We define continuous improvement as the process by which we identify problem areas in the business cycle, and then tackle those problem areas one by one. That way, we fix known issues before they get too big to handle. In addition, this concept can be applied to the ongoing improvement of products, services, and processes; efforts known as incremental or breakthrough improvements.
For example, suppose your company is expanding after a few years of stagnant growth. The legacy, on-premise enterprise resource planning (ERP) application which has been working well enough for years, isn’t going to handle the additional volume or provide an opportunity to improve productivity.
Before you go out, select, buy, and implement a new ERP or General Ledger application, which could cost you hundreds of thousands of dollars, first select a good team, sit down and review the accounting and consolidation process step-by-step and see if you can identify why and where your process could be changed or improved. You and the team work on the process incrementally until you lay out your key requirements for a system replacement, which will save your company time and money during implementation. By the end of the review, you’ll have your reasons for replacing the application clearly laid out and key requirements and benefits properly defined.
How does it work?
To begin, select a dedicated team with clearly defined roles, as well as an executive sponsor. The team should be made up of cross- functional team members relevant to the issue. For example, if you have accounts being incorrectly coded on invoices, leading to delays in processing and payments, select a team member from all invoice and accounting touchpoints in the process. The executive sponsor could be from operations, or from finance, whomever is most affected by the issue.
Now that you have a team, you can begin the six steps of the Continuous Improvement process.
Step 1 - Identify Improvement Opportunity: Select the appropriate process for improvement
Mature processes erode over time as people come and go from the team and as the needs of the organization evolve. So, it is important to evaluate your current process, and identify pain points and areas that could use improvement. Think about your needs and select a challenge or problem to address.
Define your key goals and objectives with each problem. Trying to make too many changes at once could be overwhelming and lead to disorganization, so it is a good idea to prioritize your objectives and keep a backlog of objectives to address in the future.
Step 2 - Analyze, Identify, and verify the root cause(s)
Discover where the problem is stemming from to plan the best course of action. Determine underlying cause and effect, and identify areas for improved productivity, cycle times, and quality. Once areas for improvement have been identified, determine what metrics and reporting will be tracked to see if your process improvement changes had a positive effect.
Step 3 - Take Action: Plan and implement actions that correct the root cause(s)
Once the major challenges and their causes have been identified, prioritize, create the measurable objectives, and lay out a roadmap (a step-by-step plan to tackle the issues) that aligns with the organization’s strategic goals. Be sure stakeholders are on board with the plan and proper materials have been distributed before you begin implementation. Starting the project with key goals and a consistent communication plan will help ensure stakeholders can participate effectively.
Step 4: Study Results: Confirm the actions taken to achieve the target
How is it going? Review your metrics to see if your actions achieved the desired results. If not, re-evaluate how you can reach your target.
Some common pitfalls that occur during an improvement process are lack of communication and misalignment with leadership. These things should be monitored and addressed, as they can hinder the success of the project. Taking the time to get everyone on the same page, providing context to the actions being taken, and emphasizing how the improvement will help achieve organizational objectives, are instrumental change management practices to achieve desired goals.
Step 5: Standardize Solution: Ensure the improved level of performance is maintained
After taking these steps, it is essential to standardize your improved process to achieve consistency and be sure you will continue operating in the intended way. Lay out thorough process documentation and a communication plan, continue your change management strategy, and set key performance indicators (KPIs) to assist with monitoring and maintaining performance.
Step 6: Plan for the Future
As you conclude the continuous improvement process, evaluate the team’s effectiveness in reaching goals and plan what is to be done with remaining backlog of objectives. Best practice is to re-evaluate systems and processes twice a year to stay current and keep the department operating at its best.
The best thing insurers can do is to constantly look for ways to improve. In a changing business environment, it is essential to develop new processes, solutions, and improvements to adapt and evolve with it. To be sure your accounting and finance department operates in the most efficient, profitable, and innovative ways possible, using a Continuous Improvement process to evaluate your enterprise applications and develop solutions will set your organization apart.