Editor's Note: Take a look at our featured best practice, Kaizen (254-slide PowerPoint presentation). [NOTE: Our Kaizen presentation has been trusted by an array of prestigious organizations, including industry leaders such as Apple, Bayer, University of Michigan, General Motors, Cummins, Baxter, Johnson Controls, Ulta, Daimler Truck, Aramark, Parsons Corporation, to name just a few.]
Explore [read more]
* * * *
A recent report from AlixPartners posited a surprising finding in the field of Process Improvement Programs for manufacturers: Most companies engaged in Lean Management, Sigma Six, or another management philosophy are achieving a poor return on their investment, and appear to be only partially engaged in the process itself. Considering that the entire purpose of a CI program is to reduce costs, a lax ROI is one of the last results one might expect to find, but going by the observations of Steve Maurer, Head of the Manufacturing Practice at AlixPartners, it’s clear that these disappointing numbers are not a failure of Continuous Improvement, but rather skewed perceptions and flawed applications
Many manufacturers, particularly those who are achieving sub-par returns, have an idea that CI is simply a philosophy change, and not a capital investment.
Continuous Improvement (CI), sometimes called Continual Improvement, is the ongoing improvement of products, services or processes through incremental and breakthrough improvements. These efforts can seek “incremental” improvement over time or “breakthrough” improvement all at once.
Very often Organizational Leadership is disappointed with the results of their business improvement activities. This is usually because they do not make the changes needed to fully integrate improvement skills and behaviors into the daily work of their entire team, including the Leadership.
If Continuous Improvement is to become a sustained force moving the business forward, it must be weaved it into the fabric of how people are hired, trained, and evaluated.
As identified by Lean Experts, CI must form part of the Culture with which organizations and people function in their respective capacities.
ROI from CI initiatives is not only driven by the very obvious business metrics but, they are also much embedded in the cumulative result to the business through each incremental change that happens to the processes and people affected by the initiative
Looking at these details will enable leaders to evaluate their CI initiatives for efficient decisions, and also communicate the broader and long-term impact to business stakeholders
Lean experts point out 10 general guidelines for developing and structuring high ROI Continuous Improvement Initiatives:
Brief Outline
Look at the Big Picture – Leaders and managers working on Continuous Improvement projects are typically focused on optimization, waste elimination, capacity utilization, process redesign, and other operational challenges. This focus can lead to a lack of big picture perspective. When calculating ROI, it is important to adopt a higher-level, big picture perspective, so that our ROI calculation is complete and not missing important components that could add up.
Factor in Customer Loyalty – Continuous Improvement activities are seen to generate Customer Loyalty, an outcome which is often overlooked. Customer Loyalty increases sales and profitability, so it is a factor that should be included in ROI calculations.
Quantify Savings – Savings estimation of Continuous Improvement initiative builds stakeholder confidence and generates the necessary excitement to foster collaboration from internal teams.
Include All Ancillary Savings – Ancillary Savings estimation of Continuous Improvement initiative builds stakeholder confidence and generates the necessary excitement to draw participation from internal teams
Expand Employee Work Roles – Work role expansion of employees have a direct influence on bottom line of the business .When employees who execute, are given more empowerment and expanded roles, they are seen to connect deeper with the business and deliver more value to customers
Assume 30% Waste – The extent of waste in processes can be considered at 30% at the beginning of an improvement project to set a hypothetical baseline for estimating the potential
Develop CI KPIs – Improvement initiatives must set the right KPIs and then estimate how those KPI achievement would translate into dollar value immediately and over the years.
Think Long term – While short-term impact measurements are needed, long-term benefits must also be measured and quantified to understand the ROI impact of the CI initiative over a longer time horizon.
Use Turnover to Boost Employee Morale – Positive turnover through waste reduction provide opportunities to improve ROI while parallelly boosting employee morale and also defer OPEX category investments. Use the KPIs of waste reduction, and improved performance to boost the morale of employees and ensure to communicate how these business improvements will benefit them
Link Engagement to Stakeholder Value – Profitability is directly linked to efficient functioning of a business and this in turn is closely connected to the efficiency of the workforce. An engaged employee base increases profitability and thereby Shareholder Value.
In many industries, executives have had their hands full staying competitive and surviving market downturns. This is done by making cuts, often silo by silo, and occasionally in ways that negatively affected customers.
It is time for organizations to rework their Operating Models in a new way, [read more]
Do You Want to Implement Business Best Practices?
You can download in-depth presentations on Continuous Improvement and 100s of management topics from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives.
For even more best practices available on Flevy, have a look at our top 100 lists:
These best practices are of the same as those leveraged by top-tier management consulting firms, like McKinsey, BCG, Bain, and Accenture. Improve the growth and efficiency of your organization by utilizing these best practice frameworks, templates, and tools. Most were developed by seasoned executives and consultants with over 20+ years of experience.
Readers of This Article Are Interested in These Resources
Total Quality Management (TQM) is a strategic approach that embeds a culture of continuous improvement across an organization. It goes beyond processes and outcomes, fostering a mindset where every function, system, and individual contributes to quality and excellence. By engaging all [read more]
With the evolving technology, leaders will have to keep evolving their Customer Experience (CX) approaches to secure additional avenues of revenue and to stay competitive in the market. To do this, they will need to develop Data Analytics capabilities to effectively utilize insights on customer [read more]
Big cross-organizational change can be difficult and not all organizational transformation is the same. Rapid advances in technology, a growing global creative workforce, and market with fewer and fewer barriers to entry are driving a hyper-creative volatile marketplace. New ideas are making [read more]
This document provides a collection of 100+ Key Performance Indicators (KPIs) related to the Operations functions listed further below.
Keeping in mind that each organization is different, the enclosed KPIs are intended as a general reference and their relevance depends on the specific [read more]
A recent report from AlixPartners posited a surprising finding in the field of Process Improvement Programs for manufacturers: Most companies engaged in Lean Management, Sigma Six, or another management philosophy are achieving a poor return on their investment, and appear to be only partially engaged in the process itself. Considering that the entire purpose of a CI program is to reduce costs, a lax ROI is one of the last results one might expect to find, but going by the observations of Steve Maurer, Head of the Manufacturing Practice at AlixPartners, it’s clear that these disappointing numbers are not a failure of Continuous Improvement, but rather skewed perceptions and flawed applications
