Over 1.8 million professionals use CFI to learn accounting, financial analysis, modeling and more. Start with a free account to explore 20+ always-free courses and hundreds of finance templates and cheat sheets.
Kaizen is a Japanese word (改善) that means “improvement” or “to improve.” When applied to the world of business, kaizen refers to every action, operation, or rule employed to implement changes within a company to make it operate more efficiently and effectively.
In the western world, the focus of kaizen on maximizing efficiency has led to the principles involved commonly being referred to as “lean and kaizen.”
Breaking Down Kaizen
In terms of improving a business, kaizen is meant to affect everyone, from the common employee to the CEO. In most cases, it means a change or implementation of procedures, hours, standards, rules, codes of operation, and processes or ideas that affect how the business functions.
Kaizen was first widely practiced in Japan after World War II, being heavily influenced by American business practices and coaches who worked to help Japan rebuild its business marketplace, including the quality and quantity of goods and services provided within the country and abroad. Today, it is now a worldwide standard that businesses in every sector seek to employ. Kaizen principles are also applied in environments outside of the business world, such as in schools and non-profit organizations.
The Duality of Kaizen
Kaizen is ultimately a two-part concept, with action being a major portion, and philosophy or wayof thinking being the other.
First, let’s consider the action piece. Kaizen, while it can be done on a much smaller scale, is often event-centric. Most businesses seeking to institute kaizen create in-company events focused on areas within the company that can or need to be improved. The events aim to go about finding the best ways and means to implement needed changes. Teams of employees from every level of the company are involved in such events because the changes are meant to affect and benefit everyone.
The philosophy aspect of kaizen is really all about building a specific type of company culture and way of thinking that encourages all employees to be actively involved in the company’s success and productivity, as well as looking out for the best interests of one another. The goal of kaizen philosophy is to foster a work environment that breeds positivity, which is then reflected in the way employees work together and alone, and how dedicated they are to their place of employment.
Kaizen events follow the PDCA pattern – Plan, Do, Check, Act. To break it down further, a typical kaizen event begins by gathering all employees, or at least a few employees, from each department of the firm, and establishing goals and standards designed to benefit everyone and the company as a whole. During these events, a thorough review of the company’s current practices is important to identify areas that need significant change or to facilitate new or reaffirmed goals that aren’t being achieved.
Once the planning portion of a kaizen event is through, it’s time to implement the changes that have been agreed upon during the planning stage. The process enables employees to actively participate in implementing new procedures and seeing how they affect the work environment, morale, and whether they are successful in helping to reach the newly outlined goals.
Following initial implementation, management seeks to obtain feedback from employees and find out which new procedures aren’t working, so that they can be tweaked. This series of actions and checks should continue until the ideal balance is reached or it is determined that new goals need to set and achieved.
Kaizen, once a uniquely Japanese concept, has spread around the world, helping companies and their employees reach higher levels of productivity while improving working conditions and company morale. As a business grows and changes, goals and the actions needed to achieve them also change. Using Kaizen principles enables a company to grow and operate more efficiently, benefiting every employee, from the CEO on down.
CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. The following CFI resources will be helpful in furthering your financial education:
Take your learning and productivity to the next level with our Premium Templates.
Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI's full course catalog and accredited Certification Programs.
Already have a Self-Study or Full-Immersion membership? Log in
Access Exclusive Templates
Gain unlimited access to more than 250 productivity Templates, CFI's full course catalog and accredited Certification Programs, hundreds of resources, expert reviews and support, the chance to work with real-world finance and research tools, and more.