How to Create and Sustain a Continuous Improvement Culture

A healthy company culture is the cornerstone of successful companies. So, what kind of culture should you develop in your organization for long term performance and success?

Today we’re making the case for Continuous Improvement Culture (CIC). What is it, why more companies should consider it and what does it take to implement it successfully?

According to?McKinsey, a healthy culture is reflected in the ability of an organization to function effectively and be highly performant for a longer period of time. Their research showed the Continuous Improvement approach to be one of the major signs of a?healthy organizational culture. But why is that and how does it look like in practice?

What is a continuous improvement culture (CIC)?

The continuous improvement culture refers to the system of values shared by an organization that promotes the belief that whatever is good today, might not be good enough tomorrow. In broader terms, it’s a shift in the way employees think about their work, a mindset that makes people eager to become better every day, through incremental improvements.

When developed right, a Continuous Improvement culture naturally instils in people the desire to become better and strive for excellence. It’s rarely the case that we can simply change how people think or what they believe.

Why does it matter?

In the McKinsey?Organizational Health Index, CIC is one of the key ingredients for a healthy organizational culture. Their research shows that the most common type of culture in high performing companies is the continuous improvement one.

The companies with the healthiest cultures are more than twice as likely to outperform their peers.

This Index also proved that in almost 2000 companies, organizational health is closely linked to performance. In fact, the healthiest companies are more than twice as likely to outperform their peers.

So, here are four key benefits that come with the continuous improvement approach.

1. Operational Excellence

Unfortunately, excellence is more of an exception than the rule in many organizations. Operational excellence refers to the alignment between continuous improvement, innovation, business strategy and the corporate culture.

A Continuous Improvement Culture plays an important role in achieving operational excellence because once it is absorbed and integrated into an organization, it becomes its DNA.?

At the same time, continuous improvement culture contributes to operational excellence and in return, operational excellence reinforces the mentality ingrained in the culture that empowers the workforce to continuously improve.

2. Companies with a strong CI culture are more innovative

Continuous improvement?is one of the building blocks of incremental and?sustaining innovation.?

As a culture, is embedded in the “Toyota Way” and since the introduction of the Toyota Creative Idea and Suggestion System (TCISS) in 1951, the company has constantly empowered employees to participate in improving on their products. At the time, they were not the first to value creative ideas from their workforce, but they were the first to make this system an ongoing, widespread practice.

Just having new ideas is not enough to make innovation happen. What moves things forward is how those ideas are prioritized, managed, and implemented. At Toyota, up to 90% of ideas saw the daylight. 70 years and?40 million ideas later,?they proved that a culture that empowers employees to continuously improve has a great impact on how innovative a company can become.

3. Employee retention, engagement and turnover

It’s often said that an organization is only as good as its people. They come with their unique mix of skills, knowledge and backgrounds which add great economic value. Employees’ motivation and commitment has become a major concern for organizations.

As younger generations have different incentives and expectations from their workplace, companies fight for the best talent. The weapon of choice is the corporate culture, because employees are nowadays paying attention not only to perks and benefits, but also to the culture of the company they choose to work for.

When things are going south and engagement rate is low or turnover rate high, ask yourself (and then ask them too): Do they have development opportunities? Can they grow as professionals and individuals? Do they relate with the core values of the company? Is their work meaningful enough, appreciated and recognized? Does it give a sense of accomplishment and purpose? If you manage to address these concerns, you are on the right track.

4. Competitive advantage

If you stop improving, you to stop evolving. In today’s highly competitive markets no one can afford to fall behind. Cultural change gives employees power and while a continuous improvement culture is led from the top-down, it is implemented form the bottom-up. It’s only when management puts responsibility in the hands of front-line workers, that they can take ownership and become accountable.

What makes a strong continuous improvement culture

Leaders should understand that culture is not just a corporate thing HR has to advocate for. Good leaders act both as role models, and as coaches. They have to steer the ship and make sure the organization is not dragged in the wrong direction by the prevailing winds.

1. Great leadership, specifically lean leadership

Leaders should understand that culture is not just a corporate thing HR has to advocate for. Good leaders act both as role models, and as coaches. They have to steer the ship and make sure the organization is not dragged in the wrong direction by the prevailing winds.

2. Communication

Good communication is not as much about talking as it is about active listening and understanding. When we make the effort to listen to understand, not just to answer, communication is more successful.

Communication is a key element for the CI culture. First of all, conveying the right message early on will help employees align with the corporate culture. Being transparent in all areas of the organization also creates a more welcoming and trusting environment which in return makes everyone in the company feel they matter.

Secondly, communication also refers to knowledge exchange. How can anyone improve without knowing about best practices across, up and down the organization?

3. Ownership and trust

A culture of continuous improvement will work if employees can?balance their freedom?to create and develop new ideas with the discipline of accountability and ownership. Still, it’s the leader’s role to empower and inspire people to take risks without fearing judgment or penalty. For this to happen, they also need to feel they are trusted. The reverse should also apply, employees should be able to trust the actions of your company.

Here is where we come back to our previous point, communication and transparency as key factors in building trust.

4. Learning culture

We often see companies providing short term training programs that don’t have continuity. This happens because companies usually overlook the importance of long-term growth orientation that favours learning.

Elizabeth Young McNally, global leader at?McKinsey Academy?has recently talked about building a culture of learning that drives business forward. She is making an interesting point, that “you first have to learn to follow in order to learn to lead.” This is what makes good leaders and also accountable employees.

A few steps to start building a continuous improvement culture and maintain it

Even though we talk about organizational culture as a mindset first and actions second, the truth is that both mindsets and behaviours are difficult to change. So, while it won’t happen overnight, that doesn’t mean that we can't make it happen. Here are five practical steps that can help you make progress on the path towards a continuous improvement culture.

1. Create a safe space

Involve everyone in meetings, always leave your door open for conversations, give feedback and let them know why you value them. Offer learning and development opportunities by allocating time, funding, or just encouragement to follow their personal and professional goals.

2. Implement continuous improvement processes

?Processes help you identify new opportunities and add value to your services or products over time. You can consider Kaizen as a first step. Kaizen is ultimately about building a culture where continuous improvement becomes second nature for all employees, so it’s a natural fit.

Another popular approach that goes hand in hand with a continuous improvement culture is?lean management, a method of managing and organizing work with the aim of improving the company’s performance, especially its quality and profitability.

3. Lead the way: walk the talk

We all know that actions speak louder than words. So, leaders act accordingly by becoming an example for their teams. A very interesting concept in leadership, that comes from the 70s and has been increasingly studied in recent years is the?“servant leader”.

This style of leadership is clearly opposing the traditional approach to leadership where authority prevails. How to achieve this? Be empathic towards your employees’ issues, be a good listener, motivate and encourage people. Stimulate dialogue across all departments and celebrate success, even if it’s small. Lead by example by acting on suggestions and encourage others to do the same.

You could use a?tool for continuous improvement?and ideation. This can help you keep track and implement new ideas which will make everyone feel included.

4. HR as a strategic partner

HR departments play a major role in setting the cultural tone and promoting it. Among their key roles in the company, they have to attract, develop and retain talent. This is why they need to be your strategic partner in building a strong continuous improvement culture.

5. Remove barriers

Going back to the issue of changing mindsets, this can be a huge barrier for organizations. If leaders have a fixed mindset, for example, is hard to achieve a culture of improvement.?Microsoft, for example, leveraged the power of mindset development when Satya Nadella took over as the new CEO in 2001. In his book, “Hit Refresh”, he talks about how Microsoft grew thanks to the growth mindset.

Conclusion

Changing the culture of a company can be a tremendously difficult task, but one worth fighting for. Few companies commit to it, but those who do it and do it well, can see the results of their work. The key takeaway to remember is that while this is a conscious effort from top management, it is a human cantered approach that touches on intrinsic motivation and behaviour change.

A continuous improvement approach can suit any type of organization. When in doubt, it’s best to start small. Get the conversation going, clearly communicate your values and vision and start aligning those with the company’s culture. Ask for help from leaders and management, involve your HR department and set the wheels in motion to get everyone on board.

We’ve created a toolkit for creating an innovation culture, which is in many ways very similar to a continuous improvement culture. So, you might find the toolkit useful if you’re looking to start shaping your culture towards continuous improvement. You can get the toolkit from?here.