Managing Business Improvement

Institute of Leadership & Management

MANAGING BUSINESS IMPROVEMENTHow to improve the performance of your business

Contents • Click on the headings to be taken to that section.

Institute of Leadership & Management2

Copyright © The Institute of Leadership and Management 2015. These materials may not, in whole or part, be copied, reproduced, communicated, or otherwise distributed without the prior written permission of ILM.




Section one:

Problems are there to be solvedThis workbook will show you how to problem-solve and provide advice on how you can identify and implement business improvements.



Converting problems into improvements

‘Difficult times disrupt your conventional ways of thinking and push you to forge better habits of thought, performance and being.’

Sharma, n.d.

To remain competitive, businesses must continually strive to improve their performance. While led from the top, managers at all levels have a critical part to play in business improvement. In many instances, improving performance begins by addressing specific issues that could be supressing productivity or creating inefficiencies. To contribute to the improvement of business performance, therefore, managers need to understand the key principles associated with problem-solving and the methods and techniques that can be applied to make improvements.

Problem-solving is a skill that will help mark you out as a manager and can mean you earn a reputation as the go-to person when the organisation runs into difficulties. It requires a systematic approach, and a number of different problem-solving techniques have emerged over the years.



• Roll over icons to find out about the techniques.



What is the problem?

Choose one of the methodologies from the above and show how it could help you solve the problem. Explain the methodology where appropriate:

• Task one: Getting to the root cause of a problem

Consider a real business problem that you have faced and use one of the above methodologies to find out the likely cause.

Type in your answers below.



Other considerations when problem-solvingManagers are often encouraged to think out of the box when it comes to solving problems, but it is important to be aware of any constraints that dictate a direction or route that might be taken. These constraints could be legal, moral or ethical. Today’s complex operating environments mean a number of different restrictions could apply so managers need to view the problem from all angles. Constraints imposed by legislation and regulation are among the biggest challenges for businesses, and managers who don’t have the knowledge to understand how these could affect a project should talk to someone who does to ensure they come up with a compliant solution.

Identify all stakeholders involved in the business issue early on and engage with them. Find out what the problems are from their point of view. Failure to do this can mean that your solution merely creates new issues for people and can lead to conflict. Stakeholders can help to generate a solution; involving them early provides managers with a much broader field of vision.



• Task two: Identifying constraints

Use the diagram below to list a legal, moral and ethical constraint that you need to be aware of when problem-solving and briefly explain why.




Making a decisionManagers need to have an objective method of making a business decision as part of the problem-solving process. A common approach used is the decision matrix method, which is also referred to by a number of other names including a decision grid, problem-selection grid, criteria-based matrix or sometimes the Pugh Matrix (1990). It is a chart with columns and rows that allows the systematic evaluation of a range of criteria relating to a number of different scenarios/approaches to a problem or situation.

• Click on the numbers to find out the steps for creating and using a simple decision matrix.



Totals:

Criteria Importance Option 1 Option 2 Option 3 Option 4

• Task three: Creating a decision matrix

Using the diagram below, consider an important decision you have had to make that relates to a new business solution, and score and weight the criteria that are important to that decision.

Type in your criteria, rate them in the order of importance, then give each option a score between one and 10. When you’re done, refer to the previous page to find out how to identify the best solution.



What impact will the decision have?Having made your decision, further analysis needs to be done before the solution is fully implemented. This means you need to:

• Roll over the icons to find out more.

Having done this, the next stage is to create an implementation plan.



Why and how a business needs to continually improve and what a manager needs to know to make it happen.

Section two:

Committing to continuous improvement




Striving for high performanceAdopting continuous improvement programmes means that a business is unlikely to stand still, and it increases its chances of maintaining long-term competitive edge and continually adding value for its customers. Improvements can be small (sometimes referred to as incremental) or major (sometimes referred to as breakthrough) and can affect all areas such as customer service, cost control, quality assurance, productivity and delivery.

With organisations having to be more reactive and agile than ever before, finding the time to implement continuous improvement strategies can be challenging. Once the mind-set and processes are embedded, though, it provides a way of continually enhancing the capability of employees and the organisation in tandem with its day-to-day running. It can also act as a powerful engagement and retention tool, because employees feel they are being listened to and are contributing to the performance of the business.



Continuous improvement models and techniquesThere are a number of models and techniques used to achieve continuous improvements. Here are some of the most popular in use today:

KaizenKaizen, which means ‘continuous improvement’ in Japanese, seeks to involve all employees within an organisation at all levels. It means that all areas of the organisation can be subject to ongoing improvement by those closest to a particular process, operation or system. Kaizen, brought to the West by Masaaki Imai, focuses on making improvements in a number of areas – such as quality assurance, cost management and delivery – which will ultimately be felt by the customer. A classic use of Kaizen would be when a factory line worker comes up with a more efficient way of assembling components and, after a brainstorming session and discussion with management, the improvement is implemented.

The Kaizen Institute lists the guiding principles of Kaizen as:

• Roll over the icons to find out more.



The Institute says that while one of Kaizen’s most notable features is that big results come from many small changes accumulated over time, this has been ‘misunderstood’ to mean that Kaizen simply equals small changes. It contends the greatest impact may be Kaizens led by senior management as major transformational projects or cross-functional teams as what it terms ‘Kaizen events’.

Kaizen is well suited to a manufacturing environment but can be adapted for other sectors. It works well in workforces that are motivated and loyal, but the philosophy won’t flourish in a workforce that feels disconnected from the management and is resistant to change. It can also have a negative effect if the management tier consistently rejects ideas from workers. As well as supressing improvements, this will also damage morale.

Kaizen is a cycle of continuous activity. The Deming Cycle (plan-do-study-act or the variation plan-do-check-ACT), is a concept that is often used to show the thinking required for continuous improvement programmes such as Kaizen (Deming, 1992).



Crosby’s 14 stepsCrosby (1979) developed 14 steps that are frequently used by organisations as a guideline for a quality improvement programme. They are summarised as follows:

• Click on the icons to find out what more about Crosby’s 14 steps.



• Click on the icons to find out more about Crosby’s 14 steps.

Crosby’s 14 steps seek to improve quality by removing errors and defects. Doing so can save money. While seen as an excellent quality improvement programme, some claim that the zero defects target can be hard to achieve and is demoralising for those employees who consistently fall short. Managers adopting this approach should therefore view it as the performance standard to which they and their teams should aspire, and they should support employees in their efforts to reach it.

APPROVED



Six SigmaOne of the most popular business methodologies and quality improvement tools in the world, Six Sigma takes a statistical approach to measuring and improving performance by identifying and removing defects in processes, services or products. It also removes any wastage by taking out processes that make no contribution to the end goal. It was pioneered by Motorola in the 1980s, which describes it as a metric, a methodology and a management system. At its core is the DMAIC (Define Measure Analyse Improve Control) model of process improvement.

• Click on the circles to find out more.

Being rooted in hard data and analysis, there is no doubt about the potential of Six Sigma to make sustained improvements to the business. However, it is sometimes perceived as a difficult technique for people to understand, so organisations will need to invest in training if it is to be implemented successfully. It requires long-term commitment from management, who must ensure the right culture exists in the organisation. Its success also relies on being able to collect accurate data in the targeted areas.



• Task four: Applying business improvement methodologies

Using the diagram, list three different business improvements that could make use of the three methodologies described above and why.




What will the improvements cost?When exploring options and solutions for making business improvements, it is important to perform a cost benefit analysis ahead of putting any changes into action. This entails adding up the financial benefits of your proposed improvements and examining how they compare with the costs involved in implementing it. The analysis will tell you if the improvement process is financially viable and how long it will take to derive a return on investment.

• Click on the numbers to find out the key steps of a cost benefit analysis.

What will it cost?

What are the cost

benefits?

How do they

compare?



• Task five: Undertaking a cost benefit analysis

Using the grid below, create a simple cost benefit analysis for a business improvement. Below shows a four-year timeframe, but fill in what you need to in order to make it more realistic for your project.


Costs of improvement

Benefits

Benefits minus costs

Year 4

Year 4

Year 3

Year 3

Year 2

Year 2

Year 1

Year 1

Totals

Totals



Seek feedback on the improvementsFeedback should be regularly sought from employees, stakeholders and customers. It is important to make sure benefits are being felt by all sides and that the business improvements haven’t simply shifted the problems further down the line or created issues for someone else in the process.

Hold regular meetings with employees and stakeholders, undertake customer satisfaction surveys and monitor customer complaints to assess whether the improvements are having the desired effect.



Effective problem-solving and making the right decision are at the heart of business improvement. A guide to the key steps required for both.

Section three:

Practical problem-solving




Getting to the root of a problem

‘The formulation of the problem is often more essential than its solution, which may be merely a matter of mathematical or experimental skill.’

Einstein (1938)

There is no shortage of methodologies to help managers problem-solve but alongside them are a sequence of actions you should go through.

Define the problem

A problem has occurred because something has gone wrong. In their book The Rational Manager, Kepner and Tregoe define a problem as a ‘deviation from the norm’. So establish what is happening, where it appears to be centred and how often it is occurring. Gather as much information as possible about the situation. Talk to those affected, collect relevant data and undertake any other necessary research to ensure you are seeing the bigger picture.

Identify the likely cause(s)

While you will want to find out why it is occurring as quickly as possible, don’t apportion blame without viewing the problem from all angles. It may be manifesting itself in one department but the root cause could be found in a different one. Poor performance, for instance, may be due to lack of training or inadequate resourcing. If it is a fresh problem, investigate what has changed. Use the information gathered and established problem-solving methodologies to help you get to the bottom of it.



• Task six: Problem-solving methodologies

List three problem-solving methodologies that could be used to identify a problem and its cause.


1

2

3



How big a problem is it?Evaluate the scope and scale of the project. Be mindful that while intrinsically linked, these are two different things. The scope relates to the breadth of the problem and its range of symptoms, while scale relates to how big – or small – the problem is or could become. Managers must look closely at both and assess the current impact and future implications if the problem is not dealt with in a particular timeframe.

Addressing the problem

Analyse the possible courses of action that can be taken to solve the problem. Seek input from those individuals close to the cause and effects of it, and hold brainstorming sessions to talk through all possibilities. Having arrived at a set of solutions, shift your attention from analysis of the problem to decision-making. Use a decision matrix to assess the best course of action.

Test your solution

Work through a number of scenarios and employ the use of problem-solving methodologies as you did in the analysis stage to test your theory. Make sure that the solution you choose does not have any adverse effects elsewhere and you aren’t simply moving the problem. Solving the problem should bring about a business improvement, so generate evidence including hard data to justify the approach you have decided on.

Plan of action

Formulate a plan for how you will implement the solution and assign responsibilities. Consider what you will need in terms of people and resources and set a realistic timeframe. Detail how success will be measured and when improvements will be felt. Also put a plan in place to communicate the changes that will be occurring.



Get the go-ahead

Before seeking final approval, ensure all stakeholders are happy with the solution and follow up on any concerns they have. Also ensure you have factored in any legal or other considerations that might place constraints on any changes you introduce. Support your implementation plan with a cost benefit analysis.

Action the plan

Implement the plan and continually monitor and measure progress. Things don’t always run smoothly so be prepared to act quickly if any changes adversely affect day-to-day business. Hold regular meetings with those involved in implementing changes so you hear about any problems/issues from the source.

Problem solved?

After implementation, evaluate the scale of success in solving the problem. Talk to all stakeholders about how successful they feel the solution has been. Gather evidence to demonstrate how this has helped to make a business improvement and what the longer-term implications might be for the business.



• Task seven: Step-by-step problem-solving

Describe your approach to a particular problem using the below steps.


What is the problem?

List the likely causes of it

List the possible courses of action

Describe how you would test the solutions

Briefly describe your plan of action

Following implementation,

how will you measure

its success?



How managers can put the theory behind making business improvements into practice to contribute to improved performance.

Section four:

Making a contribution




How to realise business improvements

‘80% of an organisation’s improvement potential lies in front-line ideas.’

Robinson and Schroeder (2014)

Opportunities for business improvement lie in all areas of the organisation, and anyone within the organisation has the potential to come up with bright ideas that will bring about improvements. The chances of this happening are far more likely if a culture of continuous improvement exists within the organisation. Managers can help to encourage and embed this. They should proactively look for ways to make improvements, and need to acquire knowledge of the processes and methodologies that can be used to implement any changes.

Identifying where improvements can be made

Many business improvements arise from identifying a problem such as a bottleneck in productivity or a drop in an individual’s performance. They also come from a manager’s desire to put best practice in place in a particular area or streamline processes and remove duplication and wastage. Additionally, they can derive from a member of staff who, having repeatedly carried out a task, believes they have come up with a more efficient way of performing it.



What will it mean to the business?

Not all attempts at business improvements will be financially viable at the current time, and managers must assess the scope and scale of the contribution to the business. Having identified an area for improvement, gather relevant data and information and document the current situation. Visualise the situation with the improvement in place and measure the impact of the projected changes against the baseline data. This will help give an indication of how much value it will bring to the business and its customers.

How to implement the improvement(s)

Work out how you will realise the improvement(s). If the organisation is committed to continuous improvement, it may already have adopted one of the popular business improvement methodologies such as Kaizen, Six Sigma or Crosby’s 14 Steps.

Examine which methodology may be appropriate. All require a long-term commitment and buy-in from the senior team and in the majority of cases organisations will have to invest in training so managers and facilitators can master the principles of each technique.

Make your case

Put together a cost benefit analysis of the projected improvements and support your case with other evidence. This could include a projected drop in customer complaints or an illustration of how wastage and duplication has been removed from a process. In the longer term there may be softer benefits such as an increase in employee engagement. These may be difficult to quantify but should still form part of your business case.

Plan for your action

Develop the necessary operating procedures and resource plans to achieve the business improvement. If successful, these can become standard.



• Task eight: Turning a problem into an improvement

Using the most appropriate business improvement methodology in tandem with the above steps, describe how a business problem you have experienced could lead to a business improvement.

Type your answer below.



ReferencesBuchanan, L. and O’Connell, A. (2006) A Brief

History of Decision-Making. Harvard Business Review

Crosby, P. (1979) Quality is Free. McGraw-HillDeming, W. E. (1992) The Deming Management

Method. Mercury Business BooksDeming, W. E. (2000) Out of the Crisis.

The MIT PressEinstein, A & Infeld, L. (1938) The Evolution of

Physics. Cambridge University PressGupta, P. and Schultz, B. (2005) Six Sigma Success in

Small Business. Quality DigestImai, M. (1986) Kaizen: The Key to Japan’s

Competitive Success. McGraw-Hill EducationKepner, C.H. and Tregoe, B.B. (1965) The Rational

Manager: A Systematic Approach to Problem-Solving and Decision-Making. McGraw-Hill

Pugh, S. (1990) Total Design: Integrated Methods for Successful Product Engineering. Prentice Hall

Richman, M. (2006) The Quest for Zero Defects.Quality Digest

Robinson, A.G. and Schroeder D.M. (2014) The Idea-Driven Organization: Unlocking the Power in Bottom Up Ideas. Berrett-Koehler

Spradlin, D. (2012) Are You Solving the Right Problem? Harvard Business Review

The Kaizen Institute uk.kaizen.comWoehr, B. (2015) Using Six Sigma to Fix a

Deployment in Progress. isixsigma.com



• Task checklist

Below is a list of all the practical exercises in this workbook to help you record your activity. Completing these will enable you to understand and practise the skills you need to manage change effectively.

Getting to the root cause of a problem

Identifying constraints

Creating a decision matrix

Applying business improvement methodologies

Undertaking a cost benefit analysis

Problem-solving methodologies

Step-by-step problem-solving

Turning a problem into an improvement

Documents

Managing Business Improvement