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A Section from "The Continuous Improvement Development Guide"

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Principles and Values

Basic Section Information

If you have done more than a simple cursory search about continuous improvement, you will probably have come across a discussion about guiding principles or values. Unfortunately, the use of those words, principles and values, is not consistent. This section attempts to provide clarity regarding these terms.



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Detailed Section Information

Continuous improvement works best when there is an underlying culture driving it. Because cultures are based upon a system of beliefs, if those beliefs are not well understood, it can be extremely challenging to align the organization.

While it may seem like a simple semantic issue to discuss the meaning of principles and values, there is more to it than that. There is actually an interaction between principles and values, and understanding that connection will help give an organization clarity of its purpose and unity in its efforts.

One of the main differences between a principal and a value is its source. Principles are external, and values are internal. Let’s start with a definition of the two terms:

Definition of Principles

A principle is something that defines the natural order of things. You can think of it similarly to a law of nature. While it is not as strong as the rules governing something like physics, there is still a fairly predictable way that the world works. Actions have natural consequences to them, and generally yield fairly predictable results.

An example of this would be something like the relationship between an item’s price and its unit sales. In nearly all circumstances, if you lower the price of an item, you will sell more of it.

Regardless of what you do within the walls of your company, principles remain unchanged. In the pricing example, how you run the company, the marketing approach you take, distribution channels you set up, and how satisfied your employees are will not change the basic principle that there is a relationship between your pricing and the number of units you sell.

Now, to clarify, principles will change over time. The point, though, is that the change is external to the company. Most businesses have little ability to influence these natural laws.

Definition of Values

Values, on the other hand, are internally generated belief systems that govern behaviors. Some organizations feel that giving back to the community is important. Others may have a high commitment to quality. Some may feel that it is important to treat the company as a family. The way a company chooses to act originates from the values it embraces.

Having a consistent value system can help an organization get the results it wants, but there is not as clear of a cause and effect relationship as with a principle. There also may be different value systems that can get the same result, or similar value systems may get different results.

For example one company may embrace have an extremely service oriented outlook. They may create intensely loyal customers as a result. Another company may take a no-frills approach and pass substantial savings on to customers. Both can be the foundation of a successful business.

Furthermore, values can have internal sources that are completely unrelated to business. “Green” companies may not have a business reason for adopting environmentally friendly practices. That sort of value comes purely from a sense of right and wrong.

How Principles and Values Interact

All companies in the same businesses operate under the same set of principles. This is an important point. Principles are universal. But just because a principle is universal, doesn’t mean it will have the same impact in all situations. Some affect big companies more than small ones. Some affect those with high labor costs more than those with highly automated processes. But similar companies are impacted by principles in a similar way.

What is different between comparable companies, though, is which principles, and thus the resulting behavior, are emphasized. There are countless natural rules that govern behaviors. A company simply does not have the resources to emphasize every one of them. What they do, then, is try to find a combination of those that they can successfully live by, and that provide the best bang for the buck. The principles we will introduce you to in the coming lessons are those that we have found to correlate closely to success in continuous improvement.

Actively choosing a set of principles to focus on helps employees determine how to behave in particular situations. Like in physics, some principles work opposite of each other. A falling object has gravity accelerating it towards the earth, but friction in the air works to slow it down. We emphasize a set of principles that seem to work together well.

We have also truncated the principle into just the ’cause’ side of the equation. It simplifies a team’s ability to live by them. For example, “Show respect for people” is one of the principles we recommend following. There are associated costs and benefits, of course, to doing that. But to keep things simple, we simply list the principle as a rule.

Values, on the other hand, vary by company, and are not as conducive to a standard list. They run a wide gamut. Attitudes on diversity, the environment, supporting the community, social issues, and the conduct of business fall into the realm of values. The big distinguishing factor, as opposed to principles, is that they are chosen based on an internal compass.

Some values will overlap into the area of principles. For example, a company may have a value associated with quality. We recommend principles of “Focus on processes”, “Build in quality”, and “Adopt a zero defects mentality”.

In a nutshell, values defines what is important to a business and principles clarify how the business will operate.

Developing the company’s value system is really a job for senior management. They are the ones who choose what is important to the organization.

Your focus will be on creating a list of principles that define how the company will manage its business. It is important to get buy-in from the executive team about these principles. That is not to say that the cause and effect nature of these principles is open for debate. To be clear, your company will be governed by all of the principles listed in this phase and all of the subsequent ones. You do not have a choice about whether a principle applies to you.

What you do have a choice about, though, is how much effort and emphasis you will place on the principles. You also have a choice about whether or not your company operates with blinders on. What I mean by this is, for example, whether you acknowledge that the need for inspections at the end of the production line, and the associated costs that go with them, is the result of not paying attention to the principle of building quality into processes.

This example may seem like something of a “no brainer.” Most managers will recognize that if a process has fewer defects at the source, there will be fewer problems later. What is much harder to do is to convince them to live by the principle. It is easy to know the relationship between building in quality and defects. It is a far more challenging endeavor to secure the resources to apply the law than it is about proving that the natural law applies.

Some of the principles related to soft skills, however, often do also need to be accompanied by education and convincing. “Building trust”, “Respect for people”, and “Develop relationships” are principles that do not have such a clear result associated with the investment of time. If you have a hard time just convincing a manager to put these types of principles on the formal list, imagine the challenge is in getting them to actually live by the guidelines. The best approach is to build a structure that keeps these principles in mind.

  • Every company has a set of principles and values. In some, they are actively defined and managed by the leadership team. In others, informal values are established and principles prioritized by the team in a leadership vacuum. If leaders do not provide clarity in defining how the company will operate, they will find that their team operates by an unintended set of rules.
  • Don’t create an extensive list of values. There should be just a handful of items. A long list dilutes focus.

  • Your company will operate with a set of principles and values. This is true whether that set is intentionally established or develops in a leadership vacuum.
  • Principles are external and apply to all companies; values are internal and vary from company to company.
  • Principles are natural rules; values come from a sense of right and wrong.

Mastery of this section comes in two parts.

  1. The leadership team should define its current set of values and the values they want to live by. Recognizing that there is a gap is a major step. This can be a painful a painful process when done honestly. People are often surprised by the values that currently govern their company.
  2. The leadership team should formalize its principles. While the entire set of values should be defined early, the list of principles will grow over time as the team develops. We give recommended principles for each phase of a company’s continuous improvement journey.

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