Some elite companies pass from a strong continuous improvement culture to one that drives world class performance. These top tier companies continually stay ahead of the competition, and regularly make game-changing breakthroughs.
This final phase of the continuous improvement model is an extremely interesting one. It does not have a lot of supporting sections, as there are not many specific things that separate a good or great company from a world class one. That just means that you can’t just add new ingredients like A3 reports to the mix and become world class. Rather, world class companies come into being because to their ability to do all the little things extremely well.
What this means, in simpler terms, is that this phase is more about doing all the things you have learned better than it is about learning new things. It is relatively easy to distinguish where someone is on their journey by what they are doing in their organization. If there are red tags and kanban cards in use, you can see a measure of progress that means they have at least started ramping up. A3 reports generally mean the company is well along its Lean journey and is focusing on keeping momentum. On the other hand, once a company enters the momentum phase, you can’t simply do a walk through and inventory the tools that are in use to tell if a company is world class.
Instead, you have to look at performance. Do the financial numbers tell the story of an elite company? Now, there can be some debate about whether profit is the only indicator of a successful company. But to be clear, companies cannot exist if they are not profitable. The owners may have a social agenda and want to share the wealth the company creates, but a more financially sound company has more options to fulfill that desire. But there is more to it than just squeezing dollars out of people. How a company earns is important, morally. But it also matters from the profitability standpoint too. Respecting employees, and customers for that matter, is not just the right thing to do. It is also the profitable thing to do. Taking advantage of either group may be of benefit in the short term. But in the end, adversarial relationships with either group are incompatible with long-term success. And world class companies are built to last.
Beyond the financials, though, world class companies build a stellar reputation. Is filling open positions tough because there are too many good candidates to choose from? Is the company emulated by others? Are news stories covering the company’s accomplishments commonplace? Are there case studies about it? If you answered yes to these questions, you may be a world class company.
Obviously, getting to this point takes hard work. It takes commitment. It takes discipline. But the benefits are substantial. Toyota’s reputation for world class quality bolsters its sales. Google’s reputation for how it treats its employees has applicants lining up to work there. That means low turnover costs and a virtual guarantee that they will have the perfect person for a job applying for it. A reputation for world class performance is not only the result of having an edge over the competition. It is also yet another advantage over them.
Becoming world-class is not a matter of simply flipping a switch. There is a lot of work and a great deal of learning that goes into it. There is also the not insignificant issue of the composition of the team. When companies start on their continuous improvement journey, most do not have the right people on the team to make it world-class. The people at all levels of the organization were hired with an entirely different skillset in mind.
Many of these people are great individuals and adapt well to the new culture, but they are not built for the new culture. What that means is that some people are energized from working in the environment that we’ve been showing you how to build. Other people, though, can do well in it, but it they must put energy into it. World-class companies need more of the former. But the people in the latter group do everything you ask of them. In fact, even senior managers can fall into this latter group. Not only would it be unfair to terminate them, it would be harmful to the culture. People want to feel safe and if you release high performing individuals, others will become disengaged. They will feel at risk.
Over time, though, the composition of the team will change. Some people will slowly shift to the energized group. Some of the people in the other group will retire. Your hiring and promotion plan will favor the people with the right skills and the right demeanor. Eventually, the makeup of the company will change to one that is compatible with world-class performance. Unfortunately, the right way to do this takes time, hence the extensive timeline to get to world-class performance.