What Is Process Improvement and How Can You Utilize It?

By Indeed Editorial Team

Updated September 14, 2022 | Published November 5, 2021

Updated September 14, 2022

Published November 5, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

If you want to stay competitive in business, it helps to reevaluate and improve your business processes. While this may sound difficult, it only requires looking at your employer's processes and finding ways to improve them. By adapting to the ever-changing market, your employer can stay competitive and begin to outpace once stronger rivals. In this article, we provide an answer to the question of "What is process improvement?", review six approaches to it to best meet your employer's specific needs, and then review the common improvement targets companies use to improve their model.

What is process improvement?

Process improvement is when a company reviews the practices it engages in and looks for ways to optimize them further for the benefit of the company and its customers. All business is a series of choices and their consequences. Almost any choice your business might make takes time and resources. The goal is to have those spent resources used to produce greater profit. By examining the choices your business makes, you can often experience major benefits with minor alterations. If you can make this a regular practice, you can begin consistently locking in growth.

Related: What Is Strategic Planning? (With Benefits)

6 approaches to process improvement

There are several different approaches that can help improve your business processes:

1. Technology-centric review

Technology is constantly evolving. The challenge is that this evolution is usually incremental. Deciding when to update a particular piece of technology that your business utilizes requires a review. First, consider what your current technology does for you in terms of value. The metrics you use in this judgment may vary. For example, you can evaluate a printer on the rate of its output, the quality of that output, the efficiency with which it uses ink, and its average repair cost. For a chatbot or company vehicle, the relevant metrics look very different.

With that information, you can then compare what the latest technology offers. Minor improvements may be worthwhile, but they depend on the improvement's initial cost. The goal of a technology-centric review is to find technological improvements that offer significant positive change at the lowest possible cost. This allows you to improve company processes in a way that is cost-effective while maximizing growth.

2. Cause-and-effect approach

The cause-and-effect approach is a problem-first style of process improvement. Many companies come to solutions via diagrams. They start by naming a problem. Then they chart out the aspects contributing to that problem. For particularly complex problems, they may go multiple levels down, further determining the contributors to those aspects. You can go as far into this process as you want, breaking down those contributors as well. Once a team has charted the contributing factors to a problem, actionable solutions become easier to find.

This approach allows for scalability. A company without the resources to erase a problem can combat contributing factors to reduce the problem's impact. For example, the cost of modernizing an entire factory may be too high. Instead, that same company can focus efforts on the least efficient machines in that factory, reducing inefficiencies even if more improvement is possible in the future.

3. Efficient automation

Many businesses hold automation in high regard. It reduces the number of employees a process requires and is often extremely cost effective. The goal of this approach is to ensure your business automates its processes in a way that is sensible and efficient. Instead of assuming automation is always the superior option, you analyze its cost and benefits. For example, completely automating customer support is often possible, but many companies choose a blended option, using modern technology and human employees together. This is because human employees are much more adaptable than technological solutions.

Technology is effective at automating simple, repetitive tasks. The more complex a task, the more analysis your employer can justify engaging in to see whether automation is both possible and cost-effective. As time progresses, technology allows us to automate increasingly difficult tasks. Automation is most competitive in manufacturing. Its viability in other fields varies, depending on the creativity and adaptability required.

Related: Automation Tester Interview Questions With Sample Answers

4. GUT matrixing

A GUT matrix is a diagram that helps a company determine where to focus resources. Your team begins by identifying potential problems in the company's model. These include anything that is presently creating a loss and activities that may cause a future loss. Then your team diagrams these problems based on three metrics:

  • Gravity: What is the potential damage this issue might cause?

  • Urgency: What is the timeframe to prevent or mitigate those expected damages?

  • Trend: Is this problem improving, worsening, or remaining the same without interference?

The results of this examination help your team prioritize improvements and corrections. Grading problems by their gravity shows which corrections could likely have the most meaningful impact. Grading by urgency and trend illustrates which require a timely response. All that remains once this analysis is complete is determining what fixes might bring your company the most net benefit. The most significant benefits often come from focusing on the most urgent problems, unless they are of very minor gravity. Your company can face less urgent problems at a later date unless you expect serious complications as you fix them.

Related: What Is Quantitative Analysis?

5. Six Sigma

The Six Sigma strategy focuses on the use of sigmas, a term used to refer to standard deviations. In this approach, your team first uses statistical analysis to determine how far from perfect your manufacturing processes are. A high level of deviation indicates there are parts of your manufacturing process that could benefit from correction. Once your company makes the recommended corrections, your team then analyzes the data again to see how much your processes have improved.

Assuming you can make the effort cost-effective, the goal of this approach is to create a Six Sigma process. At that level of perfection, your manufacturing process may produce only 3.4 defects for every million opportunities. A defect rate that low is perfection by most business measures. In different terms, this would mean your manufacturing process results in a viable product at least 99.99966% of the time. A higher level of production represents a lower level of waste and more profit potential.

6. Risk aversion

Risk aversion is an approach to business with a goal of slow but steady growth. When applied to process improvement, your company first identifies what elements of your current processes represent the highest risk. By reducing the risk of financial loss a process represents, your company can better rely on that process to work consistently.

The caveat with risk aversion is that it is not always the most profitable approach. In business, taking on risk can sometimes result in bigger gains. Instead, the benefit of avoiding risk is consistency. You can rely on less risky processes to generally work as predicted. A process that is both reliable and profitable is a goal that can often help a company to success. Reliability in one area can also help justify taking on more risk in others.

Related: Understanding How To Complete a Risk Analysis

Common improvement targets

Once your team has analyzed a process, they can then determine ways to improve it. Some areas commonly focused on, many of which are interrelated, include:

Training and specialization

The human element of business processes is usually worth examining first. Through better training or freeing employees up for specialization, you can often bring out their potential in a way not possible with machines. They can grow and change to your needs given time and the right training. To do the same with technology, efforts may be more expensive.

Bottlenecks

Bottlenecks represent one of the biggest contributors to inefficiencies in business. A bottleneck is any part of your process that holds up workflow, even when the elements of the workflow after the bottleneck could handle more. If you can identify and correct bottlenecks at your company, it is often possible to see significant leaps in efficiency and output.

Risk reduction

When you or a member of your team makes a business decision, it is rare they have perfect information. Most business decisions involve some amount of risk. By understanding the risk a process represents, you can work to reduce the chance something goes wrong. In many cases, it is also possible to reduce the potential cost if such an issue arises.

Resource allocation

All business decisions involve the allocation of resources. To produce a product or provide a service, your company uses time, money, and materials. You may require space in your factories or the use of company vehicles. Sometimes analysis can reveal opportunities to reallocate these resources for a greater profit or reduced loss.

Related: What is Strategic Management and Why is it Important?

Messaging

Your company's messaging to your target demographic affects some of the most important elements of your business processes. This is because attracting and retaining customers is key to growth and sustainability. By building a strong brand image and working to address common customer concerns, you can make customers happier and increase your profits.

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