• This requires data• Unless this method is followed results can be

subjective and inaccurate• Follow on improvement activity can have

negligible impact

Using your Peer-group

• Benchmarking relies on a partner organization or “peers” which will be measured against.

• Peers could be a different group in the same organisation (e.g two purchasing departments in a multinational organisation) or a completely separate company

• The importance is measuring your performance against another “peer” with a different standard

Benchmarking doesn’t stop

• Benchmarking should be viewed as a continuous improvement method

• Regular reviews of performance should be taken especially if improvement activity is underway to transition to “best practice”

• Regular reviews of the peer group should be taken to cater for any changes/improvement made


Business Process Re-engineering

Learning Objectives

• Understand and be able to implement a BPR Strategy

• Understand the main challenges in implementing a BPR Strategy

BPR & The Organisation

What is BPR?

• Reengineering is the fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.

(Hammer & Champy, 1993)

BPR is Not?

• Automation• Downsizing• Outsourcing

BPR Versus Process Simplification

Process Reengineering

Radical TransformationVision-Led

Change Attitudes & BehaviorsDirector-Led

Limited Number of Initiatives

Process Simplification

Incremental ChangeProcess-Led

Assume Attitudes & BehavoursManagement-Led

Various Simultaneous Projects

(Source Coulson-Thomas, 1992)

BPR Versus Continuous Improvement

Process Reengineering

Radical TransformationPeople & Technology Focus

High InvestmentRebuild

Champion Driven

Continuous Improvement

Incremental ChangePeople Focus

Low InvestmentImprove ExistingWork Unit Driven

What is a Process?

• A specific ordering of work activities across time and space, with a beginning, an end, and clearly identified inputs and outputs: a structure for action.

(Davenport, 1993)

What is a Business Process?

• A group of logically related tasks that use the firm's resources to provide customer-oriented results in support of the organisation's objectives

Why Reengineer?

• Customers– Demanding– Sophistication– Changing Needs

• Competition– Local– Global

Why Reengineer?

• Change– Technology– Customer Preferences

Why Organisations Don’t Reengineer?

Why Organisations Don’t Reengineer?

• Complacency

• Political Resistance

• New Developments

• Fear of Unknown and Failure

Performance

• BPR seeks improvements of

– Cost– Quality– Service– Speed

Origins

• Scientific Management. FW Taylor (1856-1915).

• Frederick Herzberg - Job Enrichment • Deming et al - Total Quality Management and

Kaizen • In Search of Excellence (Peters and Waterman) • Value-Added Analysis (Porter).

Key Characteristics

• Systems Philosophy • Global Perspective on Business Processes • Radical Improvement• Integrated Change• People Centred• Focus on End-Customers• Process-Based

TransformationInputs Outputs

Feedback

Environment

Systems Perspective

Process Based

• Added Value– BPR Initiatives must add-value over and above the

existing process

• Customer-Led – BPR Initiatives must meet the needs of the

customer

Radical Improvement

• Sustainable– Process improvements need to become firmly

rooted within the organization

• Stepped Approach– Process improvements will not happen over night

they need to be gradually introduced– Also assists the acceptance by staff of the change

Integrated Change

• Viable Solutions– Process improvements must be viable and

practical

• Balanced Improvements– Process improvements must be realistic

People-Centred

• Business Understanding• Empowerment & Participation• Organizational Culture

Focus on End-Customers

• Process improvements must relate to the needs of the organization and be relevant to the end-customers to which they are designed to serve

Implementing a BPR Strategy

Key Steps

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan

Select the Process & Appoint Process Team

• Two Crucial Tasks

– Select The Process to be Reengineered

– Appoint the Process Team to Lead the Reengineering Initiative

Select the Process

• Review Business Strategy and Customer Requirements

• Select Core Processes

• Understand Customer Needs

• Don’t Assume Anything

Select the Process

• Select Correct Path for Change

• Remember Assumptions can Hide Failures

• Competition and Choice to Go Elsewhere

• Ask - Questionnaires, Meetings, Focus Groups

Appoint the Process Team

• Appoint BPR Champion

• Identify Process Owners

• Establish Executive Improvement Team

• Provide Training to Executive Team

Core Skills Required

• Capacity to view the organization as a whole

• Ability to focus on end-customers

• Ability to challenge fundamental assumptions

• Courage to deliver and venture into unknown areas

Core Skills Required

• Ability to assume individual and collective responsibility

• Employ ‘Bridge Builders’

Use of Consultants

• Used to generate internal capacity• Appropriate when a implementation is needed

quickly• Ensure that adequate consultation is sought

from staff so that the initiative is organization-led and not consultant-driven

• Control should never be handed over to the consultant

Understand the Current Process

• Develop a Process Overview• Clearly define the process – Mission– Scope– Boundaries

• Set business and customer measurements • Understand customers expectations from the process

(staff including process team)


• Clearly Identify Improvement Opportunities–Quality–Rework

• Document the Process–Cost– Time –Value Data


• Carefully resolve any inconsistencies– Existing -- New Process– Ideal -- Realistic Process

Develop & Communicate Vision of Improved Process

• Communicate with all employees so that they are aware of the vision of the future

• Always provide information on the progress of the BPR initiative - good and bad.

• Demonstrate assurance that the BPR initiative is both necessary and properly managed

Develop & Communicate Vision of Improved Process

• Promote individual development by indicating options that are available

• Indicate actions required and those responsible

• Tackle any actions that need resolution

• Direct communication to reinforce new patterns of desired behavior


• Develop an Improvement Plan

• Appoint Process Owners

• Simplify the Process to Reduce Process Time

• Remove any Bureaucracy that may hinder implementation


• Remove no-value-added activities

• Standardize Process and Automate Where Possible

• Up-grade Equipment

• Plan/schedule the changes


• Construct in-house metrics and targets

• Introduce and firmly establish a feedback system

• Audit, Audit, Audit

Execute Plan

• Qualify/certify the process• Perform periodic qualification reviews• Define and eliminate process problems• Evaluate the change impact on the business

and on customers• Benchmark the process• Provide advanced team training

Information Technology & BPR

Benefits From IT

• Assists the Implementation of Business Processes– Enables Product & Service Innovations– Improve Operational Efficiency– Coordinate Vendors &

Customers in the Process Chain

Computer Aided BPR (CABPR)

• Focus– Business Processes– Process Redesign– Process Implementation

BPR Challenges

Common Problems

• Process Simplification is Common - True BPR is Not

• Desire to Change Not Strong Enough• Start Point the Existing Process Not a Blank

Slate• Commitment to Existing Processes Too Strong– REMEMBER - “If it ain’t broke …”

• Quick Fix Approach

Common Problems with BPR

• Process under review too big or too small• Reliance on existing process too strong• The Costs of the Change Seem Too Large• BPR Isolated Activity not Aligned to the

Business Objectives• Allocation of Resources• Poor Timing and Planning• Keeping the Team and Organization on Target

Summary

• Don’t assume anything - remember BPR is fundamental rethinking of business processes

Summary• Reengineering is a fundamental rethinking and

redesign of business processes to achieve dramatic improvements

• BPR has emerged from key management traditions such as scientific management and systems thinking

• Rules and symbols play an integral part of all BPR initiatives


Quality Standards and Knowledge Management

Traditional approach

Tolerable error

Modern approach

Define Quality

Competition and the demands of customers are increasing which leads to …Demand for high quality goods and services.

This can be achieved through:• continuous improvement• Focus on the customer• emphasis on flexibility and qualityThis is the reason why quality and continuous improvement are

seen as the ways in which one can survive in increasingly competitive markets.

Quality-The Changing Business Conditions

• Quality has become a cardinal (main) priority for many organisations. This

reality has evolved through a number of changing business conditions: • Competition – it is not enough to have a “good quality image”. If the internal

costs of achieving that image are high (eg. inspection, scrap, rework), a company will lose sales.

• Changing customer – Eg. A manufacturer of tractors for individual farmers who starts producing machinery for car companies. The latter will be more demanding about the “quality system” used by the company. Eg McDonalds, Chips are made against certain specifications, length, width, size.

• Product complexity – As products have become more complex, the quality was required to improve

• Higher levels of customer expectation – Eg. in the case of a service, the customer expects an improved quality of service both before and after the sale.

Total Quality Management

• Quality must not only be seen as a competitive weapon it once was. It is now

expected as a given requirement and is considered an entry-level characteristic to the market place. Nowadays most organisations are transforming themselves in order to adopt a culture of total quality management (TQM). TQM is the mutual co-operation in an organisation and associated business processes to produce value-for-money products and services which meet and hopefully exceed the needs and expectations of customers.

Quality- Not an absolute requirement!

• It is wrong to assume that maximum quality is desirable.

• Should every computer system be held back until there is not one single flaw remaining?

Why is Quality Important?

Goodman et al. (2000), based on a range of studies carried

out, outline two arguments that are effective in selling quality to senior management.

• “First, quality and service improvements can be directly and logically linked to enhanced revenue within one’s own company, and secondly, higher quality allows companies to obtain higher margins.”

Why is Quality Important? Various quantitative evidence exists which suggests that quality is a

necessity in any organisation. Such evidence includes: • Dissatisfied customers tell an average of 10 other people about

their bad experience; 12 % will tell up to 20.• Up to 90% of dissatisfied customers will not buy from you again,

and they won’t tell you why.• It costs 5 times more money to attract a new customer than to

keep an existing one.

What is Quality?

• Quality can be qualitative defined• Quality can be quantitatively defined• Juran – “Fitness for use”• Crosby – “Conformance to requirements”• Deming – “A predictable degree of uniformity and

dependability at low cost and suited to the market.”• Satisfying customer expectations and understanding their

needs and future requirements

Quality can be qualitatively defined

When used in this way, it is usually in a non-technical situation. BS EN ISO 9000 (2000) says that ‘the term “quality” can be used with adjectives such as poor, good or excellent’. For example:

• In advertising slogans – Esso: “Quality at work”• Philips Whirpool: “Brings quality to life”• Ritter Sport: “Quality in a square”• By people, in general – Top quality, high quality, quality time, quality

product.

In such cases, the context in which the word quality is used is highly subjective and in its strictest sense is being misused.

Quality can be Quantitatively defined

• The traditional quantitative term which is still used in some situations is acceptable quality level (AQL). This is defined in BS4778 (1991) as: “When a continuing series of lots is considered, a quality level which for the purposes of sampling inspection is the limit of a satisfactory process”. Eg. 1 out of every 1000 is defective.


• An AQL is often imposed by a customer on its supplier in relation to a particular contract.

• In this type of situation the customer will inspect the incoming batch according to the appropriate sampling scheme.

• If more than the allowed number of defects is found in the sample the entire batch is returned to the supplier or the supplier can, at the request of the customer, sort out the conforming from non-conforming product on the customer’s site.


• Adopting an AQL can work against a ‘right first time’ mentality in the people working in the organisation, suggesting that errors are acceptable to the organisation. It is seen by many as being equal to planning for failure.

‘Fitness for use’

Joseph Juran, identified 5 dimensions of quality:• Design• Conformance• Availability• Safety• Field use


• Design: specifies what a product or service is and what it should do; it distinguishes a truck from a car.


• Conformance: reflects the match between design intent and actual product delivery. Conformance is directly impacted by process choice, input materials, work-force training and supervision, transitory environmental influences, and adherence to testing programs.


• Availability: encompasses aspects of reliability, maintainability, and durability; it reflects a product’s freedom from disruptive problems (i.e. the product is available for customer for use)


• Safety: examines risks to the user from product hazards that may be associated with one of the other dimensions.


• Field use: encompasses the other four dimensions, but with emphasis on use in the customer’s hands. Field sue is affected by packaging, transportation, storage, and field service competence and promptness.

‘Conformance to requirements’

Crosby – four absolutes of quality management:• Quality must be defined as conformance to requirements-not

just as a good thing to do;• The best way to ensure quality is prevention, not inspection;• The standard for quality must be zero defects, not ‘Close is

good enough’;• Quality is measured by non conformance, not indexes(Source: Philip B. Crosby’s Mark on Quality’

‘A predicable degree of uniformity’

Deming – “A predictable degree of uniformity and dependability at low cost and suited to the market.”

• Deming states that good quality was not necessary about excellence. Rather, it is about producing a product that was uniform and predicable, day to day and batch to batch, as well as being satisfactory from a customer’s perspective.

• He states; Cut out slogans and targets asking for zero defects and higher productivity. These only cause bitterness, as most of the reasons for low quality and low productivity are to do with the system, not the fault of the workforce.

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Performance Optimisation in the Hospitality Industry