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Implications of lean manufacturing for human resource strategy

Rosalind Forrester
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 Implications of lean
manufacturing for human
resource strategy
Rosalind Forrester
Introduction
The advent of fundamental changes in
processing systems towards lean
manufacturing has coincided with a
period of transition within the field of
people management. Many companies
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are adopting lean approaches, either
through their own or through their
major customers’ volition. For many
this is a potentially fraught route, lined
with possible difficulties. This
transition, however, can offer
personnel practitioners and business
managers an opportunity to assess
areas of potential synergy between
their lean processes and their people
policies, a chance to examine the
different paradigm offered by this
approach. This article examines the
implications on human resource
strategy and policies of lean processes
and highlights the major areas of
transition.
The term “human resource” (HR) is
now ten years old. Coined originally by
Harvard academics[1], it has been
heralded by some as the establishment
of “new industrial relations”[2] and has
been accompanied by a general shift
towards a more strategic per-
spective[3]. Some have seen it as the
closer integration of policies for people
management within the business plan
and the change in status for employee
from cost to asset[4].
This change in terminology has also
brought into sharper focus the place of
people management within the
business strategy. The word “strategy”
has been given a number of definitions
over the years. Gleuck and Juach[5]
defined it as being “the means used to
achieve the ends (objective)”. This is
seen from the perspective of “a unified,
comprehensive and integrated plan that
relates the strategic advantages of the
firm to the challenges of the
environment and that is designed to
ensure that the basic objectives of the
enterprise are achieved through proper
20 Work Study Vol. 44 No. 3, 1995, pp. 20-24, © MCB University Press, 0043-8022
execution by the organization”. Some,
however, proposed a different
definition, arguing that strategy “is a
game that managers play every
day”[6], with the dynamic environment
incorporating complex feedback
processes. This notion of day-to-day
“play” must not be confused with the
daily operational decisions a manager
makes. Other authors have provided
the most traditional definition,
distinguishing it from the operational
by emphasizing the focus on major and
long-term decisions of the firm.
In speculating on the correct place of
personnel strategy within the business
plan, the literature offers a number of
perspectives. Some provide an extreme
view, like failing to include it, others
place it in last tenth place, such as
Gleuck and Juach’s[5] model, through
to Purcell’s[7], whose model perceives
it as being an integral part of the
business strategy process. The model
provided by Purcell clearly
demonstrated the inter-relationships
between different elements of the
business plan and HR strategy.
Purcell’s[7] model, developed from
Chandler’s[8] work, provides an
interesting theoretical perspective,
suggesting the importance of HR in the
overall business strategy-making
process. The first order of strategy
proposed concentrates on the long-run
goals and scope of activity for the
company, while the second develops
this by focusing on the procedures
needed to achieve the goals. Together
they provide the critical context in
which the third order of HR functional
strategies is determined. All these
“upstream” strategies lead in turn to the
“downstream”, which is more
concerned with outcomes.
Chandler emphasized the im-
portance of structure following from
strategy, with structural aspects
focusing on how the organization
would actually meet its goals. Both are
important, not only because they have
long-term implications for the
deployment of the resources of the firm
(in terms of people, money and time),
but also for an organizational
behavioural perspective. They are both
determined in conditions of
uncertainty.
An underlying influence, Purcell[7]
suggests, on all the orders of strategy is
the political process. He, along with
Stacey and others, sees strategy as
being largely concerned with the
process of change. Politics, in terms of
bargaining and trading between
different groups in determining the
direction of the change, will inevitably
play its part.
“Theoristsnn
put HR in
different places in
their strategic
models
”
Purcell[7] highlights the inherent
difficulty of HRM within firms in
trying to establish whether its policies
are successful or not. This model
implies rationality but, as Purcell
asserts, elements like “good industrial
relations” and “high motivation” are
phenomena which cannot be
satisfactorily reduced to simple
measurement terms which sit
comfortably in the rational, normative
model of strategy. HR management
 deals with ambiguity, the result of
which can often be a relatively weak
position in the decision-making
structure of organizations. This weak
position may provide an insight as to
why theorists put HR in different
places in their strategic models. In
practical instances first- and second-
order strategies are often determined
without any regard for their impact on
the downstream conduct for HR
management, leaving HR teams in the
unenviable position of trying to
reconcile this disparity (see Figure 1).
It is a potentially vicious circle in
which HR practitioners may not be
seen as effective as they could be with
more involvement.
The actual outcome of downstream
HR management is influenced by an
enormous variety of forces interacting
in a dynamic and complex way,
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potentially compounded by any lack of
direct involvement in strategic
formulation.
Lean manufacturing
Lean production is a further
development of mass production
developed by Taiichi Ohno of Toyota.
The process is also known as the
“Toyota production system”. Its
foundations are undoubtedly in the
camp of Taylor with the emphasis on
the areas of “wasted resources”. The
goal of the process is the reduction of
Upstream
First order
1. Long-term direction of firm
2. Scope of activities,markets, locations, etc.
Second order
Internal operating procedures, relationship between
parts of firm
Third order
Strategic choice in HR
Downstream
Outcomes: style, structure, conduct of HR
Source: [7, p. 61]
Figure 1. HRM model
waste in all forms through the
maximization of “added value
activities”. The system fundamentally
alters the whole nature of processes by
stripping it of all safety nets; hence the
name “lean”. It is a holistic process
comprising a number of interdependent
elements, such as JIT, zero buffer
stocks, maximum delegation to direct
workers, small lot production,
continuous improvement, quick set-up
times, standardized work, total
preventive maintenance, visual control
systems and team working. The
premiss behind these lean systems is to
stretch every system to allow any
problems to be quickly identified,
instead of being hidden under a series
of contingency plans. This in turn
creates a new balance between the
actual production process, or added
value operation and the support
systems. This is especially in terms of
materials management. The whole
system essentially changes the roles of
everyone in both manufacturing and
support processes. In personnel terms,
it offers a major paradigm shift through
changing the role of departments and
people at all levels in the organization.
Changes in production process have
also been accompanied by technical
advances which herald further changes
in the role of people in the operation.
Walton and Susman[9] argued that the
introduction of advanced manu-
E the “Economy”. In some manu-
N capital market
V product markets
I technology
R labour markets
O workforce
N demands the development of a number
M characteristics
E values
N public policy
T law
facturing technology (AMT) has made
the need for “skilled, committed
employees more important than ever”.
They highlighted the increased
“interdependencies between functions;
skills requirements; speed, scope and
cost of errors; sensitivity of
performance to variation in skills,
knowledge and attitudes; pace and
dynamics of change and development
capital investment per employee and
dependence on a smaller number of
skilled people” which AMT can
produce. They argued that four key
responses are necessary for these
changes to be successful; first, in terms
of a highly skilled, flexible, co-
ordinated committed workforce;
second, a lean, flat, flexible and
innovative management; third, the
ability to retain experienced people;
and finally, a strong relationship
between management and union.
Impact on HR
If we examine lean manufacturing
more closely, the changes it demands
from personnel systems are incredible.
One impact of lean production is level
scheduling. This involves the
production area building a consistent
pattern of products so that the labour
requirement is evened out. In car
manufacturing, for example, the line
will be manned up for the medium-
range car. The build schedule may be
“Economy, LS, GLS, GTI turbo,
Economy, Economy”, in this way when
the overload of the “GTI turbo” is
followed by the relative underload of
facturing units this process is achieved
by restricting the type of production
lines to a few similar ones and
removing more complex lines to a
entirely different site.
Organizational style and structure
The whole lean process in cultural
terms is the complete antithesis of most
current environments. The process
of interrelated policies covering
virtually every aspect of personnel
policy and practice.
One of the most visible changes is in
the organization of employees through
the utilization of teams. For many lean
producers the definition of “team” is
central to the process. Wickens[10]
defines a team as a “group of
individuals whose individual
contributions are recognized and
valued, and who are motivated to work
in the same direction to achieve clear,
WS May/June, 1995 21
 understood and stretching goals for
which they are accountable”. In this
definition the change in focus is as
much on those being managed as
among those managing.
The transformation of the leader’s
role is central to the initiation and
sustained development of lean
manufacturing. Without this main-
tained change, there is a danger of
reversion to mass production[11]. The
resultant effect is a shift in
management philosophy towards a
more empowering style[10,12].
Through empowerment the change of
role definitions produces a blurring of
the traditional distinction between
white- and blue-collar workers.
“Companiesnn
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have
developed
organization
structures
deliberately to
produce
conflict
” organizational structures to enhance
A further cultural effect stems from the
philosophical changes accompanying
the emphasis on waste reduction. This
has an impact both at the macro
departmental level and at the micro
level for individual workers’ roles. For
example, the whole role and culture of
the materials department shifts away
from pushing as much material out to
the shopfloor, to a system of materials
being pulled to the line as production
requires them. As a result the tasks of
store staff become less to do with
goods coming into storage, and more
focused on the increased frequency of
delivery both from suppliers and to the
line, which has to be co-ordinated
through the Kanban system. A further
impact can be seen on the culture of
maintenance departments, shifting
22 Work Study
from reactive breakdown situations
towards a proactive, preventive style of
working. This process can have major
ramifications on the traditional
“pecking order” which exists between
departments. Unless the departments
recognize and understand the cultural
changes affecting them, on both an
intra- and an inter-departmental basis,
overt and covert resistance will
undermine lean processes.
The whole process becomes a more
people-centred one, with employees
becoming more involved and flexible.
In its simplest terms lean production
has to be a people-driven process,
because only the employees can
identify ways of improving the existing
process or product.
This change in role has implications
for organizational structure, creating
flatter structures focused on process,
not hierarchies. This brings structure
more in line with Handy’s[13] “matrix
organization” focusing on jobs or
projects in a task-focused culture. This
structure emphasizes flexibility and
adaptability by bringing together those
who have the skills and knowledge and
letting them get on with it. Kanter[12]
suggests that the application of these
teams acts to “bridge” functions and
departments. Some Japanese manu-
facturers have set up multi-functional
new product development teams,
including members from product
design, production engineering and
marketing, making a car designed not
only for the marketplace, but also for
manufacturability. Pascale[14] has
developed this idea of utilizing
lean processes. He cites companies
which have developed organization
structures deliberately to produce and
capitalize on constructive conflict, for
example the splitting up at Honda of
their engineering, research and
development and manufacturing
divisions into separate organizations.
Role and selection in job style and
flexibility
The development of teams necessitates
the creation of team leaders, whose
role is by necessity broader than the
traditional charge hand or group leader.
Their remit often covers many of the
areas traditionally reserved for
supervision, which may generate
industrial relations discussions.
Increased duties include: production of
their team, housekeeping, tool repair,
minor maintenance and quality control
for everything which is produced in the
team. From an HR perspective, this
requires the development of new
selection strategies to identify those
capable of the team leader’s role. This
new role is often accompanied by the
need to introduce man-management
skills at a far lower level in the
organization than before.
The roles of team members also shift
with the introduction of more flexible
job descriptions. Individuals no longer
have their own jobs, but have a
collection of team responsibilities. To
assist in this process each separate task
which is carried out is now required to
be performed in a standardized form,
i.e. being done in exactly the same way,
taking the same time and involving the
same movements. In other words in the
“one best way”. The team is
responsible for developing its own
“standard operation sheet”, or SOS
chart, for every operation it performs,
outlining in precise detail the
movements and layout of the task. This
role was often previously the domain
of engineers, again a change affecting
two diverse groups of employees.
More fundamentally the move
towards empowerment has an impact
on the calibre of all the employees in
the process. Lean manufacturing puts
stress not only on production
processes, but also on individuals,
making any weak links vulnerable,
drawing attention to the importance of
having the right employee in the right
position. This forces HR practitioners
to review the validity and reliability of
their selection programmes for every
level of the organization.
In examining the composition of
roles, a further change can be seen with
the proportion of time spent in
prescriptive elements shifting towards
discretionary throughout the work-
force, even for blue-collar employees.
Prescriptive demands must be made at
a specified time and in a specific way.
In terms of teams, these new
discretionary elements would include
training, maintenance and
housekeeping. Psychological research
on performance management
highlights the necessity of making
discretionary time as meaningful as
possible for all levels. In HR terms, this
can have a major impact on
performance management, opening up
the potential for having clear
performance targets for all employees,
right down to team members. This, for
some more traditional companies,
opens previous industrial relations
battlefields, as this level of the
organization has never had individual
performance targets.
 Training
The process of lean manufacturing
often requires a re-framing by both HR
departments and individuals of the
paradigm of what actually constitutes
training. Some firms have solved
this problem by removing their
management development entirely and
replacing it with individual, continuous
development, competence-based
programmes. These are generated by
identifying what actual skills and
capabilities individuals need as they
climb the organization. The role
requiring most development is that of
team leader, pushing competence in
man-management much lower down
the organization than previously. This
delayering and the empowerment
occurring further down the
organization may have serious long-
term implications for career
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development, as opportunities in all
levels of management are necessarily
reduced.
The training needs of team members
broaden as a result of lean production
to include different processes and
techniques, e.g. generation of SOS
charts, instead of being concerned
purely with how to carry out a single
operation. Specific courses are aimed
at the team members, providing them
with the skills of continuous
improvement or Kaizen, allowing them
to be able to alter their workplace and
solve their own problems. This again
takes the onus away from previous
management or engineering roles,
changing the dynamics and implied
hierarchy of the organization.
Problem solving and innovation
Lean manufacturing is generally
accompanied by a shift towards the
exposure and solving of problems, both
at the incremental improvements level
for existing systems and processes, and
to generate new methods and systems.
This transition calls for a new approach
in problem solving, putting the burden
on teams and requiring the careful
management of controversy and
conflict in a way which does not affect
ideas generation. Research into how to
improve both the outcomes and the
process of ideas management in teams
is currently limited.
A positive impact of the creative
problem-solving process often creates
a rising spiral of improved motivation
and job satisfaction, which increases
further employee commitment. At the
extremes of this process lies potential
anarchy or total alienation of team
members who would no longer feel
empowered. The process requires a
delicate balance between em-
powerment and control, which is
achievable only in an atmosphere of
trust. This requires employees to feel
both that they have a valuable
contribution to make and that
suggestions would not result in their
redundancy. This dilemma is only
resolved by managers making and
maintaining guarantees that no one will
lose their jobs through Kaizen.
Industrial relations and pay
In reviewing lean production it is clear
that it creates new demands from an
industrial relations perspective. The
culture of innovation and creative
tension, focusing on the development
of new, less wasteful means of
production, can only be achieved
through the commitment of employees
to solve their own problems and
generate new ways of doing their jobs
in a secure environment. The creative
solution for managers is to create
trusting and open communication with
trade unions.
“Leannn
manufacturing
emphasizes the need
to add value
to the final
product
” change may trigger. These routines
Mahoney[15], in his review, suggests a
new style of pay system reflecting the
demands of lean manufacturing. He
proposes that pay be made up of three
elements; base, mastery and bonuses.
Members of a team would receive the
same job-based pay, with extra pay
available to those with mastery of
specific skills which the teams needs,
i.e. all prescriptive tasks, and bonuses
would be available on the basis of
specific performance goals, i.e.
discretionary tasks. This idea is further
expanded by Herriot[16,17] and others
who have recently begun to examine
the whole area of employment
contracts and are proposing the
notion of individual “psychological
contracts”. This would have an impact
on collective contracts, with companies
instead looking to increase flexibility
through having individually negotiated
contracts.
Head office implications
Many large companies which are now
embracing lean manufacturing used
their head offices for collective pay
negotiations. The introduction of
discretionary pay and the potential of
psychological contracts draws into
question their traditional role. Lean
manufacturing also emphasizes the
need to add value to the final product.
Hill and Pickering[18], in their study of
decentralization, surveyed corporate
offices regarding their roles. They
found that strong divisional offices
appeared to slow down decision
making, produce intra-organizational
conflict, and increase complexity and
rigidity. All these are contrary to the
aims of lean production. Hill and
Pickering[18] concluded that it was
decentralization, not divisionalization
that was the key. They identified that
stronger head offices were actually
correlated with less profit! Head
offices may have a role to play in
ensuring the standardization of HR
practices on multiple sites and in
assisting with legal situations.
Words of warning
Not every cultural change is
successful; the change in culture to
lean manufacturing is a profound one.
A major reason for failure of new
cultures may be the “powerful
organizational defence routines” which
involve employees playing public
games committing to the change, while
their actions undermine the new
culture. Ultimately, as a result of this,
those responsible for developing
organizational change programmes
may come to use the very control
models they are trying to dislodge.
Empowerment needs to become a way
of life and not an act the subordinates
perceive as thinly disguising the real
managerial style operating in the firm.
Lean manufacturing offers
companies an opportunity to realign
their HR practices and policies to
enhance and sustain the lean processes.
This process, however, needs to be
more than a name change. HR and
business managers must understand the
WS May/June, 1995 23
 necessity of integration to create a
more fundamental synergy between the
business and people issues. Failure to
recognize this resultant paradigm shift
will at best produce a stalling in the
lean process and at worst be an
abortive and potentially suicidal foray
into “foreign and new” ways. Lean
manufacturing offers companies a
chance to take a good look at the way
they produce their goods and services
and make great strides in re-focusing
their energies into productive areas.
Embracing the philosophy requires a
major examination of the synergies
which are required from HR
departments and practitioners. It also
provides a chance for HR leaders to
ensure that strategy does include
people issues. For many companies
lean manufacturing may be something
that is foisted on them and therefore
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they need to begin by asking
themselves whether lean is what they
really mean.
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Guest D., “Right enough to be dangerously
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excellence phenomenon” in Salaman,
G. (Ed.), Human Resource Strategies,
Sage, Newbury Park, GA, 1992, pp. 5-
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Kanter, R.M., “Five Fs for success”, The
Independent on Sunday, 1 July 1993.
Pemberton, C. and Herriot, P., “The career
management of the technical
professional”, paper presented at the
British Psychological Society
Occupational Division Conference, 4-6
January 1993.
Waterman, R., Peters, T. and Phillips, J.
“Structure is not organisation”, Business
Horizons, June 1980, pp. 49-63.
Rosalind Forrester is in the Department of
Organization Studies, Aston Business
School, Birmingham, UK.
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