Directors of Operations have a tough job. There’s a lot to juggle – from ensuring that individual projects are delivered to deadline, scope, and budget, to keeping clients, stakeholders, and staff happy. That’s as well as ensuring that every single element is optimized to make individual projects and the whole business more profitable and efficient.
That’s difficult at the best of times, but in a post-pandemic world, it’s even harder. Trying to forecast and balance resources when clients aren’t sure if projects are going ahead and budgets are in flux means the goalposts are constantly moving. And internally, remote work means visibility over employee utilization and productivity is limited. Moreover, the margins for error are slim: many service businesses have taken a financial hit over the last 18 months, and as the world starts to open up again, there’s a more urgent need for growth and profitability than ever.
Retaining a solid competitive position requires an equally solid operational strategy – one that’s adapted to ‘the new normal.’ During the pandemic, service businesses were forced to pivot, bringing in new tools and processes to help them work better. With the landscape changing again, it’s a good time for Directors of Operations to reflect, re-strategize, and take critical learnings forward. But with so much to manage and when so much has changed, where do you start?
What is an operational strategy?
Put simply, an operational strategy maps out how you’ll put your internal resources (people, money, and time) to best use to deliver against high-level business goals.
Those goals can vary from business to business, and it’s essential to decide, communicate and get whole-company alignment about what’s most appropriate for you. For Directors of Operations at service businesses, among the most important is profitability – essentially, your revenues minus your costs.
But achieving profitability goals isn’t a one-and-done job, and it won’t happen overnight. In order to increase profitability at the top level, Directors of Operations need to build a strategy that increases efficiency within projects, between teams, and across every level of the business.
With a good operational strategy in place, you’ll have a clear view of what’s coming up and how you’re going to deliver it – as well as the confidence that you’ll be able to deliver it efficiently, to a high standard, and with a happy team.
What should an operational strategy include?
There’s a lot to think about. When starting to build out a strategy, Directors of Operations should consider five key areas: goals, resources, available skills; processes; technology, and reporting.
Fail to set the right goals at the outset, and the rest will fall apart. Everyone across the business should be pulling towards the same high-level goal and understand their role in reaching it. It’s critical to communicate it well and ensure that every level of the business can set appropriate goals at their level to feed up to it.
- Have you set the right business goal?
- Has it been transparently communicated, and is everyone aligned around it?
- Has each level of the business established its own sub-set of goals?
- Do employees understand the part they play and what good looks like?
Resources and available skills
Once you’ve worked out where you’re headed, it’s time to figure out what tools you already have at your disposal to get you there – as well as which are missing. Whether that’s time, skillsets, money, or other assets, figuring out the gaps will give you an idea of what’s achievable.
- Are business targets realistic with your current resources?
- Do you have the right people in place for upcoming projects?
- If not, do you need to hire more staff to cover projects?
- Are your current employees being under or over-utilized?
Growth businesses need processes to succeed and scale. Streamlining and standardizing work can free up time and ensure you get more mileage out of the resources you have. In addition, optimizing processes at the micro-level can drive significant results at the macro level.
- Have you embedded ways of working at the point of onboarding?
- Are there processes that could be automated?
- Is there coaching in place to help employees work more efficiently?
Likewise, technology can help accelerate processes and enable employees to work smarter, faster, and more efficiently. With the right technology and tools in place, Directors of Operations can drastically improve their visibility and control, helping keep work on track.
- Do your tools give you enough visibility over business-wide projects?
- Do your tools enable you to flex your resources up and down as projects change?
- Are the technology and tools you have driving maximum ROI?
A good operational strategy not only gives you the means to succeed but to look for improvements, take learnings forward and foster a process of continuous improvement. To start that flywheel turning, you need to benchmark, track and report on the business metrics that matter.
- Have you got visibility over targets at every level of the business?
- Have you got the data you need to measure success?
- Can you quickly surface data to generate relevant, actionable reports?
What are the challenges when building an operational strategy?
Even with a clear view of what an operational strategy should include, it can still be difficult for Directors of Operations to put it into action effectively. Several common challenges can stand in the way of strategic success.
Directors of Operations are sometimes given unrealistic deadlines and expected to “figure something out”. Similarly, last-minute requests and changes to scope from clients can knock timelines out, impacting other projects and, ultimately, profitability.
And then there are process issues. With so many variables to manage, Directors of Operations can find themselves wasting a lot of time on repetitive manual admin instead of high-value work. Constantly nagging project leads for progress updates means spending too much time collecting data to report upwards or meaningfully action it. And that’s assuming they can get hold of the correct data in the first place. Poor task estimation from project teams can make forecasting unreliable, and lack of engagement with data collection (like timesheets, for instance) only exacerbates the problem.
7 ways to improve your operational strategy
But it’s not all bad news. There are seven actions Directors of Operations can take to overcome these challenges, improve their operations strategy and deliver business growth.
1. Reduce administrative work
Look for ways to automate repetitive tasks, like cost and budget estimations. Make it easy for employees to share timesheet data to forecast utilization more accurately and easily ensure you have the right resources in place to hit targets.
2. Manage resources intelligently
Before you take on new projects, get a reasonable estimate of the resources they’ll require so you can assess their profitability. Next, think critically about whether you have the right staff and skills in place and if not, consider revising your hiring plan. From there, you can start to assign workload across the resources you have – but ensure there’s flexibility built into your plan, so you can pivot when change requests arise. In service businesses, they almost certainly will. Get started with resource management with our guide here.
3. Monitor utilization rates
One of the most important success metrics for Directors of Operations to measure is staff costs to revenue percentage. To understand this, you need visibility over not just who is assigned to each project, but how much of their time it’s using. For example, you may find you have staff who are underutilized and could be put to work on more projects. Or there might be those who over-utilized, eating into your profitability margins.
4. Balance workloads
Understanding your utilization rate makes it much easier to forecast and balance workload across your talent pool. This not only maximizes resource efficiency but also makes for happier staff and better team culture. Ultimately, happy employees are more productive employees.
5. Streamline operations
Centralizing financial and project management in one platform creates a single source of truth for operational excellence. It prevents the issues that can arise with data entry, miscommunication, and manual work when toggling between different, disjointed tools. Getting a helicopter view also enables you to see if and how much more work you can accept, as well as look for quick ways to maximize efficiency on individual projects.
6. Surface operational data
Centralizing operations gets critical data out of silos and makes it easier to understand, report against, and action. You should look to gather not just historical but real-time and future operational data. That way, you’ll be able to understand holistically how your business is performing and where there are gaps in plans vs. actuals.
7. Invest in tech
This can seem like a daunting list, but it doesn’t have to be. PSAs like Forecast makes it easier to manage projects, resources, and finances. Forecast automates busywork, surfaces best practices, predicts outcomes, guides projects to success, and most importantly, empowers every team member to do their best work.
Now that the economy has started to bounce back, businesses across all industries are rethinking and reevaluating their operational strategies. As we enter a new era of business, there’s tremendous opportunity for savvy Directors of Operations to transform their departments into well-oiled machines. Download our ebook on operational excellence to learn how: