Continuous improvement: It’s organic

By Gerry Keim

“Competition only makes us stronger!” Many business leaders say this, but worrying about what will happen next in the market is something that small business owners and corporate executives have in common.

Staying ahead of market changes means continuously improving what we do. The impetus for change can be shifting consumer tastes, new technologies, offerings by competitors, evolving government policies or macro events such as a terrorist attack or a financial crisis.

Sometimes we can anticipate change, although the risk is guessing wrong. Responding to the first clues of change is often enough to stay ahead of the competition, but how do we do that? How do we continuously improve what we do?

The Lincoln Electric company of Cleveland, Ohio has been continuously improving for more than 100 years. They were the leading manufacture of welding equipment in the U.S. for most of the last century, and in this century they lead the world. All the while, the company never laid off any U.S. employee who had worked for them for more than two years. During the most difficult recessions all employees went on reduced schedules, but all continued to work. Lincoln has also paid its U.S employees huge performance bonuses for more than 80 years in a row. How have they stayed so good for so long?

Enlightened leadership from the beginning is one big reason. James F. Lincoln succeeded his older brother as Lincoln’s top executive in 1914, and one of his first moves was to create an employee board to advise and question top management. The board was welcome to weigh in on strategy and everything else, and it offered suggestions for improvements in every facet of the company, including operations and cooperation among employees.

In 1914 James Lincoln believed his shop workers had as much to give from their heads as from their hands — not a common attitude for executives then or even now in some companies. Issues raised by the employee advisory board, whose members were elected by employees, had to be addressed by top management and responses posted on a bulletin board within two weeks for all employees to see.

Lincoln Electric was not an easy place to find employment. The selection process was essentially a two-year tryout to see how well the candidate performed on the job and if he or she would fit in the company culture. A large percentage of applicants didn’t make it. For those who did, permanent employment was certain as their layoff record indicates.

The long-standing employee bonus plan is based on individual performance, on both piece rate production and qualitative ratings on everything from suggestions offered to cooperation. Bonuses have often exceeded 30 percent of yearly salary.

James Lincoln realized in 1914 that employees who work to build products and interact with suppliers and customers are often the first to see opportunities to do things better. This is especially true in a rapidly changing business environment. The first clues are not picked up in headquarters; but on the front lines of the business.

When consulting I like to ask front line employees if in the course of doing their job they see opportunities to do it better. The answer is often ‘yes.’ When I ask if their supervisors encourage them to provide suggestions for improvements, the response frequently is a chuckle, or at least an eye roll. In such cases companies have already paid for potentially valuable observations by their employees, but they are not harvesting them for the company’s benefit. Why not?

Researchers today call this employee voice: the willingness and the interest to provide suggestions that could lead to continuous improvement in company operations and performance. Employee voice is discouraged in many companies by the fear of what will happen if employees speak up, and by the belief that speaking up is futile and will not lead to change.

Research indicates that some managers believe employees do not have valuable information and that they are only interested in working less and earning more. Other managers believe that accepting advice from lower-level employees would signal weakness or incompetence on the part of managers, that they should have all the answers. Managers who get promoted quickly are less likely to seek or accept suggestions and male managers are less likely than females to seek input from subordinates.

John Lincoln believed his role as a leader was to create an environment where his employees would be encouraged to discover new ways for the company to improve and to bring those suggestions forward for his consideration. Careful selection was critical, as was the promise of long-term employment and bonuses linked to individual and organizational performance.

Any business leader could use this same approach today to lead continuous improvement.

Gerry Keim is a professor of management. His research interests include organizational entrepreneurship and why some firms respond better than others to opportunities and threats.

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