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What kind of financial plan do you think the most successful retail chain in the world uses? If you guessed that Walmart follows the practice of Kaizen Budgeting, you would be right! Every month, Walmart's expenses go down and their profits go up, and the stores themselves are constantly improving. That's a perfect example of how the system works, and here's the low-down.

"Kaizen" is a term in Japanese meaning "continuous improvement." In the business world the term frequently refers to making small improvements in throughout the organization. Improvements accumulate little by little to make a huge difference. Business, marketing, manufacturing - every part of the company should constantly be seeking ways to improve their work and processes so that they are easier, more profitable, and more efficient. Doing this results in increased revenue and decreased costs, while providing the company the edge on competing companies.

Of course, Kaizen is all very well as an idea, but the company needs more than just the idea for motivation. This is where Kaizen Budgeting comes into play. Kaizen Budgeting is a finance strategy that provides the impetus for governing improvement. Namely, the budget is created assuming that the improvements will be made, allotting less money than for the last period because with the increased efficiency of the company, less money will be needed. By allotting less money to the current month, the improvements must be made or the department will exceed their budget.

Employees of a Kaizen business must be trained to think creatively, innovatively, and be result-oriented. As they begin to make improvements to their routines, increasing their efficiency and productivity, as well as that of the company, it will grow easier and easier for them to see and make more improvements, growing exponentially in the same way building muscle trims fat faster the more there is. Like muscle though, the employees must be nourished or changes will slow and stop altogether.

For this purpose, a fund is often built into the Kaizen Budget for rewarding any significant improvements made by employees. This provides significant incentive to the employees to keep coming up with improvements. It also provides a good way to measure whether or not an employee is contributing. As time goes on, thanks to Kaizen Budgeting the company grows stronger, healthier, more efficient, and more profitable.

This revolutionary technique of innovation is a solid business tool that can benefit any business, big or small. Just look at its success in Japan, with its booming business sector, or at the ever-expanding Walmart Corporation. With patience, diligence, and a spark of creative spirit, it can increase profits and efficiency, decrease expenditures and waste, motivate and stimulate workers, and strengthen the company employing it. It's a jewel of a strategy not to be missed.

Steve Wilheir is a management consultant and C-level executive coach. If you are intrigued by questions Why Kaizen Fails, you might want to visit Kaizen.us to learn about [u]Kaizen Budgeting Process[/u] and other kaizen concepts.

By Steve Wilheir
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