May 12, 2020

How to build a culture of continuous improvement in your company

“Continuous improvement” is one of those buzzwords that seems self-explanatory, and in a way it is. It’s axiomatic that successful businesses, like successful people, are always trying to do things better. So if you’re an established tech firm trying to “build a culture of continuous improvement,” the challenge is not convincing your team that continuous improvement is a good thing. Instead, you will probably find that most of them already have a strong ethic of self-improvement, but these individual attitudes are not cohering into a company-wide culture. And without a deliberately cultivated culture of continuous improvement, the improvements themselves–and the results for your customers–will be harder and harder to sustain.

Here’s what we mean in practical terms. Let’s say you just finished rolling out a major update to one of your core products. Overall, it went pretty well. The clients seem satisfied, if not quite over-the-moon, and your customer complaints and the number of bugs you’ve had to fix are about what you expected. Your costs were a bit higher than projected, but not out of control by any means. You met your deadlines, but not without your fair share of late nights at the office. And your team seems as content as ever, ready to move on to the next project. You overhear some informal conversations about what to do better next time, and you have your own mental list of lessons learned based on your own observations and your team’s feedback during project meetings. As you’ll probably agree, there is no evidence of a “toxic culture” in this snapshot.

But just because the culture isn’t toxic doesn’t mean it’s likely to yield significant improvements for your next project. Sure, the clients aren’t complaining, but you want them to be over-the-moon. And you may have more or less met your budget and schedule, but you want it to be more rather than less. And your team could be more than merely content. They could be activated–already tuned in to the next project and going in with a clear sense of what they need to do to take their performance to the next level.

In both cases, your team will be comprised of conscientious individuals who want to do their best on every project. But the activated team is the one that has been invited to participate in a thoughtful, open, formal conversation about how to better advance the company’s goals, and by extension their own.

What is “a culture of continuous improvement”?

Before we get too much further, it’s probably important to define what we mean by “a culture of continuous improvement.” First, “culture” in this context means both attitudes and rituals. When you think of “building a culture,” chances are you are thinking mostly about attitudes–“How can I change the way my team thinks or feels about our business goals?” And getting on the same page about attitudes is definitely critical to building any kind of healthy culture. But a savvy leader understands that attitudes are shaped by well-chosen rituals, repeated and repeatable group activities that build a sense of identity around a set of shared values. In a business context, these rituals also have a practical dimension, because they are the same processes you use to generate, refine, and implement new ideas for improving your products and services.

“Continuous improvement” is harder to define than one might think. It can mean adding capability and value to every new version of your product, making your internal processes more efficient with each new project, and of course making your company more profitable for all stakeholders, including every team member. Taken together with “culture,” continuous improvement means taking informal, individual, and invisible approaches to improve performance and create formal, collective, and traceable processes that both generate meaningful improvements and reinforce the group values needed to sustain improvements in the future.

3 Core Traits of a Culture of Continuous Improvement

Healthy cultures of continuous improvement will have these core characteristics:

  • They are reflective, always thinking systematically about past performance to find opportunities to improve.
  • They are trust-building, encouraging everyone to share opinions openly and giving them the sense that they have been heard.
  • They are empowering, cultivating buy-in by demonstrating a clear relationship between the goals and interests of the firm and those of all team members.

1. Hold Project Retrospectives to Capture Tribal Knowledge

Most institutions thrive on “tribal knowledge,” a memory of how things happened in the past and an awareness of the unwritten rules that govern the present. This kind of knowledge is essential, but it’s vulnerabilities are obvious. What happens when your longest-tenured team members, your treasure troves of tribal knowledge, leave the firm? How do you pass on this knowledge to new employees?

In a culture of continuous improvement, tribal knowledge is not replaced but rather recorded. Moreover, it is recorded constantly, as it is created, long before the exit interview. We’re big fans of “retrospectives,” formal meetings that take place after significant milestones, like the end of a project, or in the wake of some event, whether positive or negative. A retrospective invites everyone who worked on a given project (or who was involved in a given event) to ask two basic questions: How did we do, and what could we have done better? Ideally, these meetings produce action items for the next project or, if you really hit the jackpot, concrete process improvements that can be implemented with a deliberate roll-out rather than by mere word of mouth. You’re still creating “tribal knowledge,” you’re just doing it on purpose as part of a formal, systematic process that both renders that knowledge into actionable intelligence and legitimizes proposed improvements through wide, open participation.

Even without a formal process for this kind of reflection, your team may continue to work hard on improving their own performance, and they may even try to collaborate a bit. But you’ll likely end up with a lack of coordination and perspective. Some improvement efforts may cancel each other out or needlessly duplicate processes. And some team members may be so hyper-focused on improving their own processes that they see diminished returns, lapsing into change for its own sake, optimizing things that are already optimal enough.

2. Build Trust by Listening Carefully to Feedback

One of our go-to resources is Patrick Lencioni’s influential book The Five Dysfunctions of a Team. Lencioni places his five dysfunctions on a pyramid:

As you can see, Lencioni believes the root of all dysfunction is the lack of trust, and we agree. Crucially, the absence of trust does not necessarily imply a toxic company culture where employees are alienated or exploited. It’s entirely possible–in fact, it’s downright ordinary–for employees to be on friendly terms with their leadership without having any reasonable expectation that their suggestions will lead to concrete improvements. That’s because neglect and active suppression are not the only ways to erode trust. A leader can talk about the value of feedback from every team member until she’s blue in the face, but the team will respond to the reality, not the words. If the process for managing suggestions is disorganized or opaque, employees may still get the impression that their ideas don’t go anywhere. A suggestion box is a classic example of a tool that presents itself as transparent but usually becomes just another administrative black hole. The effect of these dead ends is worse than neutral–pretty quickly, they engender a cynicism among team members that will make it harder to earn their trust even when you implement a better system.

So if not suggestion boxes, what? The good news is that it doesn’t have to be complicated. Depending on the size of your firm, sub-committees and working groups can be a good way to gather suggestions and disperse feedback. They give employees a voice among the peers who best understand their work, and they synthesize and amplify individual contributions in a way that makes them much easier for leadership to process and respond to. Smaller firms may be able to have company-wide meetings expressly for the purpose of discussing improvements. Of course, it is critical to set the tone for these kinds of meetings early. Voting on a set of meeting norms is a great way to make sure they remain safe and open. If leadership cannot handle constructive criticism, or if team members use blaming language in describing the shortcomings of others, the meetings may do more harm than good. And whatever you do, remember that it’s vital for team members not only to have a way to make suggestions but also to receive reasonably prompt feedback about where those suggestions lead.

Empower Team Members by Offering Tangible Incentives

Firms in every industry must contend with a 9-to-5 mentality, with a tendency among team members to see their work as “just a job.” Especially if you started the company or are part of its executive leadership, it can be frustrating to feel as though some team members are just punching the clock, not buying in to your grand vision. But before giving in to that frustration, ask yourself what you are doing to build that sense of shared destiny. Remember that most people want to believe that their work counts for something more than a paycheck, and if they don’t believe that, it is probably a rational response to your corporate culture. Building a culture of continuous improvement requires convincing team members that they are stakeholders, not just employees. Otherwise, why would they go to the trouble?

This is empowerment–a sense that one’s contributions meaningfully advance the team toward some larger goal. And it takes more than a rousing speech to do it. Your team will respond to concrete incentives long after words become stale. Think of your own motivations: what drives you to improve your own performance if not a direct and tangible correlation between the quality of your work, the success of the company, and your own personal success? It is not reasonable to expect someone to participate enthusiastically in a culture of continuous improvement without that same sense of shared interest.

So how do you build a culture of empowerment? Again, it doesn’t have to be complicated. Turn your annual performance reviews into opportunities to reward good performance with substantive incentives, and build your KPIs around your core business objectives. If a team member is improving processes in a way that saves the firm money, try to pass on some of that savings to them in the form of year-end bonuses, and be explicit about the connection. Non-monetary recognition, like awards and title bumps, can also be part of an effective incentive program, but they can feel hollow if they’re not tied to more tangible benefits. As long as your incentives are built around performance targets that really do make the company more profitable, reinvesting some of that profit in incentives will pay off in the long run.

None of this means that “informal” rituals are bad or useless. On the contrary, you want team members to be talking to each other constantly, both on and off the record, about ways to advance your shared vision. And it is definitely possible to “overprocess” your continuous improvement culture to the point where it becomes an onerous administrative burden or a wet blanket that stifles everyone’s passion. A few well-selected formal rituals will build a culture in which informal conversations flourish.

Of course, building a culture of continuous improvement requires steady, intuitive leadership. Even though a thriving improvement ethic will be very profitable, building it may require looking beyond immediate bottom-line concerns and investing in opportunities to build team identity around core business objectives and cultural values.

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