LEAN MANAGEMENT FEASIBILITY FOR PUBLIC ORGANIZATIONS - Assignment Example

?Executive Summary This business report identifies lean management as one of the potent management tools, strategies, and process for the attainment of improvements in organizational performance, value, and financial benefits. It considers many differences between private and public organizations to properly evaluate the feasibility of implementing lean management strategy in situations pertaining to the public organization. Such factors as lack of profit motivation, political issues in the hierarchy, scepticism and doubts about willingness to support lean management by the leaders, and even legal impediments can cause failures in the implementation of lean management as it is often understood to mean reduction in personnel and jobs. Assuming there is no law preventing lay-offs for public sector workers, the leadership may consider the strategy. Another assumption would be the fact that a Collective Bargaining Agreement with a labor union can permit lay-offs. In situations wherein lean management is possible, careful study of the implications of that strategy would have to be done. Research findings have identified dangerous negative results like lower quality of public services and loss of capability to be more competitive given a change in requirements for more competitive services, and the long term problems for public workers who will be obliged to shoulder additional tasks due to manpower reductions. Lean management can work if there are no legal impediments and if the available workforce will have the skills and capabilities to takeover some jobs not frequently required. Thus, careful preparations, training, and knowledge dissemination to tap all other alternative means to improve performance in order to reduce cost and expenses thereby reducing budget requirement before resorting to job cuts – all these should be done. Cooperation of leaders and followers will be needed for the successful implementation of lean management strategy. The organization’s culture will have to be ready for changes. Table of Contents Executive Summary………………………………………………………………… 1 Introduction…………………………………………………………………………. 3 1. Scenario Description 2. Lean Management Defined 3. Objectives of the Business Research & Report Methods…………………………………………………………………………….. 3 Results……………………………………………………………………………… 6 1. Limitations of Lean Management 1.1 Adequate Manpower Capacity to Perform with Good Performance 1.2 Must Consider Short Run & Long Run Impact 1.3 Manpower Knowledge & Awareness of Urgency for Change 2. Implementation Challenges in Public Organizations: Nine (9) Factors 3. Why Projects in Public Sectors Failed 4. Warnings Against Unprepared Implementations of Lean Management 5. Pre-requisites for Successful Implementation 5.1 Adequate Knowledge for Proper Implementation 5.2 Adequate Capacity for Good Performance 5.3 Leadership Participation & Workforce Cooperation 5.4 Short-to-Long Term Consequences Foreseen to be Good Conclusions…………………………………………………………………………10 Recommendations…………………………………………………………………..11 Appendix……………………………………………………………………………13 References…………………………………………………………………………..15 Introduction The CEO has requested for a careful study of the Lean Management process for a public organization in order to evaluate the impact and feasibility of implementing it as a way of initiating improvements to arrive at cost reduction while having better work performance. Lean Management is a comprehensive system of getting things done by learning from past experiences, eliminating unnecessary activities, costs, and expenses, and then continuously improving processes in order to do more with less resources as well as less wastages (Cole 2011, p.3), as the improvements add value to the organization. Like all systems, it has interrelated parts of a process, namely, “leadership, culture, team, and practices and tools” that share a common, “clearly defined goals” (Fliedner 2011, p.1). This Business Report looks into each of those parts of the Lean Management process and evaluates the impact of each part on the public organization. Objectives of the research were as follows: [a] to distinguish characteristics observed in public organizations from those of the private organizations, particularly those which will be affected by lean management; [b] to describe how the implementation of lean management might change the public organization whether positively or negatively; [c] to support the descriptions with survey results, interview results, questionnaire results, and secondary information from books, journals, and/or scholarly articles; [d] to analyze the finds from all sources in order to see the consensus as to the implications of implementing lean management in the public organization; [e] to evaluate whether or not it is feasible to actually implement the strategy and process; [f] to enumerate the conditions under which lean management will definitely benefit the public organization; and [g] to recommend a systematic procedure for its implementation such that maximum gains can be realized. Method A survey of books, journals, and articles was performed by searching Google using key words “Lean Management”, and “Impact of Lean Management on Public Organizations”, “Implementing Lean Management in Public Organizations”. This gave an estimate of the number of relevant reading materials to be able to thoroughly evaluate the feasibility, impact on performance, manpower, the public organization as a whole, and the implications of having to implement lean management. The results of search showed the following abundant resources: Key Words Input for Google Search Engine Results in No. of Book Resources Before After Careful Inspection Results in No. of Scholarly Journals (2010-2013) Before After Careful Inspection 1. Impact of Lean Management in Public Organizations 14,300 Less than 10 17,400 10 2. Lean Management 70,300 10 35,900 10 3. Implementing Lean Management in Public Organizations 1,010 10 16,600 10 A random sample of companies was contacted through their representative managers. However, this was only for the purpose of getting additional information about any feedback from their companies’ effort to implement lean management. \since there was no way of knowing if those representatives were authoritative sources insofar as lean management issues are concerned, their feedback was only noted for comparison against the reference materials which had authoritative writers on the topic of lean management. Interviews, some with questionnaires and some spontaneous, were also conducted to find out their views about the implications of implementing lean management in their companies. More information was gathered from focus group discussions. Focus group members gave their opinions for consideration in understanding the impact of lean management implementations. A review of the strategies at different levels of the organization was done. And detailed activities of the new lean management introduction processes particularly related to time and waste were also discussed. Liu, Leat, Moizer, Megicks and Kasturiratne (2013, p. 2123) revealed the significant of decision focused knowledge management approach for providing effective decision making for use of lean management approach across the organization level. Members of the focus group included a CEO from one of the public organizations, Stakeholders, and employees. The question asked in the focus group was whether or not lean management can contribute to effective business performance and allow the organization to have a competitive performance. Other sources of information about the impact of lean management were the surveys. Two types of surveys were done. The first involved case study surveys. And the second was by having a random sample of respondents consisting of CEOs and employees. Interviews were conducted. Questionnaires were answered. Data gathered were utilized for comparison against findings discovered from researched references. Results Many positive results can be derived out of lean management, among them being the better cost and expenses management and more work output per manpower in a public organization. However, according to Shillabeer, et.al.(2011, p.196), “Lean Management is not always smart management.” When a few of the management and their corresponding qualified staff are retrenched, the necessary component for good performance as a result of changes can be inadvertently eliminated, making it virtually impossible to achieve the desired, timely results. There should always be adequate management capacity as a precondition for good performance in public service. If that management capacity is damaged due to retrenchment, the usual pattern can be more expensive to restore, because such management capacity is arrived at through some time of developments and experiences of the people who are supposed to provide the capacity to serve and be flexible for low and high demand for services. Sarkar (2012) believes that lean management should be viewed as a strategy rather than just a method to improve business. It is supposed to benefit the organization in the long run. All members of the organization should be made aware of the bigger picture in order for each one to understand the changes that are taking place. Educating the members of the organization will be a must. That means members should have an appreciation of processes. Prior to implementing lean management, members of the organization should realize the urgency of change. The people should know what is happening and why. Leadership should be able to convince middle management to cooperate. In the public organization Cole (2011, p.14) identified nine challenges for the implementation of lean management to work, namely, (1) rigid hierarchical work environment, (2) less sense of urgency to change compared to private organizations, (3) less support from the leadership, (4) not so concerned with profits and losses, (5) “lack of common goals”, (6) not so customer focused, (7)manpower turnover tending to be higher than that of the private sector, (8)more complex, and (9)more variety of employees. These were identified through interviews of experienced employees in the public sector. Wirick (2011, pp. 18-19) gave a long list of his findings about why projects in the public sector failed. Appendix A shows this. Reasons for failures have to be considered because lean management implies changes that can de-stabilize regular operations given a difficult environment for its implementation. Characteristics of the public organization which was mentioned by Wirick (2011, p.12) was the higher value given to “stable processes and an aversion to risk”, the system of compensation and retirement wherein the public sector workers are given lower compensation compared to the private sector over the short term but greater benefits towards retirement, and the difficulty of introducing innovations because of the lower pay scales as the de-motivating factor. Radnor and Walley (2008, Abstract) had forewarned, after studying cases in the public organization, about implementing changes purely based on wanting the organization to be lean in order to reduce wastages and focusing “solely on lean tools”. Underlying situations or conditions have to be given adequate consideration and treated with the appropriate strategies. Drew and Bhatia (2006, p.1) gave examples of such situations, namely, “cynicism among civil servants” because of their view that the priority is with “matters of policy, not operations”. And they noted the absence of profit motive for the implementation of lean management. Lay-offs of workers are not allowed in some countries. Other countries have labor unions that protect the tenure of workers. Also, there can be less pressure from competition due to absence of competitors or fewer competitors. The employees in public sector may not have adequate qualifications to undergo the process of implementing lean management, such as when the remaining workforce would have to absorb some of the tasks of outgoing manpower. Although Drew and Bhatia (2006, p.3) recognize the lean management process as capable of improvements by resolving problems on an ongoing basis, there can be “gaps in skills and entrenched mind-sets”. There will be a need to have a risk-taking leadership capable of developing the culture of good performance and its ongoing improvements. Leaders would have to become aware of the capability gaps and prepare the public organization workforce for lean management eventually so that more can be derviced from less. In terms of the three sources of losses if lean management is not implemented: wastages, variability, and inflexibility, the organization must cut down unnecessary work activities, waiting time or idle time, back jobs, and must arrive at acceptable, effective, and efficient standard processes, while training people to forego with rigid behaviour and practices in order to be more flexible with getting things done faster but with good quality services or results. In an actual case, wherein the employees were not immune from job cuts, Carter et.al.(2011, Abstract) studied actual implementations of lean management in UK. Although 16,000 jobs were removed and ? 5 million was saved by increasing productivity and reducing backlogs with les employees in the HM Revenue and Customs, their findings showed there were “detrimental effects on employees, their working lives, and the service that is provided to the public. The consequences of Lean on public sector work are highly problematic. . .” This tallies with another case study survey conducted by Northouse (2007, p.34), who stated that the management should understand the meaning of increasing customer value. If the quality of services to the public is affected negatively, it would not be a wise decision to implement lean management. That will even lower the competitiveness of the organization against competitors. The ultimate goal of the organization is either to maximize profits or realize more gains. But this can be achieved only if human resource managers understand the needs of customers (Friedman and Miles, 2006, p. 89). Camacho-Miano, Moyano-Fuentes and Sacristan-Diaz (2013, p.1099) argue that to accomplish the organization goals, lean management should be implemented but it should focus on management process by optimizing separate technologies, product flow and assets. Knowledge about lean management implementation on all levels of the organization was the major finding in questionnaires distributed and interviews conducted. The values involved and that have to be weighed can be clearer with better knowledge about the strategy and process known as lean management. It may be easy to offer attractive termination or severance compensations in order to retrench in terms of manpower in situations and organizations where that is possible for the sake of cost savings during hard times. But the long-term impact can be overlooked, resulting in long-term weaknesses and lack of competitiveness as a result of failure to consider all the values and factors that should be weighed prior to implementation of lean management. One concrete example would be the value of being able to produce more and at higher quality in order to arrive at a competitive advantage. There may be the opportunity for the existing manpower to simply increase their productivity and work performance to meet growing and new demand from the public. Unfortunately, as a result of lack of knowledge concerning opportunities available and failing to see the value of available manpower capabilities to meet those growth opportunities, the organization accidentally ends up with lean resources incapable of flexibility to meet higher demand for greater services. Another alternative could be by simply allowing employees to go on higher educational leave without pay during a recession in preparation for re-hiring when the economy improves. They may be allowed to secure educational loans against their company benefits. Instead of being terminated and paying severance compensation, employees can be reduced by getting higher education during low demand for public services. Still another idea may be the prioritization in cost reduction by using fewer resources other than employees. Compressing office space usage and reducing rental expenses, maintenance costs, and energy consumption can be among the alternatives. These are just a few ideas arrived at in focus discussion groups. Hajmohammad, Vachon, Klassen and Gavronski (2013, p. 315) argued that improving coordination and integration of lean management in an organization will make the implementation effective and successful. . Fullerton, Kennedy and Widener (2013, p. 59) argued that lean leadership should first be trained in order to become capable of coaching and mentoring people during the implementation. Conclusions Lean management as a process and strategy has the great advantage of changing the overall performance of the public organization into one that is cost-effective, resulting in less budget requirements. However, there are many factors, situations, and conditions requiring careful studies, analysis, and evaluation of values before actual implementation of lean management may be done. There are significant differences between private and public organizations. Human factors (limitations in capabilities or skills, knowledge, and motivation) appear to be the biggest bottleneck. In order to know whether or not the organization can still deliver the desirable results for the public, the management would have to know capabilities of personnel along with tasks that would have to be absorbed, the willingness of leadership to support changes, the wide array of alternatives available in order to get more things done with less. The word “less” does not necessarily refer to less manpower, although it is oftentimes the target of cost reduction. Research showed dangers ahead in cases of wanton, reckless, or expeditious decisions to implement lean management, especially if it means affecting the lives of the workers. The unfavourable long term impact can damage the capability of the organization to satisfy public needs and wants, It can also mean substantial costs of training new manpower after discovering a mistake with retrenching people. But assuming all things have been considered and there is willingness on the part of leadership and the employees to facilitate changes, lean management can derive substantial financial savings for the public organization both for the short run and in the long run. It can indeed be feasible to implement lean management strategy given all the assumptions of preparedness for the purpose. A positive impact will serve as the attraction. But management must proceed with care and after careful studies of the consequences given the actual situation that the public organization must face. In the words of Radnor et. al. (2006, p.3), “a critical mass of people who are comfortable with Lean practices is required.” Recommendations To achieve better performance in a public organization, given the different factors that can be affected by an implementation of lean management strategy, company wide information about management plans and alternatives for improvements ought to be communicated. Lean management is only one of the alternative solutions for the attainment of higher productivity with lower budget. This will encourage employees to participate and possible arrive at solutions for the public organization to reduce costs, possibly without having to negatively affect the employment of people within the organization. Cost savings ideas can be discovered through cooperation with certain projects wherein costs can be reduced. Other sources of income might be discovered. For some who feel their jobs are at stake, they can start looking for alternative jobs elsewhere or can request for transfer to another agency that needs more manpower. Those with plans to secure higher education can voluntarily go on leave without pay but with educational and subsistence loans using their retirement benefits as leverage. And later, they can return for work when the additional manpower is required. Later on, with higher education, they can be more productive as employees in the same public organization when there is budget for more personnel. Leadership must participate in the process of implementation. The implication of implementing lean management should convince both leaders and followers if careful studies are done to successfully change for improved performance. As much as possible, the last alternative change should be one that will disregard the situation of public servants employed. Furthermore, due to the gravity of the possibility of failure, whether in the short run or long term, full accountability should be established and the leadership must take full responsibility for the ultimate impact. Because of this, they should be very careful with their final decisions to implement lean management. Consultations and full disclosure throughout the organization ought to be thoroughly done. In effect, the culture of the people in the organization would have to be prepared for such a strategy. Appendices Appendix A [Source: Wirick, David (2011). Public Sector Project Management: Meeting the Challenges and Achieving Results. USA: John wiley & Sons, pp. 18-19] References Camacho-Minano, M.; Moyano-Fuentes, J., and Sacristan-Diaz, M. (2013). What can we learn from; the evolution of research on lean management assessment?', International Journal Of Production Research, Vol. 51, Issue 4, pp. 1098-1116. Carter, B.; Danford, A.; Howcroft, D.; Richardson, H,; Smith, A.; and Taylor, P. (2011). Lean and Mean in the Civil Service: the Case of Processing in HMRC. Public Money & Management. Vol. 31 Issue 2, pp. 115-122. Cole, B.(2011). Lean-Six Sigma for the Public Sector: Leveraging Continuous Process Improvement to Build Better Governments. USA: ASQ Quality Press. Drew, J. and Bhatia, N. (2006). Applying Lean Production to the Public Sector: Governments at all Levels Must Deliver More for Less. The Principles of Lean Manufacturing Offer Surprising Apt Solutions. The McKinsey Quarterly, June 2006, pp. 1-5. Fliedner, G. (2011). Leading and Managing the Lean Management Process. NY, USA: Business Expert Press. Friedman, A. L., & Miles, S. (2006). Stakeholders: Theory and practice. Oxford: Oxford University Press. Fullerton, R, Kennedy, F, & Widener, S. (2013). Management Accounting and Control Practices in a Lean Manufacturing Environment. Accounting, Organizations & Society, 38, 1, pp. 50-71. Hajmohammad, S, Vachon, S, Klassen, R, & Gavronski, I 2013, 'Lean management and supply management: their role in green practices and performance', Journal Of Cleaner Production, 39, pp. 312-320. Northouse, P. G. (2007). Leadership: Theory and practice. Thousand Oaks: SAGE Publications Radnor, Z. and Walley, P. (2008). Learning to Walk Before We Try to Run; Adapting Lean for the Public Sector. Public Money & Management. Vol. 28, Issue 1, pp.13-20. Radnor, Z.; Walley, P.; Stephens, A.; and Bucci, G. (2006). Evaluation of the Lean Approach to Business Management and Its Use in the Public Sector. Scottish Executive Social Research, 145 pages. Sarkar, D. (2012). Lessons in Lean Management. India: Westland Ltd. Shillabeer, A.; Buss, T.F.; and Rosseau, D.M. (2011). Evidence-based Public Management: Practices, Issues, and Prospects. NY, USA: M.E. Sharpe Wirick, D.(2011). Public-Sector Project Management: Meeting the Challenges and Achieving Results. USA: John Wiley & Sons. Read More