The competitive nature of business environments prompts managers to find new ways of optimizing their internal processes to increase profits and maintain a competitive advantage. The optimization effort is generally aimed at organizing business operations in such a way as to improve the efficiency of internal processes, reduce total cost and over-costs, and maintain a consistent level of quality or service.
The concept of lean thinking was born out of the need to tailor business processes to both customer and employees’ demands and was first implemented by the automobile maker Toyota (Radnor & Johnston 2013, p. 904). The success of their implementation led to the widespread popularity of lean thinking in the management world, and further development of lean thinking as a business model which can be applied to any activity or organization. This paper explores the impact of lean thinking on organizational performance and the application of lean thinking in the context of the United Kingdom public sector.
The Concept of Lean Thinking
Lean thinking is a concept which describes a business model focused on improving both the internal processes and the quality of products or services delivered to the consumers (Radnor & Johnston 2013, p. 905). The foundation of lean thinking is, therefore, a market-driven approach to business operations optimization. The model of lean thinking implies achieving greater efficiency by eliminating waste, i.e. such practices or activities which negatively affect business performance, and use lean principles to create better customer value (Radnor & Johnston 2013, p. 905; Fullerton, Kennedy & Widener 2014, p. 415).
Several principles of lean thinking have been outlined by scholars. These include:
- adjusting production to meet demand;
- eliminating waste;
- the integration of suppliers;
- workforce as a creative force behind process improvement activities (Lyons et al. 2013, p. 475);
The Impact of Lean Thinking on Organisational Performance
Lean thinking business model requires businesses to achieve operational excellence by adopting a business-wide culture of value-focused improvements (Fullerton, Kennedy, & Widener 2014, p. 414). Lean thinking first gained recognition as a model for improving production, given its automobile industry background. However, the model quickly gained popularity as universal since its principles could be applied to virtually any activity (Lyons et al. 2013, p. 476). Since its creation, lean thinking has been adopted by healthcare, in construction, and in the service industries (Aziz & Hafez, 2013; Bonaccorsi, Carmignani, & Zammori 2011; Holden 2011).
Lean thinking business model implies a close integration of various business processes in line with lean practices. As such, the application of lean thinking has a profound impact on organizational performance in both the private and public sectors. In the public sector, lean thinking increases operational efficiency, resulting in better overall performance (Radnor & Johnston 2013, p. 906). In the private sector, the adoption of lean linking results in better quality goods or services and enhanced customer service quality, which allows the company to gain a competitive advantage (Radnor & Johnston 2013, p. 905; Bonaccorsi, Carmignani, & Zammori 2011, p. 429).
The consumer-centric approach of lean thinking implies a constant improvement of customer service and using customers’ feedback to improve efficiency. As Radnor and Johnston put it, the quality of service is the result of the internal service processes organization (2013, p. 903). Lean thinking implies creating products and services which will not only be easy to produce but will also be tailored to the consumers’ needs. As such, lean thinking increases the profitability of the company by allowing the company to create ever-improving products or services, tailored to the consumers’ needs.
A case study done by Radnor and Johnston provides evidence for the potency of lean thinking in the public sector. A positive dynamics has been observed in many public sectors, which applied lean principles in their operations management. Such sectors included healthcare, the military, the Department of Works and Pensions, etc. The application of lean principles allowed the Ministry of Defence to reduce aircraft maintenance costs by half (Radnor & Johnston 2013, p. 906).
In the Department of Works and Pensions, lean practices resulted in £575,000 cost savings and reduced bureaucracy (Radnor & Johnston 2013, p. 906). In the healthcare sector, lean thinking application in just two medical facilities resulted in direct savings of more than 3m pounds due to reduced hospital stay length and the reductions in the workforce (Radnor & Johnston 2013, p. 906). In addition, mortality rates have declined by a third (Radnor & Johnston 2013, p. 906). The reorganization of the Connecticut Department of Labour in line with lean thinking led to $500,000 of annual savings.
Such drastic improvement is the direct result of the improvements in internal processes. The poor design of certain processes also contributed to the drastic improvement introduced by lean thinking (Radnor & Johnston 2013, p. 912).The automation of simple, yet time-consuming tasks allowed for a smaller number of personnel and resulted in lower administrative costs. Other time-consuming activities were simplified to improve efficiency.
Strategies to Achieve Lean Thinking in the UK Public Sector
As shown by Radnor and Johnston case study, the limited application of lean thinking led to major improvements in the public sector. This fact necessitates the wider application of lean thinking in the UK public sector. Following operations strategies for the UK government are proposed to facilitate wider lean thinking adoption:
- To improve the quality of public services, it is necessary to implement a quality management system. Such a system should include all policies and procedures related to the quality of a public service, and quality performance objectives. Quality performance objectives have to be established and reviewed annually by quality audits to standardize the quality of service (Seddon, O’Donovan & Zokaei, 2011). The UK government has to recognize the fact that low-quality service results in higher administrative expenditures and that quality improvement is a cost-saving strategy (Waterman & Clifford 2012, p. 505).
- To facilitate lean thinking adoption, it is important to involve personnel in the process of change. The employee’s involvement has shown to play an important part in the success of change (Schwahn & Spady 47). The lack of support from the employees means that the change process is not happening in the most efficient way possible (Bovey & Hede 372). As such, employees should be made aware of the necessity of change and the benefits it will bring. Employees should be encouraged to actively participate in the process of change by providing feedback and insight (Schiele & McCue 2011).
While public sector organizations have long been striving to improve internal operations, the reasoning behind such improvements was the efficiency agenda, rather than a consumer-centric approach popular in the business environment. The outcome of such an approach is the optimization of business processes at the expense of customer service quality. Lean thinking is a business model that combines the optimization of business processes along with customer service improvement, leading to the most desirable outcome.
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