Why Should Nonprofits and Startups Care About “Lean”?

quality-686329_1280Why should your organization care about a once-obscure Japanese business principle called “kaizen”? Because it can dramatically improve your team’s performance.

Kaizen (KY’ zen), translated from Chinese and Japanese as mean “change for better,” is a method of continuous improvement in work practices, personal efficiencies, and activities. Kaizen is a core principle of “Lean” methodology, which we advocate for startups and nonprofits. But what does it mean to apply Lean and adhere to kaizen? This post explains, emphasizing the relationship between kaizen and effective risk management.

Kaizen and the Birth of “Lean”

Kaizen was adopted after World War II in Japan. It was popularized by W. Edwards Deming in his book Out of the Crisis, and began to be applied in US manufacturing during the 1980s. Kaizen means always seeking to improve and empowering individuals and teams to make changes in processes for purposes of improvement.

Kaizen is one of the basic principles of “Lean” methodology. As described in books like James Womack’s The Machine That Changed the World, Lean has become a standard feature of leading manufacturing companies around the world. Furthermore, since its original adoption in manufacturing, Lean has been applied in service industries, too, as described in books like Michael George’s Lean Six Sigma for Service and others prescribe Lean service processes for marketing and sales. Recent years have seen a spate of books relating to Lean for startups, as in Eric Reis’ The Lean Startup, Steve Blank and Bob Dorf’s The Startup Owner’s Manual, and Ash Mauya’s Running Lean. Lean even has found salutary applications in personal productivity, as described in Jim Benson and Tonianne Barry’s Personal Kanban.

The Essence of “Lean”

In Lean Thinking, Womack and his co-author Daniel Jones identify five core Lean principles:

1. Value. An organization must focus on maximizing value, as defined solely by its customers.

2. Value Streams. To focus on maximizing value, the organization must identify and describe its value streams, which are the paths by which its products or services are created internally and delivered to customers.

3. Flow. The organization must maximize flow through its value streams by eliminating waste.

4. Pull. The organization must create mechanisms that enable customer demand to pull offerings through the value stream, rather than creating inventories that employees push through the value stream to end users.

5. Perfection. The organization should strive to perfect its processes by continuously monitoring and taking small steps to improve each process. This element is captured by the Japanese term “kaizen.”

How Kaizen Works

Ultimately, kaizen is the heart of Lean. Kaizen includes looking for ways to improve, being open to improvement, fostering a culture of improvement, thinking about processes in systemic terms, and having the humility to change. When applying kaizen philosophy, teams and individuals challenge systems, processes, and controls that have previously been viewed as permanent fixtures of operations. “The way things are done” becomes the subject of continuous scrutiny.

Kaizen fosters a continuous flow of small ideas. Because kaizen promotes daily small changes, improvements can happen over time, which means faster, more efficient processes with less cost.

Kaizen emphasizes making small changes because large changes can be intimidating, may take too long, and may end up changing more than is necessary. Kaizen emphasizes incrementalism over revolution because, as Robert Pryor notes, revolution can be dangerous and counterproductive:

[Advocating revolution, or the “single big change,”] is a classic “batch” mode way of thinking: that bigger is always better. Incremental approaches to problem solving and product development . . . have been shown to yield superior results on every quality and productivity measure. This is true for several reasons: When problems are complex, we can only see so far ahead in terms of crafting solutions; everything else is guesswork and decreasingly likely to be accurate. If we wait until we believe we have every possible improvement mapped out, we may never get started on improving anything. There is a high likelihood of overdesign in attempting a “complete” solution. The problems that we see after initial implementation may not even be visible today. The problems that we think we should solve today may no longer be the highest priority problems – or problems at all – after an initial improvement initiative is completed.”

Robert Pryor, Lean Selling (2014), at 228.

Kaizen changes are immediate and localized. Changes usually occur on the spot, through a collaboration of efforts. For example, Toyota employs kaizen on the assembly line. Line personnel are expected to halt production if a problem occurs and, working with the supervisor, devise a solution. Moreover, the emphasis is on fixing the problem once and for all, so that it does not recur.

Why Kaizen Works

The beauty of kaizen is that it empowers and aligns everyone in an organization. When applied correctly, meaning every day by every employee, kaizen creates an all-eyes-on-alert approach to quality and process improvement. Kaizen thus emphasizes continuous risk management at the micro level.

What’s more, instilling a kaizen culture in your company can greatly improve employee performance. Kaizen promotes collaboration. By giving employees direct roles in helping identify and troubleshoot problem areas, kaizen can can improve morale and personal effectiveness.

Why You Need Kaizen in Your Risk Management Program

Because a kaizen culture encourages every person in the organization to identify waste and suggest improvements, kaizen is a crucial tool to help organizations identify and address threats and opportunities. A kaizen culture can help your company identify potential risks much more quickly than an annual/semi-annual risk review. A kaizen approach can augment the review process and build the review process into each employee’s daily activity.

Also, everyone from line employee to the board can create and share information. This helps reduce the likelihood of threats overtaking an organization, since everyone is on alert for anomalies and risk triggers.

Kaizen can also help companies improve their reporting. When issues are logged at the micro level, reports give a more thorough assessment of the company’s overall operational efficiencies.

By growing and nurturing a kaizen culture, you can build a collaborative, cross-functional team approach to addressing risks at their origins. Over time, this can result in dramatic improvements in performance. All because of that little word, kaizen.

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