5 Steps to Continuous Improvement

An Introduction

Early in my career I joined a mid-size Illinois manufacturing company.  After a year on the job, the master scheduler, a key employee, experienced a heart attack and I was called on to fill the chief planning/scheduling role in the company.  I quickly learned that I needed to focus my limited time and resources on bringing improvements to the company in my new role.  I found the answer to my problem in The Goal, a book written by Eliyahu Goldratt that included a five step process of ongoing improvement.  Over the next 20 years, I have practiced this improvement process with positive results at different companies; large and small, domestic and international, serving various industry segments for sales and operations issues.  The key benefit for me was finding a process of ongoing improvement that could be applied in most situations and provided a focus to help me and the organization do what’s right for the business at the right time.

The Five Steps of Ongoing Improvement

Goldratt described a five step improvement process based on the premise that each profit-seeking organization is driven by the goal to make more money “now and in the future”.  Different companies will define this goal using their own industry jargon.  Effective company management will make increasing bottom-line net earnings one of a few primary goals for the company.  The rate of achieving this goal, to make more money now and in the future, will be limited by at least one system constraint or bottleneck that prevents the company from maximizing net earnings.

Before you start a process of ongoing improvement, define the goal for your company.  What does ‘making more money now and in the future’ mean for your organization?  Define the goal in terms that your management and your workforce will understand and in a way that has meaning in their day-to-day activities.  For one job shop manufacturing company, their goal was to increase the amount of production hours booked since they were selling the time to convert raw material to finished goods.  By applying an ongoing process of improvement at this company, we doubled the new business pipeline that in turn, doubled the productive hours sold.

After defining the company’s goal, the five steps for ongoing improvement are:

  • Identify the bottleneck constraint or significant obstacle (what prevents the organization from obtaining more of the goal in a unit of time?)
  • Decide how to exploit the bottleneck constraint or significant obstacle (how to get the most out of the constraint)
  • Subordinate and synchronize everything else to the above decisions (align the whole system or organization to support the decision made above)
  • Elevate the performance of the bottleneck constraint or significant obstacle (make other major changes needed to increase the constraint's capacity)
  • If in any of the above steps the bottleneck constraint has shifted, go back to Step 1; do not allow inertia to become a system’s constraint.[2]

These five steps aim to ensure ongoing improvement efforts are focused on the organization's bottleneck constraint.  These five steps provide the foundation for many solutions, which include the management of processes, inventory, supply chains, product development and projects (single and multiple), personnel, and decision-making.  How can any generic solution have such broad applicability? Let’s explore step five and how it works.

Step #5: Go back to Step 1.

By now, the above steps have caused the constraint to shift.  That means there’s a new bottleneck constraint.  Identify the next biggest constraint or significant obstacle to increasing throughput and begin the improvement process again with a focus on this next constraint.

Don’t sit back and enjoy the first success and assume that the organization will easily create throughput on its own.  Don’t give up because the improvement process is too hard or takes too long.  Don’t think starting again at step number one is too much work.  The sustained effort will continue to result in additional improvements.

One criticism of this process of ongoing improvement goes something like this: “we can work on more than one initiative at a time.”  Yes, of course talented management can launch several improvement projects and have them running simultaneously.  But, be careful that the organization does not lose focus on what’s important.  Be careful that too many initiatives don’t cause confusion within the organization.  Most people don’t like the change necessary to eliminate each constraint.  By introducing too many initiatives at once, the organization may experience overload and do none of the improvements effectively.

If the organization has successfully begun resolving the first constraint and there’s an obstacle that only time will resolve, you may go back to step one.  It’s like a juggler adding one more item to juggle.  If his capacity is four, don’t throw him another until he’s ready.

This step of going back to the beginning was a key element in my work for the German company.  My team continued to find other obstacles to improved customer satisfaction and increased sales elsewhere in the company.  All told, we tripled sales revenues and similarly increased net income over a six year period, turning around a market share jeopardizing situation to one that restarted the company’s share growth during this period. 

Conclusion

Apply the five step improvement process as the methodology for driving results in the organization.  Bring other management disciplines to bear, like lean manufacturing or six sigma, etc. only if those apply.  If they don’t apply, even the best six sigma project, for example, applied at a non-constraint resource will have limited effectiveness.

I’ve applied this methodology in many different organizations to double the new business pipeline, triple sales revenue at another and increase throughput by 50% and double net income for an already profitable company.  An organization using the five focusing steps is limited only by how big it dares to think.  Imagine what that can mean for your organization!

References

[1] Cox, Jeff; Goldratt, Eliyahu M. (1986). The Goal: A Process of Ongoing Improvement. [Croton-on-Hudson, NY]: North River Press. ISBN 0-88427-061-0

[2] Goldratt, Eliyahu M. (2004). The Goal: A Process of Ongoing Improvement. [Great Barrington, MA]: North River Press.  ISBN 978-0-88427-178-9

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