Opinions expressed by Entrepreneur the collaborators are his.
They say all companies are growing or dying. There is no intermediate. We are improving or degrading at all times. This view is popular but somewhat flawed. The truth is that we are always flowing and going down. Up is not a straight line. Down there 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. Regardless of where the company currently resides, there is always room for improvement. This gives us power, because it gives us direction. It allows us to keep moving forward, forging our path and consolidating our role in the market.
But continuous improvement is often misunderstood. I have met many entrepreneurs who equated continuous improvement with perfectionism. They assume that dealing with every little mistake of their staff helps them improve. It allows them to maintain discontent, where they can then push their people further. The problem is that the system is more complex than that. Often, these same employers complain about high turnover. People don’t want to work for an idiot. Talented and valuable employees will have options and choose a better culture. Those who stay are often the ones who have no better options.
Of course, you feel every day that you pushed your people as hard as you could. But the complete system shows that a team of exhausted employees is no better than happy, productive and experienced workers, all driving in the same direction. Continuous improvement seems to be at odds with this vision of advanced productivity. When viewed with the perfectionist lens, it might look like this. But through the lens of systems, we see a completely different path.
So how do you incorporate continuous improvement into your business without blindly driving your people more and more? 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 stalled. This meant changing operational strategies, not just doing what the business 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 adjustment in process means more benefits and better efficiency? How can quality improvement be quantified by adding another quality assurance step?
The only way to know you are improving is by using metrics. You should have reference data. You should know that it takes three minutes per unit or that every 100 units produce an average of four quality errors. You need to know how many units are made in an hour. You need to be able to take into account variations such as seasonality, shortage of parts, employee vacations, and so on.
That means you should start measuring everything. Today, this is often much easier than in years past. You probably have several tools that you can use to spit out usable reports. You may not need to have log files to explore or data to run PivotTables to identify trends. You may find some reports useful to give you enough insight to measure key aspects of your business.
Once you have the data and the knowledge, you can create key performance indicators. Key performance indicators, or KPIs, are common in business. They give you the key aspects of the business you control. They can allow you to set goals. You can set acceptable output intervals. We used them in the past to stay balanced. When a KPI was diverted, we looked at the entire system to see why. Often, we were pressing too hard on another area, causing this side effect.
This allowed us to continuously improve, because we had the data. We knew a change meant we had better performance. We do not depend on instinct. We didn’t just change and wait.
2. Learn to see systems
Key performance metrics are useful, but to be truly effective, you need to be able to see the systems in your business. Most people are blind to them. They see the cacophony of activities, not the systematic flow.
But day after day, these activities form patterns. There are structures that underlie and drive them. This is how you start to see systems. Start by seeing patterns within the chaos. Identify the processes and procedures that drive activities and create patterns. This helps you avoid playing with your business. Jumping from one problem to another, you are not improving. This entails a change for the sake of change. But when you see the whole system, you can put in place solutions that solve the current problem, but also address the root cause, so that it doesn’t happen again.
Systematic thinking is key to stopping the recurring problem. You see things differently. Identify how it happened and see how it could happen again in the future. Your solution means more than a temporary cure for the problem. It means a change in systems to create an environment where this problem does not recur.
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 for helping them rebuild their manufacturing industry. His tactics were so successful that Japan began to surpass other countries and became known as a pillar of quality and profit.
One of the methods he used was Plan, Do, Study, Act. Often known as the Deming cycle, this process allows us to make changes without worrying about degradation. Start by planning a change of procedure. This potential step towards improvement is then implemented. It is not implemented blindly. It is often tested first in a smaller environment.
Here’s an example: Suppose you see the potential for an extra step in your quality control process. It seems like it can help detect bugs quickly. Instead of creating a whole new policy for the entire quality control team to follow, create a subset. Create a smaller batch to test. Or have half the QC employees try the new approach.
This limits the risk. If there are any unexpected results, you can revert quickly. Limit the risk of making the change. Many improvement strategies stop, because leaders are afraid to take the risk. This manages this risk and allows you to experience more.
Then we study the results. Since we have already established the metrics and collected all the reference 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 change has improved the areas we target, make change part of the standard process used. If it did not have the result you expected, go back to the old process. This shows that change does not mean going backwards. It means you always go ahead; continuous improvements.
This is the opposite of change for the sake of change. Leaders who are unfamiliar with these techniques have difficulty continually improving. They succumb to fighting for perfection and leading their people more and more. If they ever accept the current effort, they feel they are improving the business. A better way is to set metrics and define KPIs, so you know what you’re working on. You can see if you are improving or making things worse for the business.
Then visualize your business systems and focus your improvement efforts on systems and processes, not efforts. Find out about the steps the company is taking and the tasks that are being performed on a regular basis. Instead of focusing on the punctual ones, focus on those recurring actions that are taking place.
Finally, implement Plan, Do, Study, Act. Use this cycle to reduce the risk of change. Use it to get employees to comment as volunteers on how systems could be improved. Then try these ideas without worrying about them not working and causing the business to go backwards. Planning, doing, studying, and acting helps you evaluate these changes in a real-world scenario before changing your processes and procedures.
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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 pick up the basics and create your own process. They can be customized for your computers. They can be as small and agile as they need to be. Following these three steps can help you keep improving your business systems to create more efficiency, more performance, and more profits.