In one of my classes the other day, the discussion turned to continuous improvement. This is one area where I’ve spent a great deal of thought, training and practicing application.
Almost by definition, continuous improvement is a long-term business strategy to improve your business in terms of customer value and satisfaction, quality, speed to market, flexibility and reduced cost. In the economic situation most businesses are facing today, many organizations are looking at short-term strategies just to survive. So how do you balance the current realities with the need to pursue continuous improvement initiatives for the future?
This is not an easy dilemma to resolve, but what is clear from looking at the history of successful companies is that core, long-term strategies, such as continuous improvement, cannot be abandoned if future growth and success for your business is the objective.
One of the primary objectives of continuous improvement strategies is to increase the skills and capabilities of all of the organization’s employees so they can effectively engage in work area problem solving. This strategy is one of the most important and fundamental aspects of continuous improvement. However, how do you balance this with the current business conditions?
One good example was in a recent article about a major industrial company and their commitment to their continuous improvement philosophy. While experiencing a precipitous decline in consumer sales-like many companies across the globe-this company shut down its assembly plant for an extended period but did not lay off any of their employees. Instead, the company devoted the shutdown period to two primary issues:
Training and skills development of their employees so that when conditions improve, it will have a better trained and more capable workforce in its operations.
Assigning multidisciplined teams of employees, including their factory floor specialists, to work on quality and efficiency problems. Priority was given to field quality problems in order to improve customer satisfaction and reduce external failure costs due to warranty issues.
This company had announced that it expected to report its first operating loss since 1950. Conspicuous by its absence, however, was any announcement of workforce reductions, such as have been seen recently from numerous companies faced with operating losses. Isn’t this a graphic illustration of a commitment to a company’s long-term strategy and to a continuous improvement philosophy? Secondly, but equally as important, was the commitment to developing its people so they have the skills to solve problems in their work areas.
Most of you, however, do not work for this company, so what are you doing to balance your company’s short- and long-term issues? The answer is that you have to do whatever it takes to ensure survival, but that does not include maximizing short-term profits by laying off your greatest asset-your people-or by discontinuing your skills development and continuous improvement efforts.
When business conditions improve-and they will at some point, if not already-you’ll need well-trained people to serve your customers and make your business globally competitive. Reducing your work force today and later hiring replacement personnel and starting the training process all over again can be an extremely expensive, short-term strategic mistake.
Numerous companies have conducted studies to discover the cost of personnel-indirect and direct labor-is around 20% of their total cost structure. A company should look elsewhere for opportunities to lower their cost; particularly in material costs that is volume-related.
Don’t make the mistake of taking a short-term view to your continuous improvement efforts to maximize current profitability at the expense of long-term growth and skills development of your workforce. Instead, be like the company in this article, and respect your people by preserving their skills and knowledge wherever you can. It’s the smart business move if you have a long-term perspective.