Operational management principles and practices

Management Styles

Fool-proofing a service operation.

In the banking industry, a significant service industry in any country, optimized operations are essential to ensure that the public has maximum confidence in the operators of this industry. Bank of America and its operations have been selected for discussion in this study. The bank has grown tremendously in the past few years. CEO, Ken Lewis realized that the bank could gain a wider market share and customer base if it was able to streamline its operations and the level of service. Incorporating concepts of process management was considered essential to the improvement process. (Cox and Bossert, 2005) Some of the tools such as six-sigma were used to ensure that a high level of quality was maintained in the service that the provided to the customer.

Bank of America recognized that customer satisfaction was paramount in ensuring that the customer was loyal and would use the bank for all their financial needs. The company implemented the six-sigma methodology in 2001. Since then, it has observed a significant improvement in the quality of service that it provides the customer and this has reflected in the higher levels of customer satisfaction that has been observed. Unlike product and manufacturing operations, service operations are more difficult to manage and maintain with respect to quality. While many service-based products pride themselves on being "one-of-a-kind," many of the users of the services may expect some level of standardization and consistency in the service provided. Services are generally considered specialized. They require a great deal of knowledge and experience. Often, few similarities exist in the service industry even within the same business category or industry. (Peter and Donnelly, 2004)

Customers' needs in the financial industry differ significantly and extensive use of knowledge management is being considered to ensure that every customer gets the service that is best suited to his or her individual needs. Through customization, Bank of America has been able to ensure that customers get the best available service at any given time based on their individual needs. It is important that the quality of the services stays consistent over time and do not constantly change for no justifiable reason. Similarly, in a banking service, customers would like to conduct business with a bank whose mission and goals are parallel to their own. They also want to ensure that mission statements do not change drastically with time. By managing the quality control of the services that they provide the bank has been able to drop the number of defects across electronic channels by 88%.

Bank of America has been constantly growing through both internal methods as well as through mergers and acquisitions. Bank of America has a good record in managing mergers and acquisitions. (Stewart, 2005) They have been able to make transitions smoothly and allow customers to get acquainted with the different and sometimes varying policies of the bank. Bank of America's primary business is dealing serving retail customers. "The bank hopes to cross-sell other financial products like mortgages or home-equity lines" through the contacts that it has gained as a result of the MBNA deal that the company has made recently. (Creswell, 2005)

With markets getting smaller and more interlinked, many companies chose to acquire companies that they felt would help them expand and/or help gain capital for future expansion. This often however creates an issue of conflicting cultures and values within the merged operation. In the case of a bank these conflicting cultures and values can cause disruption in the processes and the way employees deal with the customers. As Bank of America's primary and significant customer base is retail banking with individual customers and small business owners' impressions of interactions of employees of the bank play a considerable role in shaping the perceptions and the satisfaction of services that customers experience.

Problems generally arise during any change. The adoption of new management methods, their implementation, changing past routines to suit the new methods of management is often a long and tedious process. (Morgan, 1997; Darnell, 1999) Any change that may be required to achieve the goals of the firm should again be clear -- the reasons for the change should not focused and comprehensible. Changes, whose final aim is not tangible or clear to the people on whom this change is implemented, create distrust and a sense of uncertainty. This affects productivity, and consequently, profitability. Maintaining the trust and respect of clients during change is critical as well. Bank of America has been working at maintaining high service levels during these changes. Bank of America, through its many mergers, has attempted to maintain as much normalcy as possible to its operations and services provided. (Talcott, 2005)

The bank has provided employees with all the necessary training and education to ensure that they are able to constantly ensure continuity of operations and provide customers will all the information and services. "Fool-proofing" is required in the initial stages to ensure that the employees make the decisions based on correct resources. There is an increased use of computerized databases for tracking and monitoring the type and nature of the services provided. By maintaining a centralized database, Bank of America has been able to track and monitor the changes that the customer makes and customize products for these needs. This centralized database is equipped to identify issues such as identity theft and fraud by comparing the past spending habits of the customer with the current spending habits of the customer. Over time, these databases have been able to reduce the errors and mistakes that customers have experience and made banking with the company a pleasant experience for the retail customers.

Successfully substituted workers for technology

While most companies have moved from replacing human workers with computers, there are relatively few that have tried computers and still persist with human workers. One of these examples is in the domain of biomedical research. In the eighties, with the development of computers, computer-speeds emboldened scientists to believe that computers could be used to process the spoken and written language. Computer scientists and linguists sought to parameterize language into processable units, such that computers could take the place of human communication. The cognitive component of human understanding and communication however, is far more evolved than can be handled by a computer. Steven Pinker in his popular "The Language Instinct" (Pinker, 1995) averred that a five-year-old could process language much better than the most modern computers. He declared that humans were several centuries from the development of a computer that will replace human communication skills.

Computers tried to process language using storehouses of the rules of grammar, linked with common dictionaries of terms. Heuristic (from previous experience) methods are then employed to process this information. Humans however, can cognate meaning from garbled words or even incorrect grammar. Teaching a computer to recognize all permutations of idiosyncrasies of personal styles of speech and writing is forbidding.

Wikipedia illustrates the problems with natural language processing, which is a branch of artificial intelligence, the same branch which includes the field of robotics, using the following two sentences: "We gave the monkey bananas because they were hungry" and "We gave the monkey bananas because they were overripe." The problems with recognition comes from the word "they." In the first case, "they" refers to the monkeys. In the second "they" refers to bananas. Experience allows humans to distinguish between the two senses of the word "they." But this kind of disambiguation is difficult for a computer. (http://en.wikipedia.org/wiki/Automatic_summarization)

The field of Artificial intelligence -- associated specifically with language -- can be divided into several parts: Text-to-speech, speech recognition, natural language generation, machine translation, question answering, information retrieval, information extraction, text-proofing, translation technology and automatic summarization. The use of computers to perform each of these tasks with even reasonable accuracy and precision has been deemed impossible.

The specific industry where this technology has been replaced by the human mind is in information management. Data-mining specific bits of data is not difficult for a database specialist. In databases are stored in specific areas in specific tables. These tables are then linked by relationships that are associated with the database architecture. These bits of information are retrieved and presented to an end-user. Researchers at the National Library Medicine, a subdivision of the National Institutes of Heath (http://www.ncbi.nlm.nih.gov/) have created a suite of state of the art software that gathers, collates and presents information freely to end users in the biomedical field. NLM has been the standard bearer of biomedical computing.

The one area of NLM's work where human input is preferred to technology is in the natural language processing of bio-medical research articles. This is a vast amount of literature, numbering in the tens of thousands of scientific articles published per day. In addition to the problems in processing written text mentioned previously, problems arise in creating domain-specific libraries and dictionaries of terms that belong to each field of the sciences. For example, a neuroscience dictionary is significantly different from a protein chemistry library. These are different from a library associated with medicinal chemistry. Links to scientific articles that can be accessed with generalized or advanced searches in two databases: PUBMED and MEDLINE. (http://www.ncbi.nlm.nih.gov/entrez/query.fcgi?db=pubmed)

The precision and accuracy with which scientific articles can be processed using computers is not high enough to serve the research communities adequately. NLM therefore, hires several hundreds of researchers that are cognizant in each biomedical field. These workers identify articles based on their own knowledge and expertise. Each article is then manually identified with a specific biomedical domain. The article is then mapped to a list of words associated with that domain of biomedicine. These lists of words are called MeSH (Medical Subject Headings) terms (http://www.nlm.nih.gov/mesh/MBrowser.html). When an end user wishes to find an article, he or she will enter relevant keywords, which are connected by Boolean operators "AND," "OR" and "NOT." These keywords are not used to scan the text of the articles. They are used to scan the keyword lists. Only those articles manually identified as being associated with specific words are returned as relevant search results to the end user.

Though in this regard, human workers perform significantly better than computers, the results have to be further parsed by the end user for relevance to his or her work. This is done manually. Sometimes computers are used. Natural language processing programs have been created to further identify relevant neuroscience articles after an initial search of PUBMED. But these programs use knowledgebases, which are manually created. Creating such knowledgebases is feasible because they are specific to an area of work.

Worker input in this field is indispensable.

A successful recovery from a service catastrophe

Recovery from a disaster is generally not an easy proposition for any company. This is true for the shipping industry that offers logistical and transportation services to the oil and the natural gas industry. The catastrophe discussed here involves the grounding of the Exxon Valdez in 1989 on the Bligh Reef in the Prince William Sound off the coast of Alaska. This disaster seriously impacted the fishing industry in this region as well as rich and varied aquatic life in the region. In addition, the oil spill took place in a region where "ten million migratory shore birds and waterfowl, hundreds of sea otters, dozens of other species, such as harbor porpoises and sea lions, and several varieties of whales" were in serious harms way. (EPA, 2004)

The Exxon Valdez disaster single-handedly reduced the financial value of the company and the shares and the stock value of the company significantly dropped. In addition, the company faced a financial and legal liability of ensuring the environmental clean up of the region. While it was impossible to restore the region to its pre-disaster condition, every effort was being made to ensure that oil spill effects were reduced and the impact to the wildlife in the region minimized. Exxon Valdez was an avoidable human error and Exxon had to rectify the serious damage that this disaster created in the region. (Lovgren, 2004)

The company was fined $5 billion for the disaster that it created in the region for fishermen and the natives. This caused the company to manage its public relations policies more stringently and effectively. Public outcry was severe due to the fact that this accident could have been prevented. The company took full responsibility for the spill and attempted to clean it up to the best of its ability. It offered compensations to those who directly filed for damages. The company paid "$300 million immediately and voluntarily to more than 11,000 Alaskans and businesses affected by the Valdez spill. In addition, the company paid $2.2 billion on the cleanup of Prince William Sound, staying with the cleanup from 1989 to 1992, when the State of Alaska and the U.S. Coast Guard declared the cleanup complete." (ExxonMobil, Exxonmobil Sets Valdez Record Straight, 2005) The company was appreciated for coming forward with the financial and the labor resources to manage the problem as soon as it arose.

The company has operated in the region for a long time and in the aftermath of the disaster has become active in ensuring that all possible assistance and aid is provided to the people of the region. By working together with private and governmental agencies for protecting and managing the ecology of the region, ExxonMobile is attempting to restore some sense of normalcy to the region. While the incident will never be forgiven or forgotten, the amends the company has made has helped return shareholder and stockholder confidence in the company.

In the period following the spill, ExxonMobil worked closely with local governments to ensure that the cleanup was done in accordance with the Environmental Protection Agencies (EPA) codes as well as the requirements of the coast guard. Local workers employed for the cleanup process were compensated for their effort and time. The company compensated the local population for the loss of livelihood that had occurred as a part of the disaster. Currently the company is attempting to restrict its punitive damages imposed by the he federal court in Anchorage stating that it has adequately compensated all the relevant parties that were impacted as a result of the disaster.

ExxonMobil has modified and changed many of its policies and strategies in the aftermath of the disaster. (ExxonMobil-Home, 2005) The company has modified its shipping routes to avoid sensitive and fragile ecosystem region. The company has instituted drug and alcohol testing for employees in sensitive positions in the organization. By incorporating technology and improved navigation systems on all their marine vessels, and offering more intensive and comprehensive training to its employees the company hopes to avoid any future major catastrophes like the Valdez grounding.

Improved container design and better quality control checks have ensured that the company follows a higher corporate and ethical responsibility effort. The company has helped spearhead spill prevention and control organization globally and constantly trains its employees to prevent similar disasters. The company has made an effort to train their employees to manage a spill if it does occur and has formulated a disaster management plan that effective.

To state that the recovery of the company is successful is possible. Exxon Mobil has been able to survive and maintain its position as one of the leaders in the petroleum and oil business. Exxon "contracted Lloyd's Register Quality Assurance Ltd. (LRQA), a leading independent classification and inspection authority, to measure its Operations Integrity Management Systems against the ISO 14001 environmental management standard of the International Organization for Standardization." (ExxonMobil, 1999 Update: Prince William Sound, Alaska, 2005) The company has however a long legal path ahead with respect to the extent of compensation that it has to awards the people affected by the damages.

Recent oil and petroleum shortages has made the company more responsible for managing its existing oil fields and the transportation facilities that are needed for the company to ensure that it continues to grow and develop. Financial statements indicate that the company while being impacted by the disaster has been able to slowly forge ahead. By incorporating environmental safety plans into its regular operations the company has been able to instill confidence in the global population about its commitment to environmental safety and pollution control. Using the motto of "we live here too," the company has been able to overcome the past.

E-procurement for a small company to gain advantage in the market

Starbucks, the Seattle-based coffee and coffee related products retail sales corporation is considered. The company markets premium coffee, pastries and ice creams to the public through its stores and is traded on the Nasdaq National Market under the trading symbol "SBUX." By the end of 2003, there were 7,225 retail stores all over the world selling their products directly to the customer. In addition, Starbucks Corporation created strategic alliances with Barnes and Nobel Inc. where book shoppers and browsers can avail themselves of a cup of gourmet coffee. Many domestic airlines and hotels provide Starbucks' products. Starbucks targeted both the individual and the corporate customer.

The company sold many of its products and services to agencies and the service industry to infiltrate the coffee market. The mission of Starbucks is to make the company "the most recognized and respected brand in the world." Coffee selling can be considered a product of a service-oriented organization -- where the customer is in direct contact with the end product. (Foster, 2003) This is due to the fact that the company does not just sell the product but it sells the ambiance, which includes the concept of the European style, laid-back coffee shop. Starbucks has created a culture of making regular coffee drinking a sophisticated act for the regular American public.

While the corner Starbucks coffee shop is the growth plan for the company, Starbucks is aggressively using technology to improve its operations and business model. Starbucks already has a loyal customer base that is computer savvy and looking for ways to improve their experience. (Morebusiness.com, 2005) Starbucks has been looking overseas to increase its market share and profitability. By consolidating its supply chain and managing its stores through aggressive strategies Starbucks has been able in a short time to create a brand name for itself. The company has been actively using e-commerce with easy access to credit card for use in stores to encourage customers to use their products. (Anonymous, 2004) Procurement is becoming an important element in the supply chain management (SCM). E-business has been defined basically as "the transaction of business over an electronic medium such as the Internet" and can "involving the buying and selling of goods and services, customers relations management, and working jointly with business partners" for a wide variety of operations and services. (Google, 2004)