At the outset of 2023, concerns about economic conditions and a possible worsening recession are top of mind for most business leaders. Interest rate increases, GDP shrinking, and rising inflation alongside low unemployment rates have left many uncertain about how to manage resources, retain talent, and find a way to grow during the next year.
Economists are mixed in their predictions, expecting everything from a mild recession to a lasting financial crisis. Whatever the outcome, there is an opportunity for leaders to help their teams thrive and even turn the situation into a competitive advantage. As budgets get tighter and undergo more strict scrutiny, leaders must get the most out of each team member, resource, and tool. How can organizations increase productivity and do more with less while being fiscally responsible? The path forward is continuous improvement.
The Principles of Continuous Improvement
The Japanese word Kaizen means “good change.” It is used by many organizations worldwide to describe the idea that continuous improvement should span all functions of an organization at every level.
A simple philosophy governs Kaizen: operations can continually improve even if their current functioning level is adequate. Problems are seen as opportunities for improvement.
Developing a culture that embraces continuous improvement with Kaizen thinking takes work. The good news is that some simple principles can help shape how people approach their work and make constant improvements to the default mode of working.
1. Question the status quo
“That’s how it’s done around here” is the antithesis of improvement. Team members should be encouraged to learn from the past but not let it be an excuse for sticking with the current mode of operation. For continuous improvement to happen, everyone must be willing and encouraged to challenge the current best practice with curiosity and respect.
2. Open your mind to change
Once team members get comfortable questioning the current method, they must be open to changing it. It is hard to change old habits even when a new approach is promising, and people often associate change with risk. Encourage everyone to practice looking at things from a new point of view and arguing for something new. These mental exercises can be the gateway to actionable improvement.
3. Turn problems into opportunities
Identifying a problem and describing its impact is the first step in improvement. Rather than find someone to blame when something goes awry, team members should jump into problem-solving mode and apply one or more continuous improvement techniques to seize the opportunity to make something better.
4. Build on each improvement
To build stronger muscles, you gradually add more resistance with heavier weights. As the weight increases, your body adjusts to overcome the bigger challenge. This is precisely what happens to organizations that work to improve. With each project, the team’s experience, knowledge, and proficiency with improvement tools and techniques increases.
5. Embrace positivity
Continuous improvement is a fundamentally optimistic management approach. Negativity is damaging to a culture of improvement. Regardless of the challenge, the first line of thinking should be, “We can make it better.” This is particularly important during a time of economic uncertainty as the messages team members may get from outside the organization may be discouraging.
6. Dont allow excuses
There’s always a reason to put off improvement work. Perhaps the proposed change will fail; maybe there is risk involved; changing the process might upset someone, etc. Continuous improvement means applying a thoughtful approach to positive change and taking action.
7. Money is not always the solution
This principle of improvement is particularly important in 2023. Yes, some improvements require investment, but throwing money at the problem or hiring more people should not be the first resort. The most successful (and profitable) organizations use innovation, experimentation, and creativity to make improvements. Organizations with tight budgets have even more reason to practice Kaizen thinking.
8. Seek the wisdom of many
While the ideas of subject matter experts may be constructive, no single person can fully understand a problem from every point of view. The more perspectives you collect, the closer you will get to the best way to improve a process. The input of process operators, internal and external customers, and leadership should be considered when looking for ways to improve.
9. Practice data-driven decision making
At the outset of every improvement project, it is critical to understand how the results will be measured. The first step is establishing baseline measurements for the performance indicators you want to improve. Letting the data determine success will help overcome resistance to change. In addition, it will eliminate faulty assumptions and make criticism of the current process less personal.
10. Learn by practicing
The Japanese phrase “Genchi Gembutsu” means learning by doing things. For example, you can’t learn how to ride a bike by reading books about riding a bike or watching other people ride; you must get on and make adjustments to your technique until you are riding away. When learning anything new, there’s a risk that you’ll make mistakes, but that’s OK. If a process change doesn’t work, the data will tell you quickly, and you will adjust.
11. Look for simple, incremental solutions
Continuous improvement is the quest for perfection, but it doesn’t come instantly. Choosing between a simple, slight adjustment vs. a complex process overhaul is easy. Pick the simple change. Quick wins are motivational, easy to implement, and less risky. After you get comfortable with incremental changes, you might consider more significant projects. Avoid letting the perfect become the enemy of the good.
The Economic Impacts of Continuous Improvement
Because uncertain economic times and a likely recession are pressing concerns, we’ll look deeper into the financial impact of continuous improvement. First, however, consider that economics is only one benefit of Kaizen thinking. Organizations that embrace improvement also enjoy higher levels of employee engagement, higher quality products, a safer, more efficient workplace, and happier customers.
Our broad base of customers gives us insight into the financial advantages of continuous improvement, all of which are amplified during a challenging economy. For example, our customers have found that 28% of improvements have an economic impact. Here’s how they break down:
- 12% of improvements reduce costs at an average of $70,000 in the first year, with about 30% of those sayings recurring annually.
- 15% of improvements result in time savings. Our clients put the value of time saved at an average of $6,000 in year one, with 92% recurring annually.
- 1.2% of improvements increase revenue. The average impact is just under $210,000, with 75% recurring annually.
Remember that these numbers are per improvement, not per organization or team member, so they can happen many times over in an organization with a strong improvement culture and the technology to support system-wide ongoing change.
It may be counter-intuitive to invest in training, technology, and employee time to support continuous improvement when the overriding concern is reducing costs. Still, these numbers make it clear that the return on investment can be substantial. Moreover, worse economic conditions make the continuous improvement approach even more compelling.
Like everyone else, we hope that economic conditions will improve in 2023, but concern about a potential recession is a good reason to rethink your organization’s approach to operational improvement. Continuous improvement is a proven, effective model for increasing productivity, improving quality, retaining employees, delighting customers, and saving money.