Continuous Improvement-- It I$ About the Money
By Ken Gaunt
Manufacturer, 2005 Issue No. 2

Organizations have adopted the popular continuous improvement (CI) programs because it seems to be “the right thing to do.” These programs foster teamwork, create a positive work environment, improve quality, and increase customer satisfaction. While all these are very positive results, the driving reason to implement CI should be to reduce waste and cost to improve profitability.

Companies may have lost sight of why continuous improvement efforts are so important. They spend a lot of money and time on CI “programs” only to experience nominal improvement before the initiatives fizzle out, leaving business owners and managers wondering why they don’t stick.

Ask yourself these questions:

• What measurable results have our CI efforts had on the bottom line in the past year? Past two years?
• How much did these efforts cost? (Include people’s time.)
• Am I satisfied with my return on investment (ROI), and am I optimistic about my future ROI?

The “Trouble” With Tools

In the Broadway musical, Music Man, Professor Hill, the fasttalking traveling salesman exhorted, “You’ve got trouble right here in River City,” and proposed the town form a band and buy expensive instruments and uniforms to address its “trouble.”

Art often mirrors life, and manufacturing organizations are hearing a similar message from improvement experts touting their latest continuous improvement tools. That’s Tools with a capital T, that rhymes with P, and that stands for Problem.

There is indeed trouble in the River City of American commerce, and American manufacturers are experiencing it. They recognize the need to improve their business and do it quickly. It’s about the money.

Many listen to the Professor Hills of today, and just as Professor Hill claimed he could cure River City’s problems with tubas and trumpets, today’s improvement experts promise their improvement instruments will do the trick. Organizations embrace the latest and greatest improvement tools. They spend a lot of money and invest huge amounts of time to mass train employees, and they turn these newly minted trainees loose within the organization to apply their recently acquired skills. They expect their employees to perform with the precision of a marching band, only to find they hit sour notes.

Make no mistake, tools such as Six Sigma and Lean can be effective, but tools alone will not generate sustainable improvement. They must be supported by certain key characteristics within an organization’s culture. Regardless of the tools used, data and results show these characteristics to be the factors that determine whether a company’s CI endeavors produce sustainable results that positively affect the bottom line. Remember, it is about the money! So what are these characteristics?

Make Your CI Investments Pay Off

To increase their ROI, organizations should consider the following characteristics typically present in high performing companies before embarking on their next CI journey.

A Clearly Articulated and Understood Vision

If the workforce is expected to meaningfully contribute to CI, management must clearly articulate a vision for the business and how everyone contributes to the achievement of that vision. One of the greatest examples is the vision articulated by John F. Kennedy to “send a man to the moon and back safely before the end of the decade.” This vision, adopted by NASA, drove that organization to accomplish that mission. As legend goes, even NASA’s janitor would repeat the vision when asked what his/her role was in the organization. What’s your company’s vision? Does everybody in your organization understand it? Do individuals know how they contribute to the organization’s achievement of the vision?

Focused/Disciplined Leadership

Because with most CI initiatives there will be momentary setbacks and minor failures, it’s crucial that leaders have the discipline to maintain focus on CI and be passionate about driving it throughout the organization. They must believe that all processes can be continually improved and be relentless in the pursuit of CI. Do your organization’s leaders have the discipline and focus? What will it take to develop it?

Strong Focus on Customers

In high performing companies, employees effectively relate to the customer and have a good understanding of how their contributions affect customer satisfaction. Ultimately, this knowledge allows employees to think more critically about their jobs and make meaningful contributions to improvements. Do your employees know who your customers are and what’s important to them? Can they describe their jobs based on the value they add versus the task orientation of what they do?

Continuous Improvement Plan

High performing organizations develop their improvement plans based on periodic assessments to determine key themes for improvement. Often, they do this in conjunction with formulating annual business plans. Improvement themes enable management to allocate resources with more focus, resulting in greater gains. High performing companies understand that adopting the latest fad in continuous improvement tools does not constitute a plan. Have you placed all of your improvement investments with a single tool? Are you leaving money on the table because that tool does not effectively solve every problem?

Management-by-Facts

Management-by-facts generally refers to the company’s performance dashboard. In high performing organizations, the dashboard is used for more than measuring monthly financial results. It contains both customer-related metrics and process-performance metrics. Process measures and performance targets are the responsibility of employees at the department and work-cell levels. This is an excellent method to help employees understand their contribution to business results. Are your employees monitoring their performance? Is the data being used to identify opportunities for improvement?

Learn by Doing

“I hear, I forget, I see, I remember, I do, I understand.” As this saying implies, adult learners will not retain what they learn if they don’t have immediate opportunities to apply new skills. High performing organizations have learning systems that are aligned with improvement plans. They know continuous improvement education is not about creating instant experts. Sending people to school and expecting they’ll be miraculously transformed into highly skilled improvement ninjas is unrealistic. For CI training to be effective, it’s important to create a learn-by doing environment where training is executed in conjunction with specific improvement projects. This is called just in-time training. What type of training approach are you using? Are your employees retaining what they’ve learned?

Empowered and Engaged Workforce

High performing organizations empower their employees and make each person feel important to the success of the organization. It’s important to create a sense of ownership of the problems and pride in the solutions. This more than anything changes behaviors and drives accountability. Are your employees responsible for using performance data to identify opportunities for improvement? Are they involved in the development of solutions and accountable for implementing them?

Make CI Work

How does your organization measure up? Do you ever feel like you’ve bought into one of those CI programs du jour? Have you been disappointed by the degree of improvement achieved for what you’ve invested? If you have, you’re certainly not alone, and it’s not too late to make some changes. You can learn from high performing organizations and develop an improvement system that will positively affect your bottom line. Yes, the investment is greater, but the return will be worth it.