Fit of technical and socio subsystems in lean context, and its impact on operational performance indicators1

Dvid Losonci (david.losonci@uni-corvinus.hu) Corvinus University of Budapest, Department of Logistics and Supply Chain Management Fvm tr 8., Budapest, H-1093

Abstract
This 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 organization and 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. Introduction Lean 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, problem solving 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 more valid on the potential synergy between HR and TQM (Bayo-Moriones and Merino-Daz de Cerio, 2001; Jimnez-Jimnez and Martnez-Costa, 2009). In spite of its importance in OM, even today, lacks a clear picture of lean productions social 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)
1

The participation in the conference is supported by TMOP-4.2.1/B-09/01/KMR-2010-0005

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 are operationalized. Section 5 contains the results, and paper is closed with conclusions and limitations (Section 6). 2. Literature review and hypotheses 2.1. Socio-technical view of (lean) production system The study is based on the concept of functional fit and considers the socio-technical approach 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).
Theoretical framework Empirical work Fit of production and work organization in lean context Lean production system
Production organizations: beginner, process-focus, lean Work organizations: traditional, formalized, empowered

Emphasis
General Production system
Technical subsystem: Production elements

Patterns of practices in lean context Lean production system

Technical subsystem: Lean production practices

Patterns of production and work organizations Lean production system

Production organizations:
Based on the extent of lean production elements

Operational impact of fit of production and work organization in lean context

Socio subsystem: Human resource elements

Socio subsystem: Best practices in human resource management

Work organizations:
Based on the extent of best practices in human resource management

- manufacturing conformance - product quality and reliability - product customization ability - volumen flexibility - mix flexibility - delivery speed - unit manufacturing cost - manufacturing lead time - labor productibvity - inventory turnover

Research steps

Defining elements in literature review (Section 2.2. and 2.3. and Table 1)

Operationalization and classification of production and work organizations (Section 4.1. and 4.2.)

Hypothesis 1 in Section 5.1.

Hypothesis 2 in Section 5.2.

Figure 1 Structure 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 the intensification and extension of HRM practices, leading to a work organization that fits lean 2

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-commitment HR 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 HR practices. Oliver et al. (1994) compares world class and average automotive 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 flexible workers and rely on quality feedback. But there is no difference in supervisors role and empowerment 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 heavily on 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 socio and 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.

Table 1 Modern production management manufacturing practices, human resource management practices, and operational performance measures
Huber and Brown (1991) de Menezes et al. (2010) Power and Sohal (2000) Sakakibara et al. (1997)

Sources
Ahmed et al. (1991)

Shah and Ward (2003)

Patterson et al. (2004)

Ahmad et al. (2003)

Oliver et al. (1994)

Oliver et al. (1996)

Birdi etl al. (2008)

MacDuffie (1995)

Cua et al. (2001)

Manufacturing programs Cellular man. IMS (TQM, JIT, AMT) IMS (TQM, JIT, AMT) JIT, TQM, TPM Lean Lean Lean Lean Lean Lean
X X X X X X

Human resource management practices

Reduces status distinction Employment security Job rotation Flexible workforce Extensive communication Teamwork (functional, crossfunctional) Empowerment (decentralization of decision making, group problem solving, suggestion system) Extensive training Compensation Selective of hiring
X X X

X X X

X X

X X

X X X X X

X X

X X

X X X

X X

X X X X X

X X X

X X X

Lean production practices (internal focused)

Setup time reduction Reduction in lead time Inventory reduction Preventive maintenance Schedule flexibility Layout (cellular) Pull system, kanban Quality management (TQM, SPC, continuous improvement) AMT (computer based technology)
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X

Other authors argue that HR practices bear the real opportunity of improvements in integrated 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 4

Lean
X X X X X X

JIT

JIT

JIT

JIT

Current study

Lewis (2000)

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 survey International 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 implement lean 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).

Original sample

753

1.Condition (number of employees)

Cua et al. (2001), Forza (1996), Shah and Ward (2003)

583

2. Condition (process types)

Hayes and Whellwright (1979), Hill (1991)

421

Final sample fabricated metal products radio, television and communication equipment motor vehicles, trailers and semi-trailers office, accounting and computing machinery machinery and equipment electrical machinery and apparatus other transport equipment medical, precision and optical instruments, watches and clocks Industries Missing 23

123

87

15

62

29

25

34

23

398

Figure 2 The original and the final sample

4. Operationalization of variables and classification procedures 4.1. 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 their internal and technical lean tools, applying all internal technical elements proposed by Shah 5

Total

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 is defined. 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 daily operations. 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 of firms is more conscious: process-oriented practices are more emphasized than those serving quality (process stability). The extent of process-oriented practices is at lean companies level. 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 2 Types of production organizations (mean (standard deviation) standardized value)
Variables in the questionnaire

Lean production practices Controlled processes, quality improvement

Types of production organization ProcessBeginner Lean focus (N=107) (N=153) (N=160)

undertaking programs for quality 2.26 4.36 3.23 (0.695) improvement and control (e.g. TQM (0.828) (0.495) -0.15413 -1.06963 0.90822 programs, 6 projects, quality circles, etc.), undertaking programs for the improvement 2.26 4.25 2.91 (0.764) of your equipment productivity (e.g. Total (0.949) (0.489) Productive maintenance -0.29670 Productive Maintenance programs), -0.88387 0.93091 undertaking actions to implement pull 2.40 3.86 3.90 (0.810) production (e.g. reducing batches, setup (0.789) (1.062) Flow 0.35916 time, using kanban systems, etc.), -0.99171 0.32490 restructuring manufacturing processes and 2.25 3.75 Pull production and low layout to obtain process focus and 3.58 (0.890) (0.938) (1.085) streamlining (e.g. reorganize plant-within-a0.24139 setup -0.90858 0.38524 plant; cellular layout, etc.). 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 productions work 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) 6

firms. Table 5 reveals that almost half of the manufacturing firms, traditional, apply HRM best practices at a moderate level. This group lags behind the two other types, especially in empowerment, training and job rotation. Formalized firms highlights training, functional teamwork and compensation in work organization. Producers following the empowered model utilize their high proportion of flexible workforce, employ practices to empower workforce, and also emphasize cross-functional team work.
Table 3 Types of work organization (mean (standard deviation) standardized value)
HR practices
Variables in the questionnaire How many organizational levels do you have (from plant manager to blue collar wokers)?

Reduced status distinction

How many employees are under the responsibility of one of your first line supervisors? (on average, number of employees in fabrication) How many employees are under the responsibility of one of your first line supervisors? (on average, number of employees in assembly)

Job rotation Flexible workforce

How frequenlty do your production workers rotate between jobs or tasks? L1 How many of your production workers do you consider as being multi-skilled? (% of the production workers) What proportion of your total workforce works in teams? (in functional team %) What proportion of your total workforce works in teams? (in cross-functional team %) To what extent are employees involved in product or process improvement initiatives? L2

Teamwork (functional, cross-functional)

Empowerment (decentralization of decision making, group problem solving, suggestion system)

To what extent is your workforce autonomous in performing tasks? L3 Increasing the level of delegation and knowledge of workforce (e.g., empowerment, training, autonomous teams) L4 Implementing continuous improvement programs trough systematic initiatives (e.g., kaizen, improvement teams)

Types of work organization Empowered Formalized Traditional (N=154) (N= 70) (N=197) 3.87 (1.146) 6.16 (3.13) 3.73 (1.02) -0.17569 1.09708 -0.25319 24.42 23.74 22.76 (24.51) (16.32) (25.51) 0,03777 0.00923 -0.03163 23.40 30.90 22.56 (23.60) (37.16) (26.08) -0.02891 0.24655 -.05985 3.69 (0.85) 2.30 (0.944) 2,91 (,062) 0.59332 -0.78718 -,17998 64.23 30.02 39.41 (25.77) (24.26) (24.13) 0.61005 -0.60431 -0.27081 60.71 72.81 54.53 (30.63) (28.48) (33.83) 0.02594 0.40019 -0.16510 31.80 18.00 23.94 (25.02) (15.49) (26.19) 0.02594 0.40019 -0.16510 2.66 3.99 (0.78) 3.78 (0.878) (0.872) 0.62217 0.42486 -0.63662 2.55 3.53 (0.81) 2.93 (0.863) (0.848) 0.59924 -0.04102 -0.44191 2.43 3.83 (0.75) 3.40 (0.858) (0.872) 0.69238 0.28334 -0.63814 4.39 (2.51) 0.40737 4.00 (0.917) 0.19709

2.91 (0.846) -0.38411 31.39 9.39 On average, what proportion of your shop-floor 9.06 (11.77) employees compensation is based on incentives?( (32.58) (11.43) Compensation -0.19521 % of compensation) 1.02204 -0.17704 35.13 71.41 18.37 How many hours of training per year are given to (29.05) (68.01) (13.43) Extensive training the regular workforce? (hours per employees) 0.06080 1.01132 -0.37818 1316 (2653) 2539 (3696) 978 (2250) Number of employess (business unit)* *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, only execution) 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.).

Table 4 Operational performance indicators in lean production researches

Operational performance indicators in the literature Product quality Flexibility (options) Reducing batch size, volume flexibility Delivery speed (flexibility) Manufacturing costs Lead time (flexibility) Reduced labor content Inventory turnover Variables in questionnaire Manufacturing conformance Product quality and reliability Product customization ability Volume flexibility Mix flexibility Delivery speed Unit manufacturing cost Manufacturing lead time Labor productivity Inventory turnover

Sources: 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. Results 5.1. 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 work organization respectively, altogether nine production systems are defined. At one extreme end of the subsystems matches is the combination of lean production organization and empowered work organization. At the other extreme end firms work with beginner and traditional models. The hypothesis indicates that the more companies emphasize lean production practices the closer they get to the empowered setting. However, the formalized 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 in every type of production organization. Beginner production organization is widely (more than 70%) integrated with this form, and almost in third of lean producers work is also organized traditionally. The empowered work organization is mostly embedded in those firms production systems that apply several or all lean production practices. Its share is slightly over 40% in these contexts. The formalized form follows the reverse direction than the beginner: enhancing lean production practices (does not) favors (beginner) formalized model.
Table 5 Matching production organization and work organization: nine types of production systems
Work organization Production organization Beginner Process-focus Lean Total Empowered 20 (18.7%) (13.1%) 67 (41.9%) (43.8%) 66 (43.1%) (43.1%) 153 (36.4%) (100%) Formalized 10 (9.3%) (14.3%) 24 (15.0%) (34.3%) 36 (23.5%) (51.4%) 70 (16.7%) (100%) Traditional 77 (72%) (39.1%) 69 (43.1%) (35%) 51 (33.3%) (25,9%) 197 (46.9%) (100%) Total 107 (100%) (25.5%) 160 (100%) (38.1%) 153 (100%) (36.4%) 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 8

considerable impact. Comparing types of production organization in pairs (beginner and formalized; 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 assess the 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 and lean). 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 and formalized work organization. In statistical terms one can expect the same results from process-focus-formalized production system. Process-focus-empowered has only to improve few indicators: product quality and reliability (to reach lean and formalized and lean and empowered), and labor productivity (lean and formalized).
Table 6 Operational performance indicators relative to main competitors
Variables in questionnaire Manufacturing conformance Product quality and reliability Product customization ability Volume flexibility Mix flexibility Delivery speed Unit manufacturing cost Manufacturing lead time Labor productivity Inventory turnover lean production and traditional work (LT) lean production and formalized work (LF) lean production and empowered work (LE) process-focus production and traditional work (PFT) process-focus production and formalized work (PFF) process-focus production and empowered work (PFE)

3.68 3.64 3.79 3.41 3.68 3.74 4.06 4.00 3.53 3.74 3.39 4.03 3.74 3.49 3.33 3.67 3.84 3.85 3.61 3.78 3.60 3.69 3.76 3.45 3.56 3.54 3.64 3.63 3.41 3.67 3.23 3.48 3.25 3.13 3.28 3.38 3.55 3.51 3.21 3.39 3.42 3.91 3.73 3.35 3.47 3.38 3.61 3.29 3.20 3.33 Likert scale relative to our main competitor, our perfomance is (1) much worse, (3) equal, (5) much better

3.64 3.63 3.77 3.63 3.73 3.55 3.20 3.50 3.49 3.33

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

Variables in questionnaire Manufacturing conformance Product quality and reliability Product customization ability Volume flexibility Mix flexibility Delivery speed Unit manufacturing cost Manufacturing lead time Labor productivity Inventory turnover 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)

n.s. n.s. 0.084 n.s. n.s. n.s. 0.011 0.085 n.s. n.s. n.s. 0.003 0.015 0.020 n.s. 0.060 n.s. n.s. 0.001 0.042 0.05 n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. 0.045 n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. 0.059 n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. 0.034 0.032 0.054 n.s. 0.062 0.007 0.010 0.017 0.013 n.s. n.s. n.s. n.s. n.s. n.s. 0.040 significant difference at 0.05 levels, significant difference at 0.10 levels, n.s. not significant

n.s. n.s. 0.081 n.s. n.s. n.s. n.s. n.s. n.s. n.s.

n.s. 0.014 n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s.

n.s. n.s. 0.060 n.s. n.s. n.s. n.s. n.s. n.s. n.s.

n.s. n.s. 0.085 n.s. 0.065 n.s. n.s. 0.037 n.s. n.s.

Even, lean-traditional production system only lags behind them in labor productivity and product customization ability. This form is not different from process -focusformalized production system. Clear performance gap exists if one compares leanformalized and lean-empowered production systems with production system that employs process-focus production and traditional work organization. This model does not differ from process-focus-formalized form. Finally, this fact together with the relations of production systems depicted in Figure 3 (all arrows are directed to lean) suggest that lean9

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

Lean & Traditonal

Process-focus & Traditonal

Lean & Empowered

Process-focus & Empowered

Figure 3 Operational performance indicators relative to main competitors

5. Conclusion and limitation The 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 in manufacturing 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 the match (or mismatch) of production and work organization effect operational indicators? The study presented clear evidences that lean production organization and formalized/empowered work organization lead to superior performance. However, it seems 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 and empowered work organization with a production system that utilizes quality and maintenance 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 to the same (empowered) operational performance. In a business environment where product customization ability and labor productivity are not of first priority lean production organization 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.

10

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