Continuous Improvement

Continuous improvement in a management context means a never-ending effort to expose and eliminate root causes of problems. Usually, it involves many incremental or small-step improvements rather than one overwhelming innovation. From a Japanese perspective, continuous improvement is the basis for their business culture. Continuous improvement is a philosophy permeating the Japanese culture, which seeks to improve all factors related to the transformation process (converting inputs into outputs) on an ongoing basis. It involves everyone, management and labor, in finding and eliminating waste in machinery, labor, materials and production methods.

The Japanese word for continuous improvement, kaizen, is often used interchangeably with the term continuous improvement. From the Japanese character kai, meaning “change,” and the character zen, meaning “good” (taken literally), it means improvement.

Although kaizen is a Japanese concept, many U.S. firms have adopted it with considerable success by combining the best of traditional Japanese practices with the strengths of Western business practice: in other words, by merging the benefits of teamwork with the creativity of the individual. Some refer to its implementation in the West as lean manufacturing since, when combined with the principles of just-in-time (JIT), kaizen or continuous improvement forms the foundation for the concept of lean manufacturing.

HISTORY OF CONTINUOUS IMPROVEMENT

Following the defeat of Japan in World War II, America wanted to encourage the nation to rebuild; to accomplish this, General MacArthur asked a number of leading experts from the United States to visit Japan and advise them on how to proceed with the rebuilding process. As history would have it, one of these experts was Dr. W. Edwards Deming. Deming was a statistician with experience in census work, so he came to Japan to set up a census. While in Japan, he noticed some of the difficulties being experienced by some of the newly emerging industries. Many Japanese manufacturers were faced with huge difficulties stemming from a lack of investment funds, raw materials, and components, and from the low morale of the nation and the workforce. Based on his recent experience in reducing waste in U.S. war manufacture, he began to offer his advice.

By the mid-1950s, Deming was a regular visitor to Japan. He taught Japanese businesses to concentrate their attention on processes rather than results; concentrate the efforts of everyone in the organization on continually improving imperfection at every stage of the process. By the 1970s many Japanese organizations had embraced Deming's advice and were very quickly enjoying the benefits of their actions. Most notable is the Toyota Production System, which spawned several business improvement practices utilized heavily in Japan, including JIT and Total Quality Management (TQM).

Despite the fact that much of the foundation of continuous improvement and other Japanese concepts originated in the United States, Western firms showed little interest until the late 1970s and early 1980s. By then the success of Japanese companies caused other firms to begin to reexamine their own approaches. Hence, kaizen or continuous improvement began to emerge in the United States concurrent with the increasing popularity and use of Japanese techniques such as JIT and TQM. In fact, continuous improvement is a major principle of and a goal of JIT, while it is one of the two elements of TQM (the other is customer satisfaction). In some organizations, quality circles have evolved into continuous improvement teams with considerably more authority and empowerment than is typically given to quality circles. In fact, management consultants in the West have tended to use the term kaizen to embrace a wide range of management practices primarily regarded as Japanese, practices responsible for making Japanese companies strong in the areas of continual improvement rather than innovation.

KAIZEN ATTITUDES NECESSARY FOR IMPLEMENTATION

Most Japanese people are, by nature or by training, very attentive to detail and feel obligated to make sure everything runs as smoothly as possible, whether at work or at home. This attitude enhances the functionality of kaizen. However, this is not typically the case in the West. To encourage the kaizen attitude, organizations require a major change in corporate culture; one that admits problems, encourages a collaborative attitude to solving these problems, delegates responsibility, and promotes continuous training in skills and development attitudes.

The driving force behind kaizen is dissatisfaction with the status quo, no matter how good the firm is perceived to be. Standing still will allow the competition to overtake and pass any complacent firm. The founder of Honda has been quoted as saying, “In a race competing for a split

second, one time length on the finish line will decide whether you are a winner or a loser. If you understand that, you cannot disregard even the smallest improvement.” Although continuous improvement involves making incremental changes that may not be highly visible in the short term, they can lead to significant contributions in the long term.

Organizational performance can improve from knowledge gained through experience. Lessons learned from mistakes mean those mistakes are less likely to be repeated, while successes encourage workers to try the same thing again or continue to try new things. While this learning process occurs throughout the system it is particularly important for accomplishing the long-term improvement associated with continuous improvement. In order for continuous improvement to be successful, the organization must learn from past experience and translate this learning into improved performance.

Part of the learning process is trying new approaches, exploring new methods and testing new ideas for improving the various processes. So experimentation can be an important part of this organizational learning. Naturally, many of these worker-led experiments will fail, so it is important to recognize that there is some risk associated with this experimentation. If management is uncomfortable with risk, it may be reluctant to allow any real degree of experimentation. Obviously, management cannot risk disabling the production process itself or endanger the well-being of the workforce, but the complete absence of risk can reduce the vision of those involved in the continuous improvement process. Improvements will generally come in modest increments of progress. Therefore, management must recognize that some experiments will fail as part of the learning process, and avoid the temptation to harshly judge the perpetrator as having new but unsuccessful ideas. Some even feel that it is critical to establish an environment that reinforces the notion that risk is good. Again, this involves consistency in management's attitude toward change and the empowerment of employees.

The achievement of continuous improvement requires a long-term view and the support of top management. But it is also important that all levels of management actively support and become involved in the process. Proper support structures of training, management, resource allocation, measurement, and reward and incentive systems must be in place for successful adoption. This includes a willingness to provide financial support and to recognize achievements. It is desirable to formulate goals with the workers' help, publicize the goals, and document the accomplishments. These goals give the workers something tangible to strive for, with the recognition helping to maintain worker interest and morale.

Kaizen also requires that all employees in the organization be involved in the process. Every employee must be motivated to accept kaizen as a means by which the firm can achieve a competitive advantage in the marketplace. All involved must push continuously at the margins of their expertise, trying to be better than before in every area. Japanese companies have been very successful with the use of teams composed of workers and managers. These teams routinely work together on problem solving. Moreover, the workers are encouraged to report problems and potential problems to the teams; their input is as important as that of management. In order to establish a problem-solving orientation, workers should receive extensive training in statistical process control, quality improvement, and problem solving.

Problem solving is the driving force behind continuous improvement. Workers are trained to spot problems that interrupt, or have the potential to interrupt, the smooth flow of work through the system. When such problems do occur, it is important to resolve them quickly. Also, workers are trained to seek improvements in the areas of inventory reduction, set-up time and cost reduction, increasing output rate, and generally decreasing waste and inefficiency.

There are two particular types of kaizen that occur within practicing companies on a day-to-day basis. The first is point kaizen, which occurs on the spot, immediately, usually within a factory or office setting. An employee, often a manager, will notice a problem in the business process. The problem could be anything from a cluttered workstation to an improper sales pitch, but once the issue is pointed out, immediate action is taken. A system is developed and put into place at once, solving the problem.

The second kind of kaizen involves a more orchestrated, company-wide change, or system kaizen. System kaizen focuses on transition, moving the organization from one particular state to another. One state is where the company currently stands in regard to inventory and production, and the second state is where the company plans to be, marked within a certain time frame of weeks or months. A series of steps are planned and executed to reach the second state. System kaizen is the method developed and used by many companies, whereas point kaizen is the application of the method at problem areas.

Unfortunately, workers in a continuous improvement system have more stress than their counterparts in more traditional systems. This stress comes not only from the added authority and responsibility but also from the fast pace inherent in the system. There is little slack built into the system and a continual push to improve. For this reason, firms stressing continuous improvement have suffered severe criticism from some labor unions.

SIX SIGMA

A concept often associated with continuous improvement is the Six Sigma system. Developed by Motorola in the 1980s, Six Sigma is a method focusing on what causes defect and error in companies. Whatever the errors may be for the company—from lost clients to malfunctioning products—Six Sigma strategies are designed to eliminate them, or make errors so rare they are statistically nonentities. This involves heavy analysis and carefully created steps toward achieving excellent production, and it can take different forms in different companies. Six Sigma is often connected with kaizen activity because the two both seek perfection, continuous change, adaptability, and quality improvement throughout every level of the organization. There are many Six Sigma programs and instructional aids active today.

MANAGERIAL KAIZEN

Continuous Improvement, Six Sigma, Lean Manufacturing, and JIT inventory all have ramifications for the ways managers lead, conduct accounting, and plan for success. Bookkeeping, for instance, functions differently under leaner, more flexible styles of manufacturing. Mike Rogers, in the 2008 CIMA Managerial Studies, refers to back-flush costing as one method of dealing with continuous improvement activities.

Backflush costing accounts the costs of production when the product is completed and error free. Instead of assigning costs in a series of steps as products are assembled, backflush costing counts the costs of the finished items, assuming that all the products sold or assembled as finished goods are, collectively, an accurate picture of the costs incurred during manufacturing. This assumption is usually safe to make in lean manufacturing scenarios, where Six Sigma techniques reduce errors and continuous improvement assures production will be steady. Backflush costing, however, does not work as well in manufacturing systems that have not developed on-the-spot improvement techniques. However, in many TQM systems there is little to no supply of raw materials, works in progress, or finished good inventory to take account of, so backflush costing is able to work very well.

KAIZEN EXAMPLES

There are many case studies available for inspection on kaizen methods, showing how continuous improvement has made a marked difference in companies and the way they produce, serve their customers, and operate their organization.

DPA, or Daniel Penn Associates, a management consulting firm specializing in creating continuous improvement processes (CIPs) for organizations, gives a case study involving a mutual fund company that contracted the firm to create a continuous improvement plan for their 1,500 employee business across five divisions. The plan focused on several key areas, including:

• The creation of a framework to help customer services achieve new quality and cost effectiveness.
• The streamlining of processes designed to move the company toward a paperless method of conducting business, involving the use of new technologies.
• The creation and maintenance of a number of immediate quality changes to enhance the overall profits and abilities of the company.

After thirteen months of work with more than 400 separate quality projects, the mutual fund company found they had, through the help of DPA and their new CIP system:

• Created a 30 percent to 50 percent increase in productivity
• Enhanced customer service
• Consolidated organizational units that reduced cost
• Reduced paperwork costs by moving their company to a paperless service system

Some of the greatest examples of kaizen can be found in European companies, which have begun embracing the continuous improvement concept. This can be seen in the 2008 kaizen example for the International Leading Practices Symposium, the Aberdeenshire Council of Aberdeenshire, Scotland, which won the European Improvement Award of 2006 through continuous improvement methods.

Aberdeenshire, an ocean-bordering county in Scotland, decided to increase the quality of public service to its people through two kaizen projects. These projects involved focusing on key components of the kaizen process, such as removing waste, encouraging flexibility, directing efforts at the customer, and daring to be different. Taking the customer as the people of Aberdeenshire, the Aberdeenshire Council hired outside kaizen consultants and began developing specific kaizen roles for their continuous improvement projects, including supporting managers, project leaders, and kaizen specialists. The organization of the public servants into kaizen teams produced an almost immediate difference, as once unwilling employees became eager to implement long-desired changes.

Soon, the Aberdeenshire kaizen service directors were submitting “kaizen blitz” plans, all to be executed within six months. The organizational structure between the Aberdeenshire IT department and the other services had to be reworked to create enough efficiency to meet deadlines. After massive amounts of training, instructional DVDs, and learning the kaizen process from scratch, the Aberdeenshire Council began to reap the benefits of their

efforts, winning first an award from the Scottish Local Authority and then the prestigious European Excellence Award. Their kaizen teams were renamed and made permanent.

SEE ALSO Japanese Management; Lean Manufacturing and Just-in-Time Production; Quality and Total Quality Management; Quality Gurus; Statistical Process Control and Six Sigma

BIBLIOGRAPHY

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