"Lean Manufacturing: Context, Practice Bundles, and Performance"

Rachna Shah and Peter Ward

Journal of Operations Management

2003, 21, 129-149

Using existing data from the Industry Week U.S. Census of Manufacturers, the authors of this article examined the influence of plant size, plant age, and unionization on implementation of 22 manufacturing practices (JIT/continuous flow production; pull system; cellular manufacturing; cycle time reduction; focused factory production systems; agile manufacturing strategies; quick changeover techniques; bottleneck/constraint removal; reengineered production processes; predictive or preventive maintenance; maintenance optimization; safety improvement programs; planning and scheduling strategies; new process equipment or technologies; competitive benchmarking; quality management programs; total quality management; process capability measurements; formal continuous improvement program; self-directed work teams; flexible cross-functional workforce) that are key facets of Lean manufacturing. They also examined the effects of 4 "Lean bundles" (JIT, TQM, TPM, and HRM)—combined from the above 22 manufacturing practices-on plant performance.

The primary results were:

1. Larger manufacturers were more likely to implement 20 of the 22 manufacturing practices (there was no significant difference for cross-functional workforce and quality management programs);
2. For age of the plants, there was no difference between older and newer plants on 14 of the manufacturing practices. Older plants were statistically less likely to implement 5 of the practices (cross-functional workforce; JIT/continuous flow production; maintenance optimization; reengineered production process; and self-directed work teams) and statistically more likely to implement 3 of the practices (planning and scheduling strategies; safety improvement programs; and total quality management);
3. Unionization had no influence on implementation of 16 of the manufacturing practices. Unionized plants were less likely to implement cellular manufacturing, cross-functional workforce, cycle time reduction, maintenance optimization, process capability measurements, and self-directed work teams;
4. JIT, TTQM, TPM, and HRM were all found to positively, and additively, influence performance variables. Overall, use of these practices explained 27.7% of the variance in operational performance of the plants, with JIT having the greatest influence on performance.

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"The Principles of High Performance—And How to Apply Them"

Leon Martel

Journal of Organizational Excellence

Autumn 2002, pp. 49-59

This article is excerpted from the author's book "High Performers: How the Best Companies Find and Keep Them." The article summarizes what the author has found to be the best practices of companies re high performers. Four general dimensions are examined, with best practices identified for each area:

1. Work Content and the Work Environment—"The practices of the best companies recognize that employees need, above all, to believe that the work they do is important and that they are valued." The relevant principles here are (a) Convey the importance of the company's work; (b) Engage employees; (c) Recognize employees; and (d) Value employees as whole people.
2. Recruiting and Hiring—The relevant principles here are (a) Look to new and changing sources of labor; (b) Search for new skills in new ways; and (c) Select with changing techniques.
3. Compensation and Benefits—The relevant principles here are (a) Make base pay competitive and equitable; (b) Pay for performance; (c) Pay for retention; and (d) Reassure employees with benefits.
4. Education and Training—The relevant principles here are (a) Make learning continuous; (b) Make training informal; (c) Share information; (d) Meet changing needs with appropriate job-related programs; and (e) Promote general education.

The author also identifies a number of "key themes" which recur in the practices of the best companies:

1. Practices should be aligned with strategy;
2. Culture is critical;
3. Paying attention to the competition is vital;
4. Face-to-face relations are necessary;
5. Listening is the most important part of communicating;
6. Engaging employees is essential;
7. Investing in employees is required;
8. Evaluating practices is the way to learn how they are working
9. Commitment begets commitment.

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"Study Finds That Knowledge of Pay Process Can Beat Out Amount of Pay in Employee Retention, Organizational Effectiveness"

P. Mulvey, P. LeBlanc, R. Heneman, and M. McInerney

Journal of Organizational Excellence

Autumn 2002, pp. 29-42

The authors of this study surveyed over 6,000 managers and employees in 26 organizations in the United States and Canada. The study was designed "to determine how well these [new] pay and performance systems are understood, and whether a fuller understanding by employees would contribute to higher results."

The high-level findings of the study were:

1. Performance management processes are well understood by employees and managers;
2. Pay processes are not well understood by employees and managers;
3. There is more satisfaction with compensation amounts than with the processes used to determine pay levels;
4. Pay knowledge and performance management knowledge are positively associated with organizational effectiveness;
5. Increasing pay and performance knowledge has such a strong positive impact on pay satisfaction that organizations may be able to offset modest base pay increase budgets by simply being more transparent about how pay is determined;
6. Short-term incentives are not signaling necessary changes in behavior or motivating those behaviors; and
7. Managers are much less confident in answering employee questions about specific pay issues than performance management issues, but managers also are not receiving many questions about pay from employees.

The article also identifies implications for action from the study's results:

1. Diagnose the current manager and employee knowledge of pay in your organization;
2. Be proactive in educating people;
3. Train supervisors and managers to communicate directly with employees;
4. Personalize the knowledge of pay for people;
5. De-emphasize traditional pay information delivery vehicles (such as formal meetings, videos, and handbooks);
6. Invest in web-based learning systems for certain types of messages and information;
7. Provide much greater information about pay processes; and
8. Evaluate how improvements in the pay process and pay process information can offset increases in total pay levels.

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"Who's Bringing You Hot Ideas and How Are You Responding?"

Thomas Davenport, Laurence Prusak and H. James Wilson

Harvard Business Review

February 2003, pp. 58-64

For the past two years, the authors of this article have been studying "idea practitioners"—people who bring into their company new ideas about how to manage better. Identification of, and interviews with, about 100 of these individuals led to the following picture of a four-phase process by which these practitioners infuse their organizations with new ideas:

1. Scouting for ideas—"All of them, not surprisingly, are avid readers of management literature and enthusiastic participants in business conferences...They approach all their sources with open minds...They are extraordinarily attuned to the zeitgeist—the often opaque economic, social, or technological environment that can determine whether an idea will thrive or quickly perish...idea practitioners tend to value an interdisciplinary perspective, looking to fields outside business for new approaches to solving problems;"
2. Packaging promising ideas for broader organizational consumption—"Idea practitioners add to, subtract from, or otherwise translate the ideas they want to introduce, tailoring them to fit their organizations' specific needs;"
3. Advocating for new ideas—"They build marketing campaigns, find early adopters, and work to persuade other leaders and managers to 'put some skin in the game.' One way they do this is by illustrating the competitive pressure to change;"
4. Making it happen—"Most are well versed in the principles of change management and understand the importance of rolling out a new idea simultaneously from the top down and the bottom up."

Based on the assumption that every company should have at least a few idea practitioners, the authors offer seven pieces of advice on the "care and feeding of an idea practitioner":

1. recognize their existence;
2. carve out roles for them;
3. give them license;
4. reward them—carefully;
5. get into the ideas;
6. run occasional interference; and
7. create an idea-friendly culture.

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"Six Steps to Integrating Complaint Data into QA Decisions"

John Goodman and Steve Newman

Quality Progress

February 2003, pp. 42-47

This article describes an effective process used to integrate complaint data into the Quality Assurance decision making process:

1. Evaluate Problem Severity—Three common ways to do this using customer complaint data are (a) looking for direct or veiled threats the customer will switch brands or service suppliers; (b) looking at problem classification data from comment cards, correspondence, or toll-free-number based complaint handling systems; and (c) looking at feedback cards and surveys, which are made universally available to customers and ask whether the customer would recommend the product or service to associates;
2. Extrapolate to Marketplace—This can be done by (a) direct estimation of the number of consumers encountering the problem through direct survey of customers or inspection of a sample of products from the field; (b) indirect measurement by gathering data from the field organizations that have received complaints but may not have passed them on to headquarters; and (c) estimation from previous complaint rates for known similar problems;
3. Estimate Revenue Impact—This is calculated by estimating the number of customers lost because of direct problem experience, as well as those lost because of negative word of mouth. (note: The specifics of this calculation is provided in the article);
4. Compare to Internal Measures—Some internal sources are QA standards, repair (and re-repair) rates, service call schedules, system downtime, and returns or warranty costs. The article explains how to reconcile discrepant pictures from complaints and internal measures;
5. Determine the Cause—The success of this step is dependent on the quality of the information available; and
6. Determine the Solution—The authors says that "...judgment based on the cost of actions vs. the benefit of reduction or mitigation of the problem must be used to determine the best approach."

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Operational Excellence Requires a Holistic System

From GP Deltapoint

Mike Bresko, Managing Director; and John McNeil, Principal Consultant

The majority of change initiatives fail to live up to expectations. Why? They typically focus on one set of methods or tools and don't create the management systems or operating philosophy to achieve sustained excellence. Simply stated, they don't achieve cultural change.

Many companies have Six Sigma or Lean Enterprise initiatives. Some have focused on improving equipment reliability through Total Productive Maintenance. Each of these methods is best suited to a different purpose:

In reality, most manufacturing companies need a mixture of all three methods.

Furthermore, companies that create successful, sustained transformations develop a system that permeates the company. These systems provide both a way of managing and a way of operating that all understand and follow. Unfortunately, most companies don't develop such systems.

GP Deltapoint provides a pathway to operational excellence. It integrates the methodologies of Lean, Six Sigma, Total Productive Maintenance; and builds a management system that drives Quantum Leap Improvement and assures Daily Management. This system improves customer satisfaction, streamlines workflow, reduces process variability, and engages people at all levels of the organization.

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