business practice evaluations Archives

Why You Need a Business Practice Evaluation

Have you thought lately about the overall health of your business? In today’s economy, it’s important to not only deliver your service, but to operate effectively and efficiently. An excellent way to gain insight into this is through conducting a Business Practice Evaluation (BPE). A BPE assesses the health of a utility by developing the framework for a structured approach to managing, operating, and maintaining assets in a more business-like manner. The goal would be to minimize the total cost of operating, managing and maintaining utility assets while still delivering exceptional service to customers. This is accomplished by providing more effective preventive maintenance to reduce capital investment.

The evaluation process will ultimately enable utility managers to assess the efficiency and effectiveness of their business practices in comparison to industry standards. Developing system specific plans, programmatic approaches, and realistic timelines to optimize utility programs are included in this process.

Similar to management consulting services, a BPE has potential to bring incredible value to your utility. While the list of benefits is copious, here are a few of the major advantages of conducting a Business Practice Evaluation.

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Next Level Growth

Firstly, conducting a BPE will provide a baseline of exactly where a utility or company’s business practices currently are. Through a rating criterion, findings report, and subsequent scoresheet, the opportunities for improvement will become clear. A company can then make modifications to their business practices to reach the next level of efficiency and effectiveness.

Objectivity

As a manager, it may be hard to focus on the cause of an issue when you are immersed in it every day. Conducting a BPE will allow for an industry expert to look at a situation objectively and make the best-informed recommendations based on the BPE’s proven history of success.

Cost Reductions

A successful Business Practice Evaluation will help companies cut costs by simplifying and refocusing existing business practices. Expert BPE consultants can look at costs from a different lens and offer insights based on data and effective-practice knowledge.

Improved Communication and Relationships

In big and small companies alike, communication is key. An open line of communication is particularly critical between management and field personnel in water and wastewater utilities. Through field observations of current business practices, valuable insights in reference to efficiency and effectiveness will be provided. Management and field personnel can then identify and prioritize opportunities for improvement, as well as come to a consensus in all business practices. A successful BPE will help to eliminate the fissure between management and field staff, eliminating the ‘us versus them’ mentality.

Staff Accountability

A Business Practice Evaluation is completed through a series of interviews within a diagonal slice of utility staff. Recommendations from the BPE findings report will aid in staff accountability by identifying and implementing realistic performance measures. For example, the report may show within the Administration category that an Emergency Response Plan (ERP) is not in place. Subsequently, a Public Water Supplier could then take the necessary steps to implement an ERP and provide staff with the required ERP training.

A Way Forward

One of the most valuable pieces of information obtained from conducting a BPE is knowing where a business stands from a micro-level view. Once the scoresheet is complete, a company can determine if their primary business functions are being efficiently and effectively managed (or not). Moreover, the risks and consequences of not moving forward with proposed recommendations are identified. Having this information allows management the ability to prioritize business practices and supporting attributes, and sets the business on the right path going forward.

Improved Quality of Life

Changes resulting from the completed Business Practice Evaluation have the potential to improve quality of life and staff morale by communicating and providing a clear management plan to move forward. While improvements may not always be evident prior to the BPE, management and staff alike will be happy when positive changes are made. With more efficient and effective business practices and improved communication, the business continues to thrive.

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Interested in the full scope of the Business Practice Evaluation? See the step-by-step process below.

Review utility documents and documentation of business practices
Develop rating criteria to determine level of performance of business practices
Develop business practice categories and supporting attributes scoresheet with the assistance of your utility staff
Conduct kick-off, consensus, and findings workshops
Conduct interviews within a diagonal slice of the organization
Conduct field observations of current business practices (not people)
Develop a BPE findings report
Develop a BPE scoresheet from the findings report

In conclusion, it is critical to stay on top of internal functionality regardless of the type of business you operate. Keep in mind, no matter how well-oiled a machine is, there is always room for growth and improvements. Organizations that have conducted a BPE significantly improve the management, operations and maintenance efficiency of their utility.

Not Just for Manufacturing — Lean Techniques for Water and Wastewater Utilities

The term “Lean” has become widely used in the manufacturing sector since the late 1980s when it was first used by James P. Womack, Ph.D. of MIT’s International Motor Vehicle Program to describe Toyota’s highly successful manufacturing process and business model. While its core premise of eliminating waste is quite simple, identification of waste and implementation of best practices takes effort. Waste can be defined as any process or activity without value — such as overproduction, defects, and waiting — and accounts for up to 60% of a typical manufacturing company’s production activities.

But Lean isn’t just for manufacturing companies. In fact, most companies can benefit greatly from incorporating Lean techniques into their standard operating procedures. At its core, Lean enables a business to run more efficiently by improving quality and reducing costs, whether that company is a car manufacturer, a hospital, a retail operation — or even a water or wastewater utility.

Key Principles

The Lean Enterprise Institute (LEI), long considered the premier resource for lean theory and training, identifies the five key Lean principles as value, value stream, flow, pull, and perfection. Value is always defined through the customer, and addresses such issues as price point, delivery timelines, requirements, and expectations. Value to a water or wastewater utility may include price, quality of water or effluent, reliability of service, and meeting regulatory requirements.

Once value has been established, each and every step and process taken to meet that value is mapped as the value stream. These steps include not only manufacturing processes, but also contributing areas and departments including administrative, human resources, and customer service. By mapping every step in the process, identification of areas lacking value can be identified and addressed. Value streaming results in not only less waste, but also improved operational understanding.

Flow refers to process efficiency and is the next step after waste was been eliminated from the value stream. Often, creating true flow requires cross-functionality across departments, something that can be a challenge for companies to implement. However, this step also boasts some of the highest efficiency gains. For water and wastewater utilities, increasing flow may include moving towards transparent communication between operators and management and standardization and documentation of processes and effective practice guidelines. Ensuring that the remaining steps in the process occur smoothly and without interruption is key to the lean process.

Reducing waste in the value stream and improving flow enables a manufacturing company to shorten the manufacturing process and implement “just in time” delivery, or pull. In service operations such as water and wastewater systems, pull focuses on the people and refers to the way in which work is distributed and managed. In a traditional push system, all projects and tasks are distributed as a giant to-do list, which can lead to disorganization, diluted priorities, and employees feeling overwhelmed. In a pull system, workers are allowed to pull in tasks as they are ready, leading to a more focused approach to projects, better prioritization of key initiatives, and increased communication between workers at all levels. Organizations that utilize a pull system for work realize a significant reduction in wasted time resulting in far more efficient time utilization.

The final step may actually be the most important: perfection. Perfection refers to continuous improvement by incorporating Lean thinking into the very fabric of the corporate culture. Perfection acknowledges that true Lean requires constant effort and is never static.

Lean Implementation

Because the main goal of Lean is to create more value with fewer resources, a Lean company strives to create an organization that provides perfect value with zero waste. In addition to changing from silo to matrix management, implementing Lean follows four basic tenets, known as the four Ps of Lean thinking: purpose, process, people, and performance.

Purpose

Companies must first determine their essential purpose. For some companies, profit may be the driving motivation, while others may exist for philanthropic purposes. Water and wastewater utilities provide an essential service to customers. Besides the general purpose of the organization, a company must also determine its philosophical drivers. These can include core values, mission, and vision.

Process

Once purpose has been determined, a company must determine the process by which it reaches its customer and produces the product, whatever that product may be. Simply put, process refers to the way in which a business operates in relation to its customer and its internal operations. Most of the key principles of Lean thinking can be applied during the process step. Unfortunately, it is also the step at which many businesses become stuck if they lose focus or lack cooperation from employees or management.

People

People refers not only to those for whom the product or service is created, but also the people within the organization who create the product or service. In other words, people are customers and employees, as well as some consultants and suppliers. Developing employees, growing leaders, improving management, and showing respect at all levels are important facets of this critical step.

Performance

Performance is the final step of the Lean approach and is in line with the perfection principle. A company must assess any improvement in its ability to deliver its product or service, and identify any additional gaps. Lean implementation typically goes through many trials and iterations before truly successful performance is achieved. Again, it is critical to remember that Lean is a continuous process that requires vigilance and ongoing effort from an organization.

Lean Thinking in Water and Wastewater Operations

Because it is often referred to as lean manufacturing, there is a misconception that Lean is strictly for manufacturing organizations. In fact, Lean is not a set of tactics or a simple method of cost reduction; rather, Lean is a completely different way of thinking and operating on an organization-wide basis.

For water and wastewater, Tata & Howard’s proprietary Business Practice Evaluation (BPE) is a highly effective methodology that can assist utilities in becoming lean organizations. By definition, a BPE is a “process that assesses the health of a utility’s business practices with the goal of minimizing the total cost of managing, operating, and maintaining utility assets while delivering exceptional service to customers” — the core definition of lean thinking. A BPE accomplishes this by assessing all business practices, identifying opportunities for improvement, and implementing a framework for a structured approach to managing, operating, and maintaining a utility in the same manner as a profitable business, where focus is placed on management of resources, employee engagement, operational efficiency, and customer service. The finished product provides a utility with a clear understanding of baseline history and areas of opportunity for improvement. In addition, the utility receives a matrix of recommendations for each business practice they want to improve, along with the risk and consequence of inaction. Organizations that have conducted a BPE significantly improve the operational efficiency of their utility. A BPE is arguably one of the most important steps in a water or wastewater utility’s journey toward becoming a truly Lean organization.

In Conclusion

All types of businesses across all industries and service offerings are turning toward Lean thinking to remain competitive and profitable in today’s consistently changing corporate climate. Successful Lean organizations recognize that lean is not a one-time cost reduction program or a quick fix, but rather a completely different way of thinking and operating that constantly evolves. While true Lean transformation takes long-term vigilance and attention, the benefits of increased operational efficiency, exceptional customer satisfaction, and better profitability are well worth the effort.

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A DPW Director’s Guide to Improving Utilities with Limited Capital

Water systems today face a set of problems that are unique to this generation. While our nation’s buried infrastructure is crumbling beneath our feet as it reaches the end of its useful life, supplies are dwindling, budgets are shrinking, and federal and state funding is drying up. At the same time, regulatory requirements continue to increase as emerging contaminants are identified. Water systems often find themselves in the quandary of whether to upgrade treatment systems to comply with these new regulations or update assets that are long overdue for replacement or rehabilitation.

Savvy DPW directors recognize the need for thinking outside the box when it comes to water system management. Gone are the days of simply allocating annual budgets to the required maintenance of assets. Instead, careful planning, thoughtful operations, and superior efficiency are the new requirements for successful utility management, and can all be accomplished with limited capital investment.

Planning for the Future with Capital Efficiency Plans™

Asset management planning is critical to the health and maintenance of water utilities. Part of a successful asset management plan is the development of a planned, systematic approach that provides for the rehabilitation and replacement of assets over time, while also maintaining an acceptable level of service for existing assets. But how are utilities able to determine which assets should be prioritized? The answer is through a multi-faceted approach to asset management.

Our Capital Efficiency Plan™ (CEP) methodology is unique in that it combines the concepts of asset management, hydraulic modeling, and system criticality into a single comprehensive report that is entirely customized to the individual utility distribution system. The final report provides utilities with a database and Geographic Information System (GIS) representation for each pipe segment within their underground piping system, prioritizes water distribution system piping improvements, and provides estimated costs for water main replacement and rehabilitation. Because the CEP takes a highly structured, three-pronged approach, utilities can decisively prioritize those assets most in need of repair or replacement, and are able to justify the costs of those critical projects when preparing annual budgets.

Increasing Operational Efficiency with Business Practice Evaluations

In addition to addressing capital efficiency, water utilities of today must also address operational efficiency. Because water systems are required to do so much with so little, efficiency in all aspects of water system management is critical. Tata & Howard appreciates the unique set of challenges faced by water systems today, and we have experts on staff who understand the inner workings of a water utility – and how to improve them.

Our Business Practice Evaluation (BPE) was designed by James J. “Jim” Courchaine, Vice President and National Director of Business Practices, who has over 45 years of experience in every facet of water and wastewater management, operations, and maintenance. He is a certified Water Treatment and Distribution System Operator, Grade 4c (MA) and RAM-W (Risk Assessment Methodology for Water). He also taught courses at the University of Massachusetts, Lowell for ten years on water system operations. Jim does not approach utility operations from the perspective of an engineer; rather, he has deep experience in utility operations and management as an actual operator.

Our BPEs assess the health of a utility’s work practices by implementing a framework for a structured approach to managing, operating, and maintaining in a well-defined manner. The overall goal of the assessment process is more efficient and effective work practices, and the assessment includes documentation of current business practices, identification of opportunities for improvement, conducting interviews including a diagonal slice of the organization, and observation of work practices in the field. The BPE encourages utilities to operate as a for-profit business rather than as a public supplier, which results in more efficient, cost effective operational and managerial procedures — and an improved bottom line. Water systems that have conducted a BPE have found significant improvement in the operational efficiency of their utility.

Improving the Environment — and the Bottom Line — with Water Audits

Besides improving operational and capital efficiency, water systems of today must reduce non-revenue water. Non-revenue water is treated drinking water that has been pumped but is lost before it ever reaches the customer, either through real losses such as leaks, or through apparent losses such as theft or metering issues. In the United States, water utilities lose about 20% of their supply to non-revenue water. Non-revenue water not only affects the financial health of water systems, but also contributes to our nation’s decreasing water supply. In fact, the amount of water “lost” over the course of a year is enough to supply the entire State of California for that same year. Therefore, the AWWA recommends that every water system conduct an annual water audit using M36: Water Audits and Loss Control methodology to accurately account for real and apparent losses.

A water audit helps water systems identify the causes of water loss, as well as the true costs of this loss. An effective water audit will help a water system reduce water loss, thus recapturing lost revenue. Water loss typically comes as a result of aging, and deteriorating infrastructure, particularly in the northeast, as well as policies and procedures that lead to inaccurate accounting of water use. Water audits are the most cost-effective and efficient solution to increasing demand, and, like BPEs, water audits usually pay for themselves in less than a year.

In Conclusion

Today’s DPW Directors are faced with the burden of increasing regulations along with decreasing supply, budgets, and funding. For water systems to continue to effectively function, they must remain profitable, which means they must implement efficiencies on all fronts. CEPs, BPEs, and water audits are all low-cost methodologies that improve efficiency with an extremely short return on investment. In addition, water systems that proactively plan for the future will more easily weather the threats of climate change and population growth. Capital and operational efficiency combined with identifying and addressing sources of non-revenue water will position water system to continue to provide safe, clean drinking water for future generations.

Why Water and Wastewater Utilities Must Practice Operational Efficiency

Water and wastewater utilities across the country face common challenges. These include rising costs, aging infrastructure, increasingly stringent regulatory requirements, population changes, and a rapidly changing workforce. While many utilities find themselves turning from one urgent priority to the next, others have implemented effective operational efficiency initiatives that have helped them enhance the stewardship of their infrastructure, improve performance in many critical areas, and respond to current and future demands. Improved efficiency is not just beneficial to a utility’s bottom line – it benefits everyone in a community.

Infrastructure Stability

Utilities who implement operational efficiency understand the condition of and costs associated with critical infrastructure assets. This allows them to maintain and enhance the condition of their infrastructure over the long-term at the lowest possible life-cycle cost consistent with customer, community, anticipated growth, and system reliability goals. Efficient utility management assures infrastructure repair, rehabilitation, and replacement projects are coordinated in order to minimize disruptions in service or other negative consequences.

Enhanced Employee Leadership Development

A common problem facing many utilities today is a retiring work force. By implementing operational efficiency now, utilities can recruit and retain a workforce that is competent, adaptive, and correctly trained to take on leadership roles of their own. Through communication and effective training, utility owners and operators can create an organization focused on continual learning and improvement. This ensures employee knowledge is retained and improved upon. Over time, senior knowledge and best practices will be passed along to promote a well-coordinated senior leadership team who understands their system and the needs of its customers.

When employees or operators of water and wastewater systems are knowledgeable enough to solve problems themselves, it allows managers to focus more on the entire utility versus consistently fixing small problems. Managers are then free to focus on internal operations, better management practices, improving water and effluent quality, and other areas of priority.

Managing Reliable Data through Operational Efficiency

Coupled with excellent communication throughout utility staff, data collection is an area of operational efficiency that helps utilities meet demand and plan for the future. With the collection of accurate, reliable data and the tools to analyze the information, utilities can prioritize actions and capitalize on their efforts. This allows them to understand the demands of their service areas and ensure sufficient supply is available. By more efficiently identifying contributors to non-revenue water, such as system leaks, aging assets, and unauthorized usage, utilities can reduce operational expenses and uncover new revenue streams. They can also provide their customers with access to that same set of information, making it possible for them to understand and manage their consumption. This delivers benefits to the entire organization, including billing, customer service, operations, engineering, and distribution, and empowers utilities to address conservation and revenue opportunities.

Reduced Vulnerability to Climate Changes

Some practices that utilities are implementing greatly help to improve resiliency and reduce vulnerability to an ever changing climate. Internal practices and initiatives such as energy conservation, solar energy, and utilizing heat transformed into energy from sewage and digestion have helped utilities rely less on the grid and more on their own operations. This is especially beneficial considering the ever-increasing price of energy. Reducing energy use significantly lowers operational costs for utilities – freeing up dollars for future initiatives or infrastructure improvements. Utilities who practice operational efficiency understand that making internal practices more efficient results in the entire distribution system becoming more efficient.

All Around Flexibility for Utilities

Practicing operational efficiency can greatly improve all around flexibility for water and wastewater systems. Knowing your distribution system and operating it to your specific community’s needs is a huge advantage in dealing with costly dilemmas that occur with infrastructure. In places that see seasonal spikes in water usage, operational efficiency allows a utility to adjust and operate more effectively during peak times as well as during the “off-season.” Practicing operational efficiency also allows a utility to better deal with issues in their distribution system without disrupting service to customers.