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They say all businesses grow or die. There is no in-between. We are improving or deteriorating all the time. This view is popular but somewhat flawed. The truth is that we are always in ebb and flow. Up is not a straight line. Down is not a perfect spiral of destruction. This makes it harder to know if you are improving. If today was great, but last week was terrible, are you growing or dying?
The answer for many successful companies is to adopt a mindset of continuous improvement. No matter where the business currently stands, there is always room for improvement. It gives us power, because it gives us direction. This allows us to keep moving forward, charting our course and consolidating our role in the market.
But continuous improvement is often misunderstood. I have met many entrepreneurs who equate continuous improvement with perfectionism. They assume that dwelling on every little mistake their staff makes helps them improve. This allows them to stay unhappy, where they can then drive their people harder. The problem is that the system is more complex than that. Often these same business owners complain about high turnover. People don’t want to work for a jerk. Talented and valuable employees will have options and choose a better culture. Those who stay are often the ones with no better options.
Of course, you feel daily that you pushed your people as hard as you could. But the whole system shows that a team of burnt-out employees is no better than happy, productive, experienced workers all rolling in the same direction. It seems that continuous improvement is at odds with this vision of advanced productivity. Seen through the perfectionist lens, this may appear to be the case. But through the systems lens, we see a completely different path to follow.
So how do you embed continuous improvement into your business without blindly pushing your employees harder and harder? Here are three easy ways to do it:
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1. Metrics and KPIs
When I took over the operations of a small business years ago, I worked to create this culture of continuous improvement. We wanted to scale a business that had hit a plateau. This meant changing operational strategies, not just doing what the company had always done. But before the change, I knew we wanted to make sure the change was an improvement, not a degradation. How do you know that the recent ongoing adjustment means more profit and better efficiency? How can you quantify the quality improvement resulting from adding another quality assurance step?
The only way to know you’re improving is to use metrics. You should have baseline data. You should know that it takes three minutes per unit, or every 100 units results in an average of four quality errors. You need to know how many units are made in an hour. You need to be able to account for variances such as seasonality, parts shortages, employee vacations, etc.
This means you should start measuring everything. Today it is often much easier than before. You probably have a variety of tools you can use to create usable reports. You may not need log files to sift through or data to run pivot tables to identify trends. You might find a few useful reports to give you enough information to measure key aspects of the business.
Once you have the data and form the information, you can create KPIs. Key performance indicators, or KPIs, are common in businesses. They give you the key aspects of the business that you are monitoring. They can help you set goals. You can establish acceptable output ranges. We have used them in the past to keep us balanced. When a KPI got out of control, we looked at the whole system to figure out why. Often we were pushing too hard in another area, causing this side effect.
It allowed us to continually improve because we had the data. We knew change meant we were more successful. We didn’t trust our instincts. We didn’t just change and hope.
2. Learn to see systems
KPIs are helpful, but to be truly effective, you need to be able to see your business systems. Most people are blind to it. They see the cacophony of activity, not the systematic flow.
But day by day, these activities form patterns. There are structures that underlie and animate them. That’s how you start to see systems. You start seeing patterns in the chaos. You identify the processes and procedures that drive the activities and create the models. This helps avoid playing the mole with your business. Jumping from problem to problem does not improve you. This translates into a change for change’s sake. But when you see the complete system, you can implement solutions that fix the current problem but also address the root cause, so it doesn’t happen again.
Systems thinking is the key to stopping the recurring problem. You see things differently. You identify how it happened and see how it could happen again in the future. Your solution means more than a temporary band-aid on the problem. This means a change in systems to create an environment where this problem can no longer occur.
Related: How to Think About Your Business Systems
3. Plan, do, study, act
Dr. Edwards Deming is famous for bringing continuous improvement to Japan after World War II and helping to rebuild its manufacturing industry. His tactics were so successful that Japan began to overtake other countries and became a mainstay of quality and profit.
One of the methods he used was Plan, Do, Study, Act. Often referred to as the Deming cycle, this process allows us to make changes without worrying about degradation. It starts with planning a procedural change. This potential step towards improvement is then implemented. It is not implemented blindly. It is often tested in a smaller environment first.
Here’s an example: Let’s say you see the potential for an extra step in your quality control process. It looks like it might help catch errors quickly. Instead of creating a whole new policy for the entire QC team to follow, create a subset. Create a smaller batch to try it out. Or have half the QC employees try the new approach.
This limits the risk. If there is an unexpected result, you can quickly roll back. You limit the risk of making the switch. Many improvement strategies are stalled because leaders are afraid to take the risk. This manages that risk, allowing you to experiment more.
Then we study the results. Because we have already established the metrics and gathered all the baseline data, we can measure the results of the change with the typical results. Are they better? Are they worse? Did the output stay the same?
Then we act. If the change improved the areas we targeted, incorporate the change into the standard process used. If this didn’t lead to the result you were hoping for, go back to the old process. It shows that change doesn’t mean you back down. It means that you are always moving forward; you are continually improving.
It is the opposite of change for change’s sake. Leaders who are unfamiliar with these techniques find it difficult to continuously improve. They succumb to the pursuit of perfection and push their people harder and harder. If they never accept the current effort, they feel like they are improving the business. A better way is to establish metrics and define KPIs, so you know what you’re working towards. You can see if you are making things better or worse for the business.
Next, visualize your company’s systems and focus improvement efforts on systems and processes, not effort. Have the company take action and get things done on a regular basis. Instead of focusing on one-time actions, target recurring actions taken.
Finally, implement Plan, Do, Study, Act. Use this cycle to reduce the risk of change. Use it to get employees to give feedback on how systems could be improved. Then test those ideas without worrying that they won’t work and will set the business back. Plan, Do, Study, Act helps you evaluate these changes in a real-life scenario before modifying your processes and procedures.
Related: Trader Joe’s Secret to Success? Adopting this Japanese business strategy
You don’t have to be a Fortune 500 company with a formal continuous improvement methodology to reap the benefits of continuous improvement. You can take the basics and create your own process. These can be tailored to your teams. They can be as small and nimble as needed. Following these three steps can help you continue to improve business systems to create more efficiency, more output, and more profit.
