This Train Don't Stop For Nothin': Continuous Improvement, Part II

Last week, we talked about continuous improvement: what it is, its basic parts, and why it’s super-important for startups. But—as is the fault of any intro—we were short on specifics. So this week, we’ve got some more details, which you can custom-fit to make permanent, positive improvement a part of your company culture.

No two companies are the same, and there are no silver-bullet solutions, but these principles should give you an idea of how you can adapt continuous improvement to fit exactly what you’re doing as a company.

If You Don’t Talk, They Don’t Listen

You don’t need a lecture about the importance of good communication. However, there are two principles of communication that you may not already have in mind.

The first is a principle called the Hawthorne effect, and it can be summarized thusly: the people watch what the boss watches. The Hawthorne effect gets its name from a study conducted on the Hawthorne Works, a Western Electric factory outside of Chicago. The study attempted to find the ideal level of light for workers, but improvements in productivity stopped when the study stopped; they found that it was the observation itself that had compelled the workers' higher productivity. 

By the present, though, the study isn't just about surveillance, or watching people’s behavior; it’s about sharing the reasons for watching. The workers knew why they were being watched: the management wanted to find ways for them to be more productive. 

In order for continuous improvement to even begin, you have to be explicit about exactly which improvements you need. If you’re the boss, you have to tell people what you’re looking for, or they won’t see it themselves, nor will they be able to work in that direction. To put it in even simpler terms: you probably won’t get what you want unless you ask for it.

As an example: Ralph, our metalworking CEO from last week, was explicit at certain times that he wanted to reduce scrap, a form of waste. He spread the word so everyone knew that’s what he was looking for. The operators became more mindful of scrap, and better, they were able to offer specific suggestions for new ways to reduce scrap. It saved his company a ton of money in just a few short months—just because he asked them to pay attention to it.

For a company to succeed, it must have successful communications. You might imagine, along these lines, that more communication is always better, that there's no such thing as giving your people too much information. But this is where the second principle enters, and it’s an important caution for tempering the first principle. If you want people to hear and understand everything that is important, you must shield them from everything that is not. Leaders are, by nature, information processors; one of a leader’s most important jobs is drawing meaningful conclusions from the company’s data. But their final charge with the information is not just drawing the right conclusions; it’s filtering those conclusions in the right ways, for the right people, at the right times.

On the continuous improvement track, you have to stay focused and efficient with your time, and people won’t usually work at maximum effectiveness if they have to split their attention too many ways. Remember, people don’t automatically understand priorities the way leaders do—and if your priorities aren’t straight with everyone, you won’t be improving as fast (or at all).

Paint a Picture with Numbers

Again, think of the C-suite as human data processors. They spend a lot of time and attention on numbers, and rightfully so—businesses need robust, up-to-date data to know where they’re going. The job of a CEO is to see the company at the highest possible level of abstraction, to “play the orchestra” in Aaron-Sorkin-via-Steve-Jobs parlance.

Much of this information won’t leave the C-suite, for a variety of reasons. But to the extent data bears on everyone’s job, everyone should know about it, and they should be able to clearly understand it. To continue the above example, Ralph had lots of data on scrap generation; since everyone was involved in helping reduce scrap, everyone needed to know how the effort was going. Ralph installed TVs in several places throughout the company’s office so that people could visualize, with charts and graphs, what the numbers were doing. This kept everyone mindful and focused on the goal.

Some CEOs have a John Nash thing going where they can “just see” what’s happening with the numbers. But for everyone else, data that cannot be visualized or put in context has no value. To continually improve along certain goals, leaders have to show people, in concrete terms, what’s happening; without painting this picture, it’s much harder to keep traction.

Everyone Gets a Stake

It’s rarely difficult to figure out how a company should improve. The tricky part is getting the right effort and behavior out of people and somehow aligning everyone’s personal incentives to the overall good of the company. It is so important to make sure everyone has a personal stake because, without one, they won’t be able to muster the energy to keep improving. Left to our own devices, we all prefer known and comfortable routines; in a sense, we all prefer steadiness (or even stagnation) because it makes for an easier job. But that certainly doesn’t make for a stronger, more successful company.

We’ve already written about the first “stake” people can earn, which is finding the meaning in our creative work. Every person in a company is important, or they wouldn’t have been hired. Companies that have successful, progressive work cultures are the companies where everyone knows how they belong and how they ultimately improve the world. Good leaders see this bigger picture and help others to see it, too.

This sentimental stake must always come first. But it’s naïve (at best) to think that employees will grow a company forever, out of love, without being compensated for it. This doesn’t mean a company’s owners have to dole out equity shares like Halloween candy or issue raises after every successful quarter. All we’ll say for sure is that it helps everyone to share in the rewards, however it makes sense for a given company.

In the case of Ralph’s company, part of their continuous improvement system is a gains-sharing program where employees are paid a quarterly bonus commensurate with the company’s success. The bonus is calculated by an algorithm and tracked, in real time, on the TVs that display other essential data. It’s a modest payout relative to the company’s profits, but it, too, helps keep everyone focused—and since the bonus is contingent on the company’s success, the company has never truly lost money doing it. In fact, given that they’ve rarely had a quarter without a bonus, it’s safely a reason the company remains strong year after year.

Power Down, Power Up

As we’ve made clear, continuous improvement never stops, and that’s precisely the point. However, continuous improvement should occasionally slow—not in its intentions, but in its pace.

We mentioned last week that the pattern of continuous improvement is often a series of plateaus. We also mentioned that continuous improvement is reflexive—that is, that it must also improve itself. One important part of maintaining this system in a company is recognizing those plateaus and, like someone climbing a mountain, using that time to catch your breath and renew your focus. At the smallest level, this takes place in meetings or over lunch, but at the company-wide level, it might happen in a particular week or month of the year.

January is usually a good time, since that’s a slow month for many businesses. (Alternately, it might happen at the beginning or end of a fiscal year.) Whatever time you designate, use it to stop, reset, and allow people to regain their strength. This is when training, professional development, company retreats, or bigger meetings might clash least with other work that needs to be done. In general: whenever the company has the luxury (or necessity) of slowing down, take full advantage. You might not like the idea of slowing or stopping work for a week, but that week’s investment can pay off big over the course of a year.

Thanks for reading Ampersand, the Code&Quill blog. (Last week, we gave our introduction to continuous improvement for startups, so click here to take a look if you missed it.) If you’d like highlights from the blog, plus brand-new info about upcoming products and promotions, feel free to join our email newsletter at the foot of the page. The newsletter is also where we give first notice when products are back in stock!