Globalization Demands Focus on Increased Operational Effectiveness

By John Doherty

As engineering and construction firms continue to expand globally, their need to manage costs at all levels of project delivery becomes increasingly important.  One of the key ways of managing costs is by putting in place a program that promotes continuous improvement in operational effectiveness, an approach that a majority of the industry’s companies are interested in adopting. 

PwC’s 2013 E&C CEO survey revealed more than half (53 percent) of CEOs indicated a focus on improving operational effectiveness. To be successful, operational effectiveness programs should have process, functional and talent management dimensions. From a process perspective, each step, from opportunity identification through turnover, needs to be assessed for opportunities to reduce time and move decisions to the lowest possible level consistent with appropriate review. Opportunities for reducing time can be as simple as making the operational manuals and sporting checklist accessible to the project manager through tablets.  Some  firms also have approval processes in place that require senior management involvement in all steps in the process, where, in fact, the decisions could easily be handled by less senior management as long as a well-structured and approved delegation of authority matrix and governance process is in place.

Processes effectiveness is not only about the efficient execution of the project. It is also about having a standard model for project management across regions and countries. With this approach, staff can be readily transferred across regions to meet client demands without the need for significant retraining. Functional excellence is also key.  Each functional department − purchasing, cost accounting, IT and HR − needs to look closely at the department processes as they intersect the delivery of a project and ensure the operational level of excellence supports the goals being set by the delivery team. For example, a purchasing department that takes weeks to respond to a request for a new subcontractor can significantly impact a project’s success.

Many companies are exploring models where the purchasing staff, while still owned by the corporate function, are deployed on the projects.  This model can help ensure the corporate policies and procedures are maintained while supporting the need for rapid response at the project level. Talent management is another area where a focus on providing operational excellence can significantly impact delivery. This is particularly true when sourcing staff from external agencies. A talent management function should have a disciplined approach to capturing not only current but projected needs and proactively translating these into a steady pipeline of new candidates from regions where the skills are well developed. In summary, globalization is driving a need for operational excellence at the process, functional and talent management levels.  Companies that do not focus on operational excellence are likely to have significant challenges meeting their profit and revenue targets as they expand into international markets.

John Doherty is PwC’s U.S. engineering and construction advisory leader. He has more than 35 years of experience in industry and expertise in the areas of strategic planning, large capital program management, project risk assessment, project bidding, buyout optimization, project execution improvement, supply chain management, strategic planning and IT management, and application implementation.

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