Intended to provide background information and preliminary options for the California Community Colleges' Commission on Innovation, this document describes the principles of Continuous Quality Improvement (CQI) and describes policy options for implementation in the state's community colleges. Following introductory materials, the paper recommends that the Commission explore the adoption of CQI philosophies to address the challenges facing the colleges. Next, the history of the quality movement is briefly described, highlighting benefits of CQI in the business sector and examples in postsecondary educational institutions. The following principles at the core of CQI are the reviewed: (1) a commitment to continuous organizational improvement; (2) reliance on information to provide evidence for cost-benefit trade off decisions; (3) an emphasis on meeting or exceeding client needs; (4) trusting and empowering people to assume authority and act responsibly; (5) investing in on-going training and education for all staff; and (6) relying on teamwork to solve problems and implement solutions. Three models for implementing CQI in educational institutions are also described as top-down, bottom-up, and loose-tight, or involving all staff at one or two units in fundamental organizational change. Finally, specific policy options for implementing CQI are presented, including incentive grants, education and training grants, business and industry partnerships, personnel guidelines, recognition awards programs, and the addition of CQI principles to the community college accountability system and accreditation standards. (Includes 42 references.) (KP)