Continuous Improvement

By Larry Chester

How to make it work!

“In the future we will no longer refer to the ‘Fortune 500’. We will refer to the ‘Fortunate 500’: companies that delight their customers, delight their employees and continuously improve.” The comment, attributed to John Naisbitt, seems paradoxical. How can an organization continuously improve, get better, faster and cheaper at the same time?

Every company, regardless of size or market position, faces the same price/cost relationship:

Price – Cost = Profit

In the past—many of us now think of it as the distant past—when our costs increased, we simply raised the selling price to maintain a constant profit. In a marketplace where competitors experienced similar cost increases this thinking process was rational and pervasive.

The marketplace has changed, however, and what was rational no longer makes sense. The domestic market has become crowded with global competitors who look at selling price in a different way: manufacturers are not price setters but price seekers, with price determined by the customer based on his or her perception of the value of the product or service.

Value, in turn, appears to be some amalgam of quality (content, reliability, durability, aesthetics, conformance to requirements), cost (initial price, ownership, cost, resale value) and delivery (where and when and how can it be acquired). When “Value” is substituted for “Price”, our equation then becomes:

Value – Cost = Profit

Our new equation suggests that we change our focus: we add value by increasing quality, lowering purchase or ownership costs and improving delivery and, at the same time, we reduce waste by eliminating anything which does not add value for the customer.

A quality-sensitive client stated, “No problem! Your firm has shown us that tackling these issues is simple. We have utilized your problem solving and decision making techniques to describe, analyze and fix our problems.”

Problem Solving and Decision Making Process

Describe the problem or opportunity so that you clearly understand the issue and its relative priority to the customer and to the organization.

Analyze the issue to determine why it is happening and what course of action to take.

Implement, ensuring that your action plan has been protected so that no additional problems are created, and enhanced to take advantage of similar opportunities throughout the organization.

“However,” he continued, “we don’t do it! The processes may be simple, but it is not easy to change behaviour, to get our people to use these new skills on the job. The skills your organization taught us are not enough. Something is missing.”

As we discussed the missing “something,” I was reminded of an old Perry Mason rerun on television. Perry Mason was addressing a jury. “For my client to be convicted, the prosecuting attorney must prove three things:

  • That the defendant clearly saw an opportunity to commit the crime,
  • That the defendant possessed the means to commit the crime, and
  • That the defendant had sufficient motivation to commit the crime.”

If any of these conditions were missing, then his client could not be found guilty.

We had been focusing on the means—the problem solving and decision making skills we had transferred to client organization—and not on the other two conditions!

All three conditions—opportunity, means and motivation—must be met when improving the quality, cost or delivery of our products or services. If any of the three conditions are missing, your quality and productivity improvement efforts will not meet your expectations. You will not become one of the “Fortunate 500.”

Ask yourself the following questions to determine if the three conditions are in place within your organization:

The Three Conditions: Do they exist in your Organization?

(Expectation: WHAT to do!)

  • How do we recognize problems which prevent us from meeting customer requirements on time and within budget?
  • How do we recognize opportunities which would allow us to meet customer requirements better, faster or cheaper?
  • Are we empowered by the organization to recognize and bring forward problems and opportunities for resolution?

(Skills: HOW to do it!)

  • Do we have the necessary processes, resources, tools, techniques and job aids to address problems and opportunities as they arise?
  • Do we possess the problem solving skills to find the root causes of problems?
  • Do we possess the decision making skills to choose and to implement the best courses of actions?
  • How do we plan, monitor, and evaluate our progress?

(Desire: WHY to do it!)

  • How do the managers and supervisors in our organization support and reinforce the recognition and resolution of problems and opportunities?
  • What really counts, i.e., gets measured, in our organization: quality, cost and delivery or production volume and efficiency?
  • What motivates the people in our organization to improve the quality, cost, and delivery of our products and services?
  • Does it make more sense to ignore problems and opportunities in our organization or to recognize and resolve them?

When these and similar questions are asked, we often discover that organizations have not developed processes for identifying problems and opportunities or for motivating their employees to resolve them.

Opportunity Identification

Organizations across North America are empowering their employees, getting them more involved in recognizing and resolving problems and opportunities. Greater involvement translates into improved quality, cost, and delivery.

For example, the president of a Japanese automobile manufacturer once stated that the success of his company was not achieved by a few major breakthroughs, but through the thousands of small breakthroughs by virtually every employee in the organization.

Five to ten years ago the typical organization in North America looked like the organization in Figure 1. Only ten to fifteen percent of employees were resolving quality, cost, or delivery concerns and they were clustered near the top of the organization. The problems, however were first seen at lower levels of the organization, where employees have direct contact with the customer or with the production and delivery processes.

hardheadfigure1 Continuous Improvement

The initial solution was better communications processes to ensure that problems were raised to a higher level where they could be resolved. Managers and supervisors became inundated with problems, which they had neither the time nor the information to effectively resolve. Hence the caption, “The Overworked Few”.

About the same time we saw a different organization emerging (Figure 2), an organization which was much more competitive and more profitable. Most employees were identifying and resolving quality and productivity issues, from the top of the organization to the bottom. The “Overworked Few” had become the “Dedicated Many”. These organizations were empowering more people to use better skills to identify opportunities to meet customer requirements better, faster, and cheaper.

hardheadfigure2 Continuous Improvement

Employee involvement was the key and companies across North America jumped on the bandwagon. Quality teams were organized and meetings were arranged. Initial results were encouraging. Within a year, perhaps two, results invariably declined. Teams quickly ran out of meaningful issues to address and meetings often degenerated into gripe sessions. Without proper leadership and guidance, meetings ceased to concentrate on the most important issue: how can we meet customer requirements better, faster, and cheaper?

A client or organization used an intriguing analogy to explain what was happening in their organization. The customer fulfilment process resembles an obstacle course; the objective is to complete the obstacle course on time and within budget. In our path are highly visible problems that can be readily eliminated or avoided. Some problems, however, are not as recognizable—we don’t see them—but they have the same potential to damage our relationship with the customer.

In partnership with this client, we developed a technique to continually identify problems and opportunities. The method was very simple. Since eighty percent of the results are produced by twenty percent of the activities, focus on the activities which produce the required results. Two questions must be continually asked:

  • What results does my customer require?
  • What are the minimum activities required to produce those results?

A simple Input/Output model (Figure 3) was developed to identify improvement opportunities. For example, customers were demanding same-day shipment of warehouse-stocked components. On the basis that ” It’s not enough to do your best, you must do what the customer requires,” a team of warehouse staff mapped the shipping process and discovered that it was taking them, on average, 380 minutes (6 hours, 20 minutes!) to ship a stock order. This clearly was not meeting customer requirements.

Further analysis revealed that value-added time—time during which an input was converted to an output—was only 35 minutes. By eliminating non-value-added time, this company developed the capability to ship all stock orders in 35 – 40 minutes. They became faster, more accurate, and improved their productivity!

hardheadfigure3 Continuous Improvement

The ability to identify opportunities is now being developed across this organization. They have a clear sense of who the customer is, what the customer requires, how well customer requirements are being met, and where opportunities exist to meet customer requirements better, faster and cheaper.


We had met two conditions: the client organization was able to identify opportunities for quality and productivity improvement and had developed the means (problem solving and decision making skills). But employees must ‘really oughta wanna” identify and resolve opportunities. We must create a climate or environment that provides sufficient motivation to “Just do it!”

Experience tells us that continuous improvement is a learned behaviour. Like any other learned behaviour it can be taught, fostered and promoted throughout the organization.

Opportunities are like seeds. We will plant, water and tend those seeds, using tools that the organization provides, if we can share in the harvest. In other words, we are prepared to recognize and resolve customer quality, cost, and delivery and productivity concerns when it is rewarding to do so.

Consider some examples:

  • A supervisor asks his employees to identify opportunities for improvement. One individual raises his hand tentatively. He is not noticed. He again tentatively raises his hand. This time he is noticed and suggests an opportunity. The supervisor scoffs and suggests that the company only wants to discuss “meaningful” opportunities. No one suggests additional opportunities for improvement.
  • Supervisors are responsible for volume and unit cost. Direct labour is the most important component of unit cost. A problem is identified that, if addressed, would improve quality. The supervisor says, “Forget it! We don’t have time to address quality problems right now. We have a monthly production target to reach.”
  • Several employees determine the root cause of a major bottleneck in Final Assembly. They identify a “fix” which will eliminate the cause at minimal cost. They talk to their foreman who promises to take action. They never hear about their suggestion again.

These scenarios indicate why some organizations seldom achieve long-term results from their continuous improvement programs. Their employees are not rewarded for identifying and resolving quality and productivity issues; they may even be punished for it. We must create an environment in which it always makes sense to meet customer requirements on time and within budget.

Employee behaviour depends on many factors:

  • Nature: they were born that way!
  • Nurture: they were raised that way!
  • Outside environment: they are influenced by what is happening at home and in their personal lives.
  • Work environment: they are influenced by what is happening on the job

Most managers understand that the only area in which they can legitimately and realistically exert any control is the work environment. They influence employee behaviour through events which precede or follow the behaviour. Events that precede the behaviour and which prompt it are called antecedents. Events that follow the behaviour and which either encourage or discourage it are called consequences.

To encourage employees to recognize and resolve quality and productivity issues, excellent companies incorporate some of the following antecedents and consequences into their performance systems:


  • Goals and objectives for improvement (customer satisfaction, productivity, bottom-line results) are set at every level of the organization.
  • Prompts are established to highlight problems and opportunities: control charts, customer surveys, worksheets, job aids, etc.
  • Role models are developed within the management and supervisory levels to model or demonstrate ideal behaviour and to coach employees to achieve the desired results.
  • Resources are set aside (time, space, training, coaching) to facilitate the identification and resolution of customer problems and opportunities.


  • Recognition of individual and team success is encouraged.
  • Feedback of progress against goals is required.
  • Participation by managers and supervisors, especially in pushing for implementation, is critical.
  • Rewards for company success are shared by all


Continuous improvement of quality and productivity is achievable and sustainable. But you must provide your people with techniques for continually identifying opportunities for improvement, provide them with effective problem solving and decision making tools and provide an environment that encourages them to continually do things better, faster, and cheaper. Meet these three simple conditions and your company can become one of the “Fortunate 500”.

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