Feedback on my post about the causes of failure of many continuous improvement programs alerted me to the fact that I sounded pessimistic about the effectiveness of Continuous Improvement programs. I reread the post from the perspective of an outsider and it does sound pessimistic. Mea culpa! That was certainly not the intended message; the post was supposed to point to what not to do when implementing a continuous improvement programs. Another post was supposed to follow shortly afterwards to discuss the way to have a successful performance improvement. Unfortunately, busy schedule delayed it. So here it goes.
In an earlier post I discussed the major pitfalls that cause many continuous improvement programs to fail. However, in today’s competitive environment it is essential for companies to embark on continuous improvement programs. Not only do well-designed and implemented CI programs ensure that assets are utilized to their full potential, they also tie in with the implementation of the corporate strategy, and give companies a leg-up over their competitors.
Successful CI programs usually exhibit the following traits:
- General understanding that continuous improvement means culture change: The management realizes that for continuous improvement to be effective it cannot be a temporary project; it has to become the culture of the organization. They also communicate this understanding to employees in each level of the organization. In this context, culture change means that the organizational culture starts exhibiting traits like problem-solving rather than finger-pointing, proactive action rather than passive indifference, and accountability rather than excuse-making.
- Long-term commitment from management: In organizations where CI programs are successful, executives, middle managers and front-line managers realize that they need to be engaged in the program for the long-term. They ask for regular updates on the progress and impacts of the different improvement projects, and are always ready to help overcome challenges that stand in the way of success.
- Operational performance drives continuous improvement: CI initiatives and projects are meaningful only in as much as they improve operational performance. CI projects are selected based on the impact they have on operational performance. This requires that operational performance metrics are tracked and reviewed regularly in order to identify the areas in need for improvement. For example, a purchasing department considering CI projects had a choice of projects that impact purchase order accuracy, supply chain diversity, or price reduction. The company had metrics that gauged the performance in all these areas and the department was struggling in the area of purchase order accuracy, driving the Purchasing Manager to choose that project. Without the performance metrics, a different project may have been selected.
- Alignment based on the impacts of performance improvement:Organizations that succeed in creating a continuous improvement culture understand that in order to get a desired result, it is important to reward that result. They believe in the saying that “you can’t reward A and expect B.” Consequently, they establish the impact of performance improvement as a departmental performance metric. This means establishing analytical targets for performance improvement impacts and baselines based on the preceding year, and rating departments on their achievement of these targets. In the purchasing department example above, the Purchasing Manager, with the help of an internal CI consultant, determined that an annual performance improvement opportunity of $1.5 can be realized by implementing three CI projects. Setting that target had positive effects on the department:
- It internalized the motivation to implement CI projects. The push for implementation came from the department as it realized that it needs to achieve a quantified improvement goal.
- It generated buy-in by helping the department manager set the performance improvement goal and giving the department control over how to achieve it.
- It improved the department’s utilization of CI techniques, such as value-stream management, control charts, root-cause analysis…etc. Employees began seeing these techniques as tools that can help them achieve their departmental goal rather than extra work imposed on them from the outside.
The points made above are truly common sense. For continuous improvement to be effective it has to become the culture of the organization, which takes a long-time and requires a long-term commitment from management. And for a positive return on investment, continuous improvement needs to be driven by operational performance and departments need to be scored on the impacts in their CI projects. Companies that observe these points usually end up creating a sustainable continuous improvement culture that allows them to thrive.
The next post deals with the steps needed to transform the organization to a continuous improvement culture.