Protocolmag_julyaugust2011.pdf

Risk, and in the context of manufacturing or opinions are a function of fundamental plants, operational risk exposure, increases increases. The presence of operational risk becomes evident through variance The need therefore exists to integrate ele- ments of cognitive science, data visualisa- parameters such as production rate, qual- tion and system improvement. Operational ity, variable operating cost and the inability to consistently comply with environmental through experiential learning. The latter regulations. The latter is not reflected in implies that people make use of feedback financial statements, although it has major Dr Kobus van der Merwe
implications for current and future / pro- however, represents a condition where feedback information is received out of The need therefore exists to quantify the context. This implies that it is not possible conditions under which the current operat- to reliably relate actions and conditions to Dr. Kobus van der Merwe
Industrial Management
to provide insight into aspects that can Enhancement
improve future financial performance. Vari- Experiential learning does not only explain What value does Operational Variance new insight and understanding are gained. Management add to the management of It is common to find people with different processes and manufacturing companies? • Trusted responsibility of management to levels of experience and opinions within How does it contribute towards growing the the production environment. Interpretation economic value of a company? Dr. Kobus of observations therefore differ which in van der Merwe of Industrial Management • Potential value that can be realised by developing operational staff’s insight and understanding with regard to their Historically, shareholder wealth is believed formance variance which, by implication, to improve with growth in annual earnings results in unpredictable performance. This per share and through increases in return • The need “to do the right things right”. on equity. Earnings do not reflect changes plants as record performances are logged in risk and inflation, nor do they account for Symptoms
on an ad hoc basis, followed by variable the cost of additional capital required for and / or poor performance. In other words, there’s a general inability to repeat good The value of companies’ shares will only facturing conditions that delivered good increase if management can earn a rate of performance provides an overall indication return on new investments greater than the of efficiency, although this measurement exist. This results in decision-making that is rate investors expect to earn by investing in method lags the real-time decision-making alternative, equally risky companies.
process. In other words, this reporting provides feedback on the financial impact of historical plant events, conditions and tify gaps within existing business process- es and procedures, quantifying the impact Lagging performance indicators creates an of the latter and facilitating the develop- governed or influenced by the efficiency of environment in which inconsistent mental ment of mitigating actions to address inef- ficiencies. A structured process is followed Operational Variance Management
challenging orthodoxies, aligning mental and to devise solutions that eliminate or facilitating the development of innovative solutions to sweat existing assets, systems • Develop people’s knowledge of the plant process to increase the probability of good view (i.e. facilitate experiential training).
Addressing challenges
that the system remains within a defined Interpretation of conditions, events and existing infrastructure – the reasoning is state (e.g. 45% in an ideal state, 15% in a transition state and 40% in an unstable actions. Interpretation is a function of achieved by utilising existing infrastruc- state). This information is also used to determine whether the ‘ideal state’ is sus- tainable or not. In the context of operational edge is biased by opinions. Consequently, by default, eliminate inefficiencies. First it is common to find that individuals A and sents the conditions where the chance of B will differ in their interpretation of the losses are minimised while minimising the sion regarding decisions and actions. By Iteration - PSMs validate mental models
implication, incorrect evaluation of condi- Operational Variance
and provide insight into system character- tions increases the operation’s exposure Management
istics. Feedback provided via the PSMs es- to potential losses as incorrect actions tablishes a platform to update and improve information contained in the Performance plines of a learning organisation as defined Driver Matrix. By implication this activity by Senge [1]: Systemic thinking, aligning facilitates team and experiential learning, mated, operational personnel’s interpreta- mental models, innovation, vision and team systemic thinking, innovation and creates a tion and actions play a significant role in learning. This is achieved by executing the vision of potential system performance.
plant performance. It is for this reason that performance indicators are utilised to Initiatives - Initiatives are launched to
Performance Driver Matrix - captur-
exposure to issues, events and conditions defines the spectrum of aspects on which that can result in losses. These initiatives ments can also influence people behaviour are diverse and aren’t bound to any spe- tion is contained in a database which is cific technology. In other words, once the also serves as a record of experience and ments aren’t aligned with overall goals knowledge. Information contained in this understood, it is possible to mitigate or and objectives. Consequently, people act database serves as a training aid and is resolve them through appropriate improve- and perform within silos (i.e. per discipline and per production unit within the process stream). The challenges to be addressed Process Status Maps – identification and
Performance Monitoring - Process Sta-
to visualise different process conditions. ing the time that the system remains within PSMs therefore establish the link between process states and performance metrics – it is possible to identify the factors that in other words, PSMs establishes the link Figure 1 illustrates the three primary ele- Figure 1 - Structured OVM methodology
Benefi ts
derstanding of risk and its implications insight into an organisation’s operational • Cultural change, helping operational • A mechanism to place front line respon- sibility for operational risk management ded at all levels of the organisation, with respect to both day-to-day activities and longer term business decision-making.
[1] Senge, P., et al., The Fifth Discipline Fieldbook1994, London: Nicholas Brealey • Clear and specific ownership of action plans;

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