Losonci Full Paper

7/28/2019 Losonci Full Paper

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Fit of technical and socio subsystems in lean context, and

its impact on operational performance indicators1

Dvid Losonci ([email protected])Corvinus University of Budapest, Department of Logistics and Supply Chain Management

Fvm tr 8., Budapest, H-1093

AbstractThis study following socio-technical approach of lean production seeks to clarify (1) how the

use of lean production practices influences socio subsystem, and (2) how different matches of

work organization and production organization (i.e., production systems) influence

operational performances. According to the results, implementation of lean production

practices enhances the extension of HRM best practices. However, this association is quite

weak. Considering (2) the study presents clear evidences that lean production organizationand formalized/empowered work organization lead to superior performance. However,their excellence is not unique: same work organizations integrated with process-focus

production organization leads to the same operational outcomes.

Keywords: lean production, human resource management, operational performance, IMSS

1. IntroductionLean production has become a focal point in operations management research (OM) in the

last decades (Slack et al., 2004; Pilkington and Fitzgerald, 2006). The academic interest

reflects that organizations have recognized its potential. Many firms implement lean

production to enhance competitiveness, but the majority of them reports disappointed results

(Anand et al., 2009; LEI 2004). One of the challenges companies face is to create the

supporting infrastructure, using this term in a broad sense (Koenigsaecker, 2005; Womack

and Jones, 2003). A major concern is to build social subsystem or work organization that fits

lean production.

The organizational logic of lean production leads to fundamental changes in human

resources (HR) policy as well (MacDuffie, 1995; Liker, 2004; Sugimori et al., 1977). The set

of human resource management (HRM) practices (e.g., team work, quality circles, problemsolving groups, job rotation etc.) associated with lean production is well documented, at least

conceptually. However, the use of and the operational performance effects of these HRM

practices are rarely in focus of empirical works (Forza, 1996; Macduffie, 1995; Ahmad et al.,

2003), or the findings are ambiguous. In contrast, quality managements knowledge is morevalid on the potential synergy between HR and TQM (Bayo-Moriones and Merino-Daz deCerio, 2001; Jimnez-Jimnez and Martnez-Costa, 2009).

In spite of its importance in OM, even today, lacks a clear picture of lean productionssocial side. This topic is also deemphasized in human resource management. This study

follows multidisciplinary research direction, highlighted by Ahmad and Schroeder (2003) and

Birdi et al. (2008), and using socio-technical approach of lean production aims to answer: (1)

1The participation in the conference is supported by TMOP-4.2.1/B-09/01/KMR-2010-0005
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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whether technical and human subsystems of lean production evolve together; and (2) how

different matches of work organization and production organization (i.e., different production

systems) influence operational performance indicators.

After the introduction the paper is organized as follows. Section 2 introduces the

theoretical framework, and hypotheses are also formulated here. Then, in Section 3 the

database is described, and in Section 4 lean productions technical and social subsystems areoperationalized. Section 5 contains the results, and paper is closed with conclusions andlimitations (Section 6).

2. Literature review and hypotheses2.1. Socio-technical view of (lean) production system

The study is based on the concept of functional fit and considers the socio-technicalapproach of lean production. In this view (lean) production system consists of two

subsystems: (1) the first subsystem, related to technical side, is determined by production

elements, so it is called production organization; (2) the second subsystem, related to socio

side, is determined by HR practices and called work organization. (This structure with related

research steps is summarized in Figure 1).

Figure 1Structure of the study

The production and work organization are integrated in every production system, and each

of them represents a consistent set of related practices. In this study the presence and the

extent of lean production practices lead to different production organizations. Similarly, the

presence and the extent of HR practices lead to different work organizations.

From OM, and especially from lean production point of view, changes in the production

organization will be followed by changes in the work organization. So, theoretically technical

and socio subsystems evolve integrated. In other words, implementing and deepening lean

production practices lead to lean production organization. These changes are followed by theintensification and extension of HRM practices, leading to a work organization that fits lean

Production

system

Emphasis

General

Technicalsubsystem:

Productionelements

Sociosubsystem:

Human resource

elements

Lean production

system

Patterns of

practices inlean context

Technical

subsystem:

Lean productionpractices

Socio subsystem:Best practices in

human resource

management

Lean production

system

Patterns ofproduction and

work organizations

Production

organizations:Based on the extent

of lean production

elements

Workorganizations:

Based on the extent

of best practices in

human resource

management

Research

steps

Defining elementsin literature review(Section 2.2. and

2.3. and Table 1)

Operationalization and

classification ofproduction and workorganizations (Section

4.1. and 4.2.)

Fit of productionand work

organization inlean context

Hypothesis 1 in

Section 5.1.

Lean production

system

Production

organizations:

beginner,process-focus,

lean

Workorganizations:

traditional,formalized,

empowered

Theoretical framework Empirical work

Operational impact offit of production andwork organization in

lean context

Hypothesis 2 in

Section 5.2.

- manufacturing

conformance

- product quality andreliability

- product customizationability

- volumen flexibility

- mix flexibility

- delivery speed- unit manufacturing cost

- manufacturing lead

time- labor productibvity

- inventory turnover


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production and can be characterized by empowerment, team work and skilled workforce.

Altogether, these changes results in improved operational performance.

In the following paragraphs the study reviews HRM practices employed in lean

environment (2.2. and Table 1) and it also touches upon the performance effects of lean

production system (2.3).

2.2. Human resource practices in modern manufacturing systems

MacDuffie (1995) is the first author who empirically supports the socio-technical approach of

lean production. He concludes that lean producers apply high-commitmentHR practices and

that firms with this integrated approach consistently outperform traditional mass producers.

Oliver et al. (1996) emphasize that work organization in high performing automotive

companies is in line with lean principles. According to Power and Sohal (2000) JIT firms are

more focused on particular HRM management policies and see the human factors as critical to

the success. Wood (2000) explains that Japanese companies are more advanced in applying

high commitment practices due to their JIT efforts. Patterson at el. (2004) presents that

integrated manufacturing is positively associated with empowerment, skill enhancement, and

job enrichment.Other authors do not find convincing differences between lean and traditional

manufacturers HRpractices. Oliver et al. (1994) compares world class and averageautomotive parts suppliers and reports no difference in work system and human resource

management. Forza (1996) finds that lean plants compared to traditional ones use more

problem solving teams, take employees suggestions more seriously, have more flexibleworkers and rely on quality feedback. But there is no difference in supervisors role andempowerment between the groups.

OM literature suggests that a well defined set of HRM practices (high commitment work

practices, best practices in HRM) fit lean production (Table 1). However, reviewing the

literature a number of concerns reveal: the number of empirical studies confirming this

relationship is limited, and findings are ambiguous. Even studies supporting this view do not

agree what HRM practices belong to lean production socio subsystem. Based on the

theoretical framework it is assumed that firms enhancing lean production organization will

alter their work organization to fit that. In other words, these firms use HRM best practices to

a greater extent.

Hypothesis 1. Firms enhancing lean production organization use HRM best practices to a

greater extent.

2.3. Impact of human resource practices on operational performance in lean production

In mainstream OM literature it is evident that lean production (i.e., firms relying more heavilyon lean production elements) leads to operational excellence. Similar arguments pervade

HRM literature (Wall and Wood, 2005), but the HR authors usually present that HR practices

result in significant performance improvements.

The socio-technical approach of lean production also draws attention to the influence of

HR practices regarding operational excellence. The studies argue differently: (1) HRM

integrated with production contributes to operational performance; (2) HRM alone can

explain performance in modern manufacturing setting; and (3) production practices result in

performance improvement.

As noted, MacDuffies (1995) findings support that in lean production fit between socioand technical subsystem leads to operational excellence. Shah and Ward (2003) also support

that HR practices (as HR bundle) contribute to operational performance in lean production.


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Table 1Modern production managementmanufacturing practices, human resource management

practices, and operational performance measuresSources

Ahmedetal.

(1991)

HuberandB

rown(1991)

Oliveret

al.

(1994)

MacDuf

fie(1995)

Oliveret

al.

(1996)

Sakakibara

etal.

(1997)

PowerandSohal(2000)

Lewis

(2000)

Cuaetal.

(2001)

Ahmadetal.

(2003)

ShahandW

ard(2003)

Pattersonetal.

(2004)

Birdietl

al.

(2008)

deMenezesetal.

(2010)

Currentstudy

Manufacturing programs

JIT

Cellularman.

Lean

Lean

Lean

JIT

JIT

Lean

JIT,

TQM,

TPM

JIT

Lean

IMS(TQM,

JIT,

AMT)

IMS(TQM,

JIT,

AMT)

Lean

Lean

Human resource management practices

Reduces status distinction X X X

Employment security

Job rotation X X X X X X X X

Flexible workforce X X X X X X X X

Extensive communication X X

Teamwork (functional, cross-functional)

X X X X X X X X X X X

Empowerment (decentralization

of decision making, groupproblem solving, suggestionsystem)

X X X X X X X X X X X X X X

Extensive training X X X X X X X X X X X

Compensation X X X X X X X X

Selective of hiring X X X X X

Lean production practices (internal focused)

Setup time reduction X X X X X X X X X X

Reduction in lead time X

Inventory reduction X X X X

Preventive maintenance X X X X X X X

Schedule flexibility X X X

Layout (cellular) X X X X X X X X X

Pull system, kanban X X X X X X X X

Quality management (TQM, SPC,continuous improvement)

X X X X X X X X X

AMT (computer based

technology)X X X

Other authors argue that HR practices bear the real opportunity of improvements inintegrated production systems. Sakakibara et al. (1997) could not find significant relationship

between JIT practices, alone, and manufacturing performance. In their work infrastructure by

itself explains performance. Patterson et al. (2004) also highlights that integrated

manufacturing practices do not show relationship with company performance, alone the

extent of empowerment predicts it. Birdi et al. (2008) reaches to a similar conclusion:

empowerment and training affect productivity and none of the operational practices show

significant effect. Finally, for example Oliver et al. (1996) see interdependence between HR

and production practices, but according to them the relationship between HR practices and

performance is not so clear in lean companies (e.g., teamwork does not impact performance).

The paper aims to analyze how production system impact operational performance. The

study hypothesize that firms enhancing lean production organization and work organization,that best fits it, outperform other manufacturers. Even those that have lean production


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organization with less advanced work organization, or companies with the most advanced

work organization but less advanced lean production organization. (The research is limited to

study companies where the use of lean production practices is relevant.)

Hypothesis 2. Producers that combine lean production organization with the most advanced

form of work organization (empowered) outperform other manufacturers.

3. The surveyInternational Manufacturing Strategy Survey (IMSS) data are used for analyses. IMSS is a

global network of researchers with the objective to study international manufacturing

strategies, their implementation and resulting performances in operations and related areas.

IMSS-V is a cross-sectional data bank and extends to 719 valid observations from 20

countries from 2009/2010. Before testing hypotheses a homogenous set of firms was created.

Altogether 421 plants remained in the final (Figure 2). Plants based on two conditions were

excluded from the original sample.

Number of employees. Previous researches (Cua et al., 2001; Forza, 1996; Shah and Ward,

2003) suggest that companies with more than 100 employees are more likely to implementlean production practices. According to this condition the paper only takes into consideration

plants with more than 100 employees.

Process types. Although lean production can be used in different production processes (e.g.,

mass production, batch production, and make to order), but to avoid confusion caused by

differences in their appropriate work organizations (Hayes and Wheelwright, 1979; Hill,

1991) the study is limited to those plants where the batch and mass production is dominant

(i.e., the portion of make to order is less than 35 percent).

Final sample

Industries

fabricatedm

etal

product

s

machinery

and

equipme

nt

office,

accounting

and

computing

machinery

electrical

machinery

and

apparatu

s

radio,

television

and

communication

equipme

nt

medical,

precisionand

optical

instrumen

ts,

watchesa

nd

clocks

motorvehicles,

trailersand

semi-trail

ers

othertrans

port

equipme

nt

Total

Missing

N 123 87 15 62 29 25 34 23 398 23

Figure 2The original and the final sample

4. Operationalization of variables and classification procedures4.1. Lean production practices and classification of production organizations

In many cases the lean tool set also consists of practices managing external relations

(customer, supplier), and product development. This wider focus of production practices is

also present in HR-related empirical works. This study grouped producers on the basis of theirinternal and technical lean tools, applying all internal technical elements proposed by Shah

753

5831.Condition (number of employees)Cua et al. (2001), Forza (1996), Shah and Ward (2003)

Original sample

4212. Condition (process types)Hayes and Whellwright (1979), Hill (1991)


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and Ward (2007) (Table 2). Each question was asked on a 1 to 5 Likert scale. It is assumed

that companies starting their lean journey had to make steps in these listed action programs

that are central to lean production. It also should be noted that many of the questions were

single respond item.

After standardization of variables K-means cluster method was chosen to classify. Means

of three-cluster solution are presented in Table 2. Three types of production organization isdefined. The three groups of firms are the beginner (B), the process -focus (PF), and lean(L) firms. It seems that basics of lean concept are embedded in manufacturing firms dailyoperations. The smooth pattern and low intensity of lean practices refers to the fact that

beginner companies do not assign importance to the implementation. The second group offirms is more conscious: process-oriented practices are more emphasized than those serving

quality (process stability). The extent of process-oriented practices is at lean companieslevel. Lean group is highly committed in every aspect and rate quality and maintenance

practices as the most important ones. The high proportions of partially or fully involved firms

reveal that lean concept is widely spread in batch and process context.

Table 2Types of production organizations (mean (standard deviation) standardized value)

Lean production

practices

Variables in the questionnaire Types of production organization

Beginner

(N=107)

Process-

focus

(N=160)

Lean

(N=153)

Controlled processes,

quality improvement

undertaking programs for quality

improvement and control (e.g. TQM

programs, 6projects, quality circles, etc.),

2.26(0.828)

-1.06963

3.23 (0.695)

-0.15413

4.36(0.495)0.90822

Productive maintenanceundertaking programs for the improvement

of your equipment productivity (e.g. TotalProductive Maintenance programs),

2.26(0.949)

-0.88387

2.91 (0.764)-0.29670

4.25(0.489)0.93091

Flowundertaking actions to implement pullproduction (e.g. reducing batches, setup

time, using kanban systems, etc.),

2.40(0.789)

-0.99171

3.90 (0.810)0.35916

3.86(1.062)

0.32490

Pull production and low

setup

restructuring manufacturing processes andlayout to obtain process focus andstreamlining (e.g. reorganize plant-within-a-

plant; cellular layout, etc.).

2.25(0.938)

-0.90858

3.58 (0.890)0.24139

3.75(1.085)0.38524

Number of employees (business unit) 1036 (2550) 1130 (2179) 3851 (1213)

*Business units with more than 20000 employees are excluded; L Likert scale from 1 (no effort in the last three years) to 5(high effort in the last three years)

4.2. HRM practices related to lean production and classification of work organizations

As noted in the previous sections, OM papers present a comprehensive list of HRM practices

(e.g., problem solving groups, job rotation etc.) that fit lean principles. The vast majority of

these papers are either theoretically or non-HR-focused empirical works. However, even these

sources reveal that these HRM practices mostly overlap with best practices in HRM (Pfeffer,1998; Legge, 2006), also known as high performance work systems (HPWS) model (earlier

high-commitment).Table 1, summarizing practices in researches following the socio-technical approach of

lean production, confirms that usually HRM best practices are related to lean productionswork organization. So, the study classifies work organization of manufacturing firms based on

the following HRM practices: (1) reduced status distinction (hierarchy), (2) job rotation, (3)

flexible work force, (4) teamwork, (5) empowerment (decentralization of decision making),

(6) compensation, (7) and extensive training. Similarly to production practices many of the

questions were single respond item (see Table 3).

The classification procedure is similar to the previous section (4.1.). Three distinct forms

of work organization are defined. Means of three-cluster solution are presented in Table 5.

The three groups of firms are the traditional (T), the formalized (F), and empowered (L)


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firms. Table 5 reveals that almost half of the manufacturing firms, traditional, apply HRMbest practices at a moderate level. This group lags behind the two other types, especially in

empowerment, training and job rotation. Formalized firms highlights training, functionalteamwork and compensation in work organization. Producers following the empoweredmodel utilize their high proportion of flexible workforce, employ practices to empower

workforce, and also emphasize cross-functional team work.

Table 3Types of work organization (mean (standard deviation) standardized value)

HR practices Variables in the questionnaireTypes of work organization

Empowered

(N=154)

Formalized

(N= 70)

Traditional

(N=197)

Reduced status distinction

How many organizational levels do you have (fromplant manager to blue collar wokers)?

3.87 (1.146)-0.17569

6.16 (3.13)1.09708

3.73 (1.02)-0.25319

How many employees are under the responsibility

of one of your first line supervisors? (on average,

number of employees in fabrication)

24.42(24.51)0,03777

23.74(16.32)0.00923

22.76(25.51)

-0.03163

How many employees are under the responsibility

of one of your first line supervisors? (on average,number of employees in assembly)

23.40(23.60)

-0.02891

30.90(37.16)

0.24655

22.56(26.08)

-.05985

Job rotation How frequenlty do your production workers rotatebetween jobs or tasks? L1

3.69 (0.85)0.59332

2.30 (0.944)-0.78718

2,91 (,062)-,17998

Flexible workforceHow many of your production workers do youconsider as being multi-skilled? (% of the

production workers)

64.23(25.77)

0.61005

30.02

(24.26)

-0.60431

39.41(24.13)

-0.27081

Teamwork (functional,

cross-functional)

What proportion of your total workforce works in

teams? (in functional team %)60.71

(30.63)

0.02594

72.81(28.48)

0.40019

54.53(33.83)

-0.16510

What proportion of your total workforce works inteams? (in cross-functional team %)

31.80(25.02)

0.02594

18.00

(15.49)

0.40019

23.94

(26.19)

-0.16510

Empowerment

(decentralization of decision

making, group problem

solving, suggestion system)

To what extent are employees involved in product or

process improvement initiatives? L2

3.99 (0.78)0.62217

3.78 (0.878)0.42486

2.66(0.872)

-0.63662

To what extent is your workforce autonomous in

performing tasks? L3

3.53 (0.81)

0.59924

2.93 (0.863)

-0.04102

2.55(0.848)

-0.44191

Increasing the level of delegation and knowledge ofworkforce (e.g., empowerment, training,

autonomous teams) L4

3.83 (0.75)0.69238

3.40 (0.858)0.28334

2.43(0.872)

-0.63814

Implementing continuous improvement programs

trough systematic initiatives (e.g., kaizen,improvement teams)

4.39 (2.51)0.40737

4.00 (0.917)0.19709

2.91(0.846)

-0.38411

CompensationOn average, what proportion of your shop-floor

employees compensation is based on incentives?(% of compensation)

9.06 (11.77)

-0.19521

31.39(32.58)

1.02204

9.39(11.43)

-0.17704

Extensive training How many hours of training per year are given tothe regular workforce? (hours per employees)

35.13(29.05)

0.06080

71.41(68.01)

1.01132

18.37(13.43)

-0.37818

Number of employess (business unit)* 1316 (2653) 2539 (3696) 978 (2250)

*Business units with more than 20000 employees are excluded; L1 Likert scale from 1 (never) to 5 (very frequently); L2 Likert scale from 1 (no involvement) to 5 (continuous, deep involvement); L3 Likert scale from 1 (no autonomy, onlyexecution) to 5 high autonomy, planning, execution and controll); L4 Likert scale from 1 (no effort in the last three years)to 5 (high effort in the last three years)

4.3. Operationalization of operational performance measures

The study only considers a selected set of operational performance indicators. The significant

positive impact of lean production on indicators listed in Table 4 is supported by empirical

works. Each question was asked on a 1 to 5 Likert scale (see Section 5.2.).


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Table 4Operational performance indicators in lean production researchesOperational performance indicators in the literature Variables in questionnaire

Product qualityManufacturing conformance

Product quality and reliability

Flexibility (options) Product customization ability

Reducing batch size, volume flexibility

Volume flexibility

Mix flexibilityDelivery speed (flexibility) Delivery speed

Manufacturing costs Unit manufacturing cost

Lead time (flexibility) Manufacturing lead time

Reduced labor content Labor productivity

Inventory turnover Inventory turnoverSources: Crawford et al. (1988), Huson and Dhanajay Nanda (1995), Flynn et al. (1995), MacDuffie et al. (1996), Sakakibara

et al. (1997), McKone et al. (2001), Cua et al. (2001)

5. Results5.1. Fit of production and work organization (Hypothesis 1)

Hypothesis 1 assumes that firms production (technical) organization and work (socio)

organization evolve together. Based on the three distinct forms of production and workorganization respectively, altogether nine production systems are defined. At one extreme end

of the subsystems matches is the combination of lean production organization andempowered work organization. At the other extreme end firms work with beginner andtraditional models. The hypothesis indicates that the more companies emphasize lean

production practices the closer they get to the empowered setting. However, theformalized model also presents outstanding results in some HR practices (e.g., training,compensation, teamwork), so its fit is also conceivable.

Table 5 reveals that the traditional approach of work organization is very dominant inevery type of production organization. Beginner production organization is widely (morethan 70%) integrated with this form, and almost in third of lean producers work is alsoorganized traditionally. The empowered work organization is mostly embedded in thosefirms production systems that apply several or all lean production practices. Its share isslightly over 40% in these contexts. The formalized form follows the reverse direction thanthe beginner: enhancing lean production practices (does not) favors (beginner)formalized model.

Table 5Matching production organization and work organization: nine types of production systemsWork organization

Empowered Formalized Traditional TotalProduction organization

Beginner20 (18.7%)

(13.1%)10 (9.3%)(14.3%)

77 (72%)(39.1%)

107 (100%)(25.5%)

Process-focus67 (41.9%)

(43.8%)24 (15.0%)

(34.3%)69 (43.1%)

(35%)160 (100%)

(38.1%)

Lean66 (43.1%)

(43.1%)36 (23.5%)

(51.4%)51 (33.3%)

(25,9%)153 (100%)

(36.4%)

Total153 (36.4%)

(100%)70 (16.7%)

(100%)197 (46.9%)

(100%)420

Statistically speaking, Hypothesis 1 is supported. There is significant association between

production and work organization. (Pearson Chi-Square (41.284) is significant at 0.05 levels.)

In other words, applying lean production practices will enhance the extension of HRM

practices. Cramer V (0.222) and contingency-coefficient (0.299) are both significant (at 0.05

levels) and indicate that the association is quite weak. The proportion of uncertainty in work

organization that is explained by production organization is between 5 to 7 percent

(considering the value of lambda, Goodman and Kruskal tau, and uncertainty coefficient).

These are rather low values, so other variables, not included in the study, can have


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considerable impact. Comparing types of production organization in pairs (beginner andformalized; beginner and lean) does not lead to more significant results.

5.2. Fit of production and work organization (Hypothesis 2)

Hypothesis 2 assumes that firms with lean production organization and empowered work

organization outperform other production systems. ANOVA analysis was applied to assessthe impact of production systems on operational performance. As noted previously, the study

is limited to companies where lean production practices are relevant (i.e., process-focus andlean).

Our results (Table 6, Table 7, and Figure 3) suggest that different production systems

(distinct matches of production and work organization) lead to the same superior operational

performance. Lean production organization is effective both with empowered andformalized work organization. In statistical terms one can expect the same results fromprocess-focus-formalized production system. Process-focus-empowered has only toimprove few indicators: product quality and reliability (to reach lean and formalized andlean and empowered), and labor productivity (lean and formalized).

Table 6Operational performance indicators relative to main competitors

Variables in questionnaire

leanproduction and

traditional

work (LT)

leanproduction and

formalized

work (LF)

leanproduction and

empowered

work (LE)

process-focusproduction and

traditional

work (PFT)


formalized

work (PFF)


empowered

work (PFE)

Manufacturing conformance 3.68 3.64 3.79 3.41 3.68 3.64

Product quality and reliability 3.74 4.06 4.00 3.53 3.74 3.63

Product customization ability 3.39 4.03 3.74 3.49 3.33 3.77

Volume flexibility 3.67 3.84 3.85 3.61 3.78 3.63

Mix flexibility 3.60 3.69 3.76 3.45 3.56 3.73

Delivery speed 3.54 3.64 3.63 3.41 3.67 3.55

Unit manufacturing cost 3.23 3.48 3.25 3.13 3.28 3.20

Manufacturing lead time 3.38 3.55 3.51 3.21 3.39 3.50

Labor productivity 3.42 3.91 3.73 3.35 3.47 3.49Inventory turnover 3.38 3.61 3.29 3.20 3.33 3.33

Likert scalerelative to our main competitor, our perfomance is (1) much worse, (3) equal, (5) much better

Table 7Significant differences in operational performance indicators relative to main competitors

Variables in questionnaire

Sign.

(LT)(LF)

Sign.

(LT)(LE)

Sign.

(LT)(PFT)

Sign.

(LF)(PFT)

Sign.

(LF)(PFF)

Sign.

(LF)(PFE)

Sign.

(LE)(PFT)

Sign.

(LE)(PFF)

Sign.

(LE)(PFE)

Sign.

(PFF)(PFE)

Sign.

(PFT)(PFE)

Manufacturing conformance n.s. n.s. 0.084 n.s. n.s. n.s. 0.011 n.s. n.s. n.s. n.s.

Product quality and reliability 0.085 n.s. n.s. 0.003 n.s. 0.015 0.020 n.s. 0.014 n.s. n.s.

Product customization ability 0.001 0.042 n.s. 0.05 0.060 n.s. n.s. 0.081 n.s. 0.060 0.085

Volume flexibility n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s.

Mix flexibility n.s. n.s. n.s. n.s. n.s. n.s. 0.045 n.s. n.s. n.s. 0.065

Delivery speed n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s.

Unit manufacturing cost n.s. n.s. n.s. 0.059 n.s. n.s. n.s. n.s. n.s. n.s. n.s.

Manufacturing lead time n.s. n.s. n.s. 0.034 n.s. n.s. 0.032 n.s. n.s. n.s. 0.037

Labor productivity 0.007 0.054 n.s. 0.010 0.062 0.017 0.013 n.s. n.s. n.s. n.s.

Inventory turnover n.s. n.s. n.s. 0.040 n.s. n.s. n.s. n.s. n.s. n.s. n.s.

significant difference at 0.05 levels, significant difference at 0.10 levels, n.s. not significant

Even, lean-traditional production system only lags behind them in labor productivityand product customization ability. This form is not different from process -focus-formalized production system. Clear performance gap exists if one compares lean-formalized and lean-empowered production systems with production system thatemploys process-focus production and traditional work organization. This model does not

differ from process-focus-formalized form. Finally, this fact together with the relations ofproduction systems depicted in Figure 3 (all arrows are directed to lean) suggest that lean-


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formalized and lean-empowered production systems perform better than any other types.Their superior performance cannot be supported by statistical measures.

Figure 3Operational performance indicators relative to main competitors

5. Conclusion and limitationThe current paper dealt with fit of socio subsystem and technical subsystem in lean

production and the impact of their match on operational performance indicators. Concerning

fit of subsystems the study revealed significant association between production organization

and work organization. This association suggests that implementation of lean production

practices enhances the extension of HRM best practices. However, the association is weak.

Furthermore, the research provided interesting inside into the distribution of work

organizations. According to the results, traditional work organization remains influential inmanufacturing firms. More than one third of firms enhancing lean production practices

organize daily operations in traditional way. This remarkable proportion raises interesting

questions about the performance outcomes of different production systems: how does thematch (or mismatch) of production and work organization effect operational indicators?

The study presented clear evidences that lean production organization andformalized/empowered work organization lead to superior performance. However, itseems reasonable that firms do not strive to achieve these models where the extent use of lean

production practices is matched with HRM best practices. Matching formalized andempowered work organization with a production system that utilizes quality andmaintenance practices at a moderate level and rely on process related lean practices to a great

extent (process-focus production organization ) leads to the same (formalized) or almost tothe same (empowered) operational performance. In a business environment where productcustomization ability and labor productivity are not of first priority lean productionorganization matched with traditional work organization can also operate effectively.

There are clear limitations to this research. The cross-sectional data limit the

generalizability of these findings. Operationalization is another limitation, since the database

does not cover all aspects neither of lean producers (Shah and Ward, 2003) nor of HRM

practices (Pfeffer, 1998). Contextual factors (e.g., national culture, economic development,

and industry (Ahmad and Schroeder, 2003; Cagliano et al., 2011)) and company decisions

(e.g., strategic orientation (Legge, 2006)) also can influence HRM practices and the fit

between production and HRM (Jayaram, 1999). None of these is considered in the study.

Further studies should clarify the source of operational performance improvement (HR

practices or lean production practices) in distinct production systems.

Lean &Traditonal

Process-focus& Traditonal

Lean &Empowered

Process-focus& Empowered

Lean &Formalized

Process-focus& Formalized


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