A comparison of Australian firms and their use of continuous improvement tools

Citation

(2002), "A comparison of Australian firms and their use of continuous improvement tools", Measuring Business Excellence, Vol. 6 No. 1. https://doi.org/10.1108/mbe.2002.26706aab.007

A comparison of Australian firms and their use of continuous improvement tools

A comparison of Australian firms and their use of continuous improvement tools

IntroductionThe increasing pace of globalisation and technological change has, according to Chapman and Hyland (1997), meant that productivity and quality improvements must occur at the same time if organisations are to maintain or improve their competitive positions.

Studies such as Garvin (1988) have confirmed the strategic importance of quality to manufacturing firms. In the 1990s elaborately transformed manufacturers such as the automobile industry have come to regard quality as a condition of entry to global markets. However, not all firms are at the same stage of development in terms of their quality journey. While some firms are content to simply eliminate defective products and reduce waste, other firms are focussing on all aspects of their operations aiming to continuously improve their total business and reduce all non-value adding activities to a minimum.

While quality of product or service is regarded by many as essential for success, recent studies such as Hamel and Prahalad (1994) have identified a need for what they term competitive quality. Competitive quality is based on what Dean and Bowen (1994) view as a systems perspective, continuous improvement (CI), high productivity and customer orientation. This article analyses how some Australian companies are using CI in their quest for competitive quality. In particular we compare and contrast the different support methods, content, and tools companies use and value at different stages of implementing CI. In doing so, this article seeks to provide lessons for managers beginning to implement CI or attempting to move from limited use of CI in the manufacturing area to using CI across the entire business in areas such as finance, design, purchasing and sales.

CI has been defined by Bessant et al. (1994) as a company-wide process of focussed and incremental innovation. CI has been viewed for some time as an important element in quality programs. There has been, according to Bessant et al. (1994) and Robinson (1991), growing use of CI in areas such as cost reductions, flexibility, inter-firm relations and support process improvements. An analysis of the level of development of CI across all aspects of a firm's operations provides a significant indicator of a company's future competitive potential.

Wacker and Sheu (1994) view the road to competitive quality as an evolutionary journey. During the evolutionary process products and services become increasingly competitive in the global market. The evolutionary process goes through a sequence of four stages. In the first evolutionary stage the firm's products do not have high quality, as there is little competition. During the second stage the firm has acceptable quality but competes on low cost as it develops its manufacturing systems. In the third stage firms have well developed manufacturing systems and are able to compete on superior durability and reliability. In the fourth stage firms differentiate their products by constantly adding new features. In this stage the firm's competitive advantage can only be sustained if its competitors' manufacturing systems cannot readily duplicate or improve on the product. Wacker and Sheu (1994) maintain that the Japanese experience is similar to these four stages. For simplicity's sake they refer to the four stages as pre-quality, conformance to design, improvement in design and finally, initiating design. So that a firm using CI would most likely be at stage 2, 3 or 4.

In a similar vein De Filippis (1994) maintains that there are three increasingly complex stages that a company must go through to be successful in performance improvement. To sustain gains from improvement activities firms need to evolve through three distinct stages. The initial stage involves building confidence and a commitment to change. Next, stage two requires that personnel are aligned with the right job. The third stage involves breaking down existing departmental frameworks so that improvement is across the whole organisation. The problem with both these models is that they are based on lifecycle theory and an evolutionary approach to change that insists that an organisation is organic in nature and to reach its ultimate stage must undergo a sequence of necessary changes.

Van de Ven and Poole (1995) maintain that teleological theory is used to explain changes based on goals as the final cause for guiding change. They claim that this approach underlies many organisational theories including March and Olsen's (1976) adaptive learning and strategic planning and goal setting as espoused by Chakravarthy and Lorange (1991). Proponents of this theory view change or development as a repetitive sequence of goal formulation, implementation, evaluation and modification of goals based on what was learned or intended (Van de Ven and Poole, 1995). CI can be viewed as part of teleological theory because, as Van de Ven and Poole (1995) point out, a teleological model regards development or change as an ongoing cycle of goal formulation implementation, evaluation and modification based on experience and learning. This is very similar to the plan do check act or PDCA cycle widely used as a basis for CI activities.

Unlike lifecycle and evolutionary theory, teleological theory operates in a constructive mode. A constructive mode of change produces innovative and often unpredictable solutions and is more creative than prescribed modes of change. Also teleological models are not based on the idea that there are clearly defined stages that an organisation must progress through in order to achieve success. A firm embarking on CI does not have to follow a prescribed path and can move from one tool to the next without having to successfully master previous tools and techniques. Analysis of tools and support methods used in CI in Australia will identify if there are tools and techniques that are more suited to mature or developing firms.

Methodology

The survey reported here was carried out as part of a wider investigation of CI being coordinated by the members of EuroCINet, a European-wide network of researchers working in the field of CI. Over the period March 1995-March 1996 the survey was conducted in Sweden, Denmark, The Netherlands, Finland, the UK, and Australia. Each country is producing its own analysis.

The survey was conducted by postal questionnaire. To enable inter-country comparisons to be made a set of core questions was agreed. These form the bulk of the questionnaire used in each country, but individual countries were able to include additional questions if they wished. Guidelines were agreed on the type of company to survey, in terms of size (number of employees) and manufacturing areas (SIC codes).

The following statement appeared prominently on the questionnaire: "the term continuous improvement is used here to describe a systematic attempt to involve all employees in incremental improvement".

The questionnaire comprised 32 questions in five sections covering:

1. 1.

   company background;

2. 2.

   general characteristics of the organisation in the business unit, and previous experiences of change efforts;

3. 3.

   issues concerning the organisation and operation of CI;

4. 4.

   support for CI, and the tools used in the CI process; and

5. 5.

   the effects of CI.

In the section of questionnaire containing the issues concerning the organisation and operation of CI, the firms were asked to rate their level of maturity in working in CI on a four-point scale (1 = mature, 2 = developing, 3 = immature and 4 = not applicable). The data used in the present analysis was for the firms which were rated mature and developing.

Analysis of data

The data provided insight into the various methods or means that are often regarded as important in accomplishing continuous improvement in the organisation or business unit. In particular, we examined the extent of correlation between the level of importance of these support methods as indicated by the managers and the extent of usage of these methods. The correlation calculated was a rank correlation, since importance is measured on a five-point scale and usage on a three-point scale (see Table I). The significance level shown in the table is the probability that the correlation is equal to zero; low significance levels indicating high probability of significant correlation. In general, there was a reasonable correlation between importance and usage for most items, for both mature CI and developing CI firms, although, interestingly, the correlation was generally higher for developing firms. The correlation was highest for means such as promotion through internal media, notice boards and competitions and awards and use of ISO 9000 and total productive maintenance, in the case of both mature and developing firms. Strikingly, there was low and generally insignificant correlation, particularly for mature CI firms, between importance and usage of management support, supportive leadership and face to face communication. In other words, of all the means used to accomplish CI that we investigated, those that lagged furthest behind in terms of implementation relative to their considered importance were in the areas of support from management and others in leadership roles, and also in areas of communication.

A similar analysis of the correlation between importance and usage of the problem solving tools employed in continuous improvement showed a significant correlation for all tools for both mature and developing firms. Once again, the correlation was higher in all cases except processing mapping tools (about the same) for the developing CI firms. It would seem that the firms more mature in their implementation of CI are more selective in the tools that they employ, presumably based on their experiences, while the less developed firms in terms of CI sophistication, are more likely to simply implement those problem solving tools that they consider important. A greater understanding of the reasons why there are differences in the use of CI tools between mature and developing firms is clearly called for. Some important practical issues could emerge for practitioners, which will allow managers in developing firms to accelerate the development of CI activities within their organisations. This issue is being addressed in ongoing research.

We turn now to the average or mean importance and usage for both the support methods for CI and the problem solving tools. These means are presented for both mature and developing CI firms in Tables II-IV, together with a significance test of the difference between firms in these distinct stages of CI implementation. A one-way analysis of variance was computed to determine which pairs of means were statistically significantly different. The actual significance levels are presented in the tables; for example, any significance level given as 0.05 or below indicates a significant difference between the means for the two classes of firms at the 5 per cent level of significance.

Table I Correlation between level of importance and usage for CI support methods

Table II ANOVA results of usage of problem solving tools

Table III ANOVA results of usage of CI support methods

Looking first at the importance that managers place on the problem solving tools, it can be observed (Table IV) that only one sophisticated tool, quality function deployment, shows a significant difference, along with the less sophisticated problem identification tools such as checklists. Interestingly, the developing firms regarded both these tools as more important than the more sophisticated implementors of CI. There were no significant differences between the two groups of firms in respect of the perceived importance of any of the CI support methods, and hence this table is not shown. On the other hand, nine of these support methods or means are used significantly more often (at the 5 per cent level) by developing CI firms, in particular, monitoring the CI process, training of personnel, use of total productive maintenance, incentive systems, and management support (see Table III). Whilst it might be considered reasonable that more mature CI firms have moved on from some of the basic methods, it is surprising that they feature management support, supportive leadership and use of formal policy deployment more frequently than do the more CI mature firms. A logical assumption is that embedded CI activities are devolved to lower levels of management, and even to the operator level. In effect, CI becomes part of normal operating procedure. The extent to which management support diminishes as an organisation's CI maturity develops, and the extent to which responsibility for CI devolves and is disseminates throughout the organisation is the subject of ongoing research. Table IV ANOVA results of importance of CI tools

Looking first at the importance that managers place on the problem solving tools, it can be observed (Table IV) that only one sophisticated tool, quality function deployment, shows a significant difference, along with the less sophisticated problem identification tools such as checklists. Interestingly, the developing firms regarded both these tools as more important than the more sophisticated implementors of CI. There were no significant differences between the two groups of firms in respect of the perceived importance of any of the CI support methods, and hence this table is not shown. On the other hand, nine of these support methods or means are used significantly more often (at the 5 per cent level) by developing CI firms, in particular, monitoring the CI process, training of personnel, use of total productive maintenance, incentive systems, and management support (see Table III). Whilst it might be considered reasonable that more mature CI firms have moved on from some of the basic methods, it is surprising that they feature management support, supportive leadership and use of formal policy deployment more frequently than do the more CI mature firms. A logical assumption is that embedded CI activities are devolved to lower levels of management, and even to the operator level. In effect, CI becomes part of normal operating procedure. The extent to which management support diminishes as an organisation's CI maturity develops, and the extent to which responsibility for CI devolves and is disseminates throughout the organisation is the subject of ongoing research.

Table II reveals that developing CI firms use on average, most of the problem solving tools more frequently than do the more mature CI firms. In particular, they use three reasonably sophisticated tools more frequently, namely, process mapping tools, quality function deployment and the seven new quality tools. This suggests that the developing firms are more prepared to try new things and experiment with tools that they think may be important. On the other hand, the more mature firms have largely finished with experimenting, and are more focused on specific tools.

Discussion of results

The quantitative data clearly established that despite the highly rated importance of management support, supportive leadership and face to face communication, these three lagged well behind when it came to using them to further CI activities. As CI theory has evolved, the emphasis for success has shifted from a strong, individualistic and entrepreneurial leadership style, typical of western management to a more team based approach to improvement activities. The emphasis of Western management has been predominantly on large-scale change and improvement, whereas management in Japan has concentrated on continuous and rapid implementation of improvements and new technologies. Imai (1986) compares and contrasts Japan and the West, stating that while the Japanese use the "gradualist approach", companies in the West use the "great-leap-forward approach". In these contrasting views, the Japanese are seen as strong on continuous improvement, but not in innovation, which is a Western strength.

Since we are arguing that supportive management is essential to the success of a CI programme, it is worth examining why management might not be supportive. The gap in management support can exist at all levels. At the most senior level the lack of support may be due to company executives not understanding the need for change and that results will not be achieved overnight. Other reasons, such as the heavy demands on the time of senior managers, may also be significant. At lower and middle levels, change may not be supported because of a perceived threat to their management role. Teresko (1996), quoting George Morris of ABB Industrial Systems had noted that "plant managers/supervisors must also support change but for a very different reason: their jobs will be totally redesigned. They will no longer be autocratic managers within a well-defined environment". In order to overcome misunderstandings, uncertainty and fear, research indicates the need to place greater emphasis on open and honest communication (Teresko, 1996; Woods, 1997; Andrew, 1996).

The role of management in CI needs to be clearly understood. It will be heavily dependent on the position of the organisation in question relative to its competitors in the global business environment. It was noted earlier that two broad approaches to CI are emerging. First, there is the organic or evolutionary process which argues that organisations must necessarily pass through specific stages before they achieve CI maturity. Second, there is teleological theory which asserts that organisations can learn from the experience of others, and in so doing, skip over certain developmental stages and achieve CI maturity far more quickly. Yet even mature CI firms may adopt different strategies for the design and organisation of CI. Lindberg and Berger (1997) argue that:

… companies tend to move from expert-oriented strategies to more organic strategies as maturity evolves, and that Swedish models for CI seem to be more organic in nature, as compared to the more expert-oriented Japanese approaches.

As far as firms, which are lagging in CI, are concerned, perhaps a far more radical approach is needed. For this reason it is worthwhile identifying the successful characteristics of mature CI firms.

Critical to the success of CI is management support, leadership, and communication. Andrew (1996) observed that:

… getting the change process moving means creating awareness and understanding, providing hope through a vision, aligning people through direction and encouragement, and communicating in a way that stimulates progress and enhances people's capabilities through freedom and self-direction. That is the leadership side.

Management's task goes beyond simply communication. Planning an effective change process, organising and directing the effort, monitoring progress against plan, and ensuring that the desired results occur – that is the management factor in the equation. Choi and Liker (1995) found that communication involving workers is strongly associated with CI effectiveness.

Complementing the quantitative research that is presented in this article was a qualitative case study interview of five medium-sized Australian manufacturing firms. The case studies were undertaken with a view to providing the participating companies with a report on the level of maturity of their organisation across six core abilities which research has identified as forming the supporting structure for effective CI processes within organisations. The six core abilities for effective CI processes within organisations were:

1. 1.

   the ability to link CI activity at all levels to the company's strategy;

2. 2.

   the ability to strategically manage the development of the CI system within the organisation's structures;

3. 3.

   the ability to generate sustained involvement in incremental improvement;

4. 4.

   the ability to work effectively across internal divisions and external boundaries;

5. 5.

   the ability to enable learning to take place, and to be captured and shared, at all levels; and

6. 6.

   the ability to articulate, demonstrate and communicate CI values.

The stages of development for each core ability were rated as:

• •

  Native CI. CI practices take place in response to beliefs of individuals in the organisation and/or in response to special problems. The use of CI techniques may stop once the problem has been solved or the person moved on.

• •

  Structured CI. An individual introduces some of the techniques or vehicles of CI but has not integrated it to the strategic process of the company.

• •

  Goal oriented CI. Top down structures start to link aspects of the CI process to the strategic processes of the business. Some feedback loops using measures of performance and formal deployment of strategic goals are incorporated in the CI process.

• •

  Empowered CI. The top down focus now extended to permit emergent strategic aspects, or "bottom up" actions, to create part of the strategy.

• •

  Systemic CI. CI is seen as a part of how we do business around here – in all aspects of the business.

As companies develop an increased level of maturity in the CI process then a range of supporting mechanisms will be brought into the activities associated with the process. With regard to management support and face to face communication as supporting mechanisms, interesting differences emerged between the case study organisations, which correlated well with the rating they achieved for their core abilities. Management support and leadership were seen as critical to generating a sustainable involvement in incremental improvement. In one organisation rated poorly for this ability came the response that management was continually driving employees to improve, rather than providing an environment in which improvements could take place. Conversely, in a mature CI firm, clear evidence existed that management was committed to CI, practiced a CI philosophy, and backed up their commitment with resources and time.

Face to face communication is important as a means of demonstrating management support, leadership and commitment. Further, this support method comes into play in evaluating core ability four, the ability to work effectively across internal divisions and external boundaries, and six, the ability to articulate, demonstrate and communicate CI values. Again firms which rated poorly in these categories seemed unable to articulate CI activities. In one small firm the organisation was not harnessing the creative potential of its employees, due to a breakdown in its communication processes. Rather than specifically pursue CI activities, the senior management had decided that employee communication and work teams should be strategic priorities. On the other hand, one of the mature CI firms was well advanced as a team oriented organisation. The organisation had abandoned the concept of boundaries and encouraged managerial discussion and interaction, both horizontal and vertical. Communication for this organisation involved regular informal "meet the customer" evenings. It was common practice for customers to tour the factory and interact with production staff. From the operators' perspective, managers were not unknown people. They commented that managerial interaction was good for morale and demonstrated their commitment to continuous improvement activities.

The quantitative survey showed a disproportionately poor use of management support, supportive leadership, and face to face communication being used to promote CI, relative to the importance placed on them. It was clear from the case studies, however, that these support methods were valued and used by the firms which rated highly in CI maturity and effectiveness.

Conclusions

If organisations are seeking to use CI as an ongoing process to sustain a competitive position then they need to focus their efforts on goals such as maintaining and improving quality, improving performance decreasing lead times and improving delivery reliability. To achieve these goals companies must select the tools that suit the people within the organisation. That is managers select tools that employees can use and understand. So that they are fully aware of what they are measuring and how they are helping to improve the overall performance of the organisation. Although it is widely accepted that management needs to support change processes such as CI, this support must be ongoing across all levels of management. Senior managers need to ensure that they do not assume that CI is systemic to the organisation and no longer requires their support or involvement. If they do this they risk CI atrophying and eventually disappearing. CI does not need to slowly grow and evolve from a naive state to a systemic state.

Developing firms which wish to outperform their competitors can move to a systemic state providing they have in place or are developing the appropriate tools, techniques and support mechanisms. However, to successfully accomplish such a dynamic change there has to be strong, consistent supportive leadership in place.

Paul Hyland, Robert Mellor, Eddie O'Mara and Ramesh Kondepudi

InCITe (Innovation and Continuous Improvement Technologies) Research Centre, University of Western Sydney, Campbelltown, New South Wales, Australia

Practical implications

• •

  Although management support and face to face leadership are highly rated, they are often neglected in CI activities.

• •

  A team-based approach is most effective when implementing CI within your organization.

• •

  To effectively manage CI you need to believe in it. It is essential to provide the right environment and pratice what you preach as opposed to merely driving your employees.

• •

  With a wealth of tools available in this field, selecting the tools that suit the people within your organization is critical to success.

This article originally appeared in The TQM Magazine, Vol. 12 No. 2, 2000, pp. 117-24. ISSN 0954-478X.