Continuous Improvement in Your Business

The notion that businesses are either growing or dying is a prevalent but limited viewpoint. The reality is that business operations are always in a state of flux, with ups and downs rather than a steady incline or decline. This can make it difficult to determine if progress is being made.

To overcome this challenge, successful businesses adopt a mindset of continuous improvement. Regardless of their current state, there is always room for improvement, providing direction and enabling them to advance and secure their place in the market.

However, continuous improvement is often misconstrued. Some entrepreneurs equate it with perfectionism and believe that criticizing every mistake made by their employees is the key to improvement. But this approach can lead to high turnover and a toxic work environment, attracting only those employees who lack better options.

A team of burnt-out employees is not more productive than a team of content, experienced workers working towards a common goal. It is crucial to find a balance between criticizing to point out areas to improve and the well-being of employees.

To achieve this balance, it is essential to understand that continuous improvement is not just about driving employees harder but rather a holistic approach that takes into account the overall system and culture of the business. It is about finding ways to improve processes, foster growth, and create a supportive work environment that allows everyone to flourish.

Metrics and KPIs

When I assumed control of a small business, my goal was to establish a culture of continuous improvement. Our aim was to revitalize a business that had reached a standstill and this required us to alter our operational approaches, not just repeat what had always been done.

Before making any changes, I wanted to ensure that the alterations would result in improvement rather than deterioration. The question was, how can you tell if the recent modifications in processes will bring about increased profits and greater efficiency? How can you quantify the quality improvement from incorporating another quality control step?

The only way to determine improvement is through the use of metrics. You need to have a baseline data to compare against. You should know the amount of time it takes to complete one unit or the average number of quality errors per 100 units produced.

You must have a clear understanding of how many units are completed in an hour, taking into account variables such as seasonal fluctuations, material shortages, employee absences, etc.

Thus, it's important to start measuring everything. With the advancement of technology, this is now easier than ever before. You have access to various tools that can generate useful reports.

You may not need to spend time sifting through log files or creating pivot tables to identify trends. You might find that a few well-designed reports provide enough information to monitor the crucial aspects of your business. Now with AI tools, it might be as simple as asking an AI bot to find the trends in the data.

Once you have the data and the insights, you can develop Key Performance Indicators (KPIs). KPIs are widely used in the business world. They highlight the key elements of the business that require monitoring.

They enable you to set goals and determine acceptable performance ranges. In the past, we used KPIs to keep us on track. Whenever a KPI went off-balance, we looked at the entire system to understand why. Often, this was due to us pushing too hard in another area.

This approach allowed us to continuously improve as we had data to support our changes. We didn't rely on intuition or make alterations blindly, hoping for the best.

Learn to See Systems

Using Key Performance Indicators is a valuable tool, but it takes a deeper understanding of the systems within your business to make them truly effective. Many individuals are unaware of these underlying systems and only see the chaotic mix of activities.

The daily activities form patterns and structures that drive them. To see these systems, you need to look beyond the chaos and identify the processes and procedures that create these patterns.

This way of thinking helps you avoid jumping from one problem to the next, and instead, implement sustainable solutions that address the root cause. This is known as systems thinking.

By taking a systems approach, you can see things differently and understand how problems arise and how they can be prevented in the future. This means that your solutions are not just temporary band-aids, but rather, a change in the systems to create a more efficient and effective environment.

Plan, Do, Study, Act

Dr. Edwards Deming is renowned for revolutionizing the manufacturing industry in Japan after WWII by introducing the concept of continuous improvement. His methods proved so effective that Japan rose to prominence as a leader in quality and profitability.

One of Deming's most successful tactics was the Plan, Do, Study, Act (PDSA) cycle, also known as the Deming Cycle (or Shewhart Cycle named for the individual who came up with it). This process enables organizations to make changes with confidence, avoiding the risk of degradation.

The PDSA cycle starts with planning a change to a procedure (Plan). This improvement is then tested, either on a smaller scale or in a controlled environment (Do), before being fully implemented. This reduces the risk of unexpected outcomes and allows for more experimentation.

Next, the results of the change are studied (Study). By having established metrics and benchmark data, it's possible to measure the impact of the change and determine if it was successful or not.

Finally, based on the results of the study, the organization decides whether to adopt the change as a permanent part of their process or revert back to the old procedure (Act).

This approach to improvement differs from change for the sake of change, where leaders are unable to continuously improve. Instead, they are striving for perfection and pushing their team harder hoping new changes result in better output.

The PDSA cycle encourages organizations to establish metrics and focus on systems and processes rather than individual efforts, leading to more efficiency, output, and profit. And because it is systematic, it can be replicated with new employees.

Even small businesses can benefit from continuous improvement by adapting the core principles of the PDSA cycle to their specific needs. By following these three steps, organizations can continuously improve their systems, resulting in increased efficiency, output, and profitability.

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