Continuous Improvement -- Taking the Long-Term Perspective Will Pay Off

A short-term reaction to the economic crisis could short-circuit your future.

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 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 long-term strategies, such as continuous improvement, cannot be abandoned if future growth and success for the 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 problem solving in their work areas. If there are managers reading this who do not believe in developing their people to increase their skills so they can solve problems, they should stop reading this now. For those who believe, you know that increasing the skills of your people can make your area perform better -- and in fact this is one of the most important aspects of continuous improvement -- but how do you balance this with the current business conditions?

While most of you have heard more than enough about Toyota, a recent example in the public media about the company is very telling about its continuous improvement philosophy. While seeing a precipitous decline in consumer truck sales (like all North American auto companies), Toyota shut down its new San Antonio assembly plant for an extended period but did not lay off any of the employees. Instead, the company is devoting the shutdown period to training and skills development so that, when conditions improve, it will have a better-trained and more-capable workforce in its operations.

Toyota also announced that it expects to report its first operating loss since 1950. Conspicuous by its absence, however, was no anouncement of substantial reductions in its workforce through layoffs, such as we have seen recently from numerous North American companies faced with operating losses. Isn't this a graphic example of Toyota's continuous improvement philosophy and 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 Toyota so what are you doing should you be doing to balance your company's short- and long-term issues? The answer is that you have to do whatever needs to be done to ensure survival, but that does not include maximizing short-term profits by laying off some of your people and discontinuing your skills development and continuous improvement efforts. When business conditions improve -- and they will at some point -- you'll need well-trained people to serve your customers and make your business globally competitive. Reductions in force of these people today and then having to hire new people and start the training process all over again in the future can be a very expensive and short-term strategy.

While retaining people and devoting their idle time (since with a continuous improvement philosophy, you would not continue production operations and build inventory with the decline in customer demand) to training and skills development may be more costly short-term, it could be the smart play long-term. Many companies underestimate the value of the knowledge that employees hold in their heads and the cost of new employees to relearn what the current employees already know.

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 Toyota 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.

Ralph Keller is president of the Association for Manufacturing Excellence, an organization dedicated to cultivating understanding, analysis and exchange of productivity methods and their successful application in the pursuit of excellence. He has been an operations practitioner for the past 35 years.

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