Operational Excellence Critical for Productivity Growth

Operational Excellence is a helpful strategy for business leaders trying to navigate government regulations and policies that cost them time and effort, and thereby dampen innovation, investment and growth. To maintain margins and financial flexibility, the best response to such pressures is to keep improving productivity growth.

As part of a series on sustaining long-term global prosperity, Essays on Growth, the McKinsey Global Institute has also pointed out the economic dangers of a slowdown in macroeconomic productivity growth. In that article Bart van Ark, chief economist of The Conference Board, writes about government policies, “There is no silver bullet to create productivity. And even drivers that work in some circumstances have the opposite effect in others.” Narrowing his focus, he also points out, in the context of maintaining a higher long-term productivity growth rate, that, “within organizations, management practices can still greatly improve to drive out inefficiencies, which should help to shorten the long tail of inefficient business practices that often remain.” We couldn’t agree more.

There are so many opportunities for businesses of all types in developed and emerging economies to leverage operational excellence to drive productivity growth in their operations. We believe such efforts can be reduced to four major elements:

Leadership engagement
A disciplined management system
Cascading strategic goals throughout the organization to align improvement activity at all levels with the core business objectives
Relentless questioning of how your processes work today

All of these don’t have to come together at the same time, and they usually don’t. But they do have to come together eventually to maintain productivity growth over the long haul that are 3X or 4X the industry average.

For example, in this TBM case study about Operational Excellence and Value Creation, one of our clients used operational excellence practices to transform its maintenance services, and then made a deeper commitment that improved their internal productivity as well as the productivity for one of their largest customers, thereby securing significant future business well ahead of schedule.

Frequently Asked Questions

Why is operational excellence essential for long‑term productivity growth?

Operational excellence is essential because productivity gains that are not grounded in disciplined execution tend to fade over time. The article explains that short‑term improvements driven by cost cutting or isolated initiatives rarely sustain. Long‑term productivity growth comes from stabilizing processes, reducing variability, and consistently managing performance so gains compound year after year rather than resetting.

Why do productivity improvements often stall after early success?

Productivity improvements stall when organizations fail to reinforce new behaviors and standards. The article highlights that early gains are often achieved through focused attention or special projects, but without strong management systems, teams revert to old habits. When leaders do not actively manage execution daily, productivity slips and improvement momentum is lost.

How does operational excellence sustain productivity improvements over time?

Operational excellence sustains productivity by embedding improvement into daily management. The article emphasizes clear accountability, real‑time performance visibility, and disciplined problem‑solving as the mechanisms that prevent backsliding. When leaders consistently manage execution and address issues as they arise, productivity improvement becomes continuous and supports long‑term growth rather than temporary gains.