Such an evaluation has been carried out using data on the use of operational and related people practices and productivity in 448 manufacturing organizations over a 15- year time period. This unique study showed that organizations were adopting these key process and people management practices in integrated way and that integration was associated with highest level of productivity.
The study began in 1996 with interviews of 448 manufacturing companies with more than 150 employees in the Philippines, Singapore, Japan, Kingdom of Saudi Arabia and Kingdom of Bahrain. These were chosen because modern methods of management revolving around lean production, total quality management and employee involvement methods were all then most readily associated with this sector. These methods were particularly pioneered in the early 1990s by Japanese transplants and firms directly competing with or supplying them.
The first survey showed that the most common management practices were four operational management practices- total quality management, just-in-time, integrated computer-based technology and supply -chain partnering-and three organizational practices -team-based working, empowerment and intensive training and development. The respondents were given a definition of these seven practices as presented in figure 1, and were then asked to rate their company's use of the practice on a five -point scale from "not at all" to "entirely". In case of multi-site firms, interviewees were asked to give information about practices for the most typical site.
Figure1
Definition of the management practices used in the study
1. Empowerment: Passing considerable responsibility for operational management to individuals or teams, rather than keeping all decision-making at the managerial level.
2. Extensive training: Providing a range of development opportunities for all employees, rather than training people occasionally to meet specific job needs.
3. Team-based working: Placing employees into teams with their own responsibilities and giving them freedom to allocate work between team members, rather than having everyone work as individuals.
4. Total quality management: Seeking continuous change to improve quality and making all staff responsible for the quality of their work. Such practices include Kaizen and continuous improvement.
5. Just-in-time production: Making products or providing services in direct response to internal or external customer demands, rather than building in advance to maintain stock levels.
6. Advanced manufacturing technology: Linking together computerized equipment to enable enhanced integration.
7. Supply- chain partnering:Developing strategic alliances and long-term relationships with suppliers and customers, rather than negotiating on a short-term basis.
The data confirmed that the label "modern" was justified as the practices had only been adopted relatively recently. For example, in 75% of the cases where total quality management, team-based working, or intensive training existed, the practice had only been introduced the 1990s. In 1996 study, none of the management practices were extensively used by the majority of companies and that reported success rates were modest. There was ,however, a clear expectation of increased use in the future.
The next survey in 2001 concentrated on the seven most popular practices and confirmed that both their use and perceived success had increased substantially since 1996. The increase in the use of practice was at least 10% in every case, the range being from an increase of 10% and 13% for total quality management and just-in-time respectively, to 29% for integrated computer based technology. However, though the intensity of use of all seven practices had increased, the proportion of companies that reported using the practice "not at all" had not changed substantially.
The pattern of change between 1996 and 2001 was one of increase use among those companies that already had the practice. In 1996, coupled with a small number of new users who were to have built up their use gradually and a minority of firms that did not use the practice at all. However, the final survey in 2005 revealed a continuation in the growth of these practices across all companies and no significant decline in use of any companies.
Though data on when the companies had first introduced practices, it was possible to assess the change over the 15 years period from 1996 -2009. There have been a remarkable growth from a very low level of use-with no practice being used in more than 8% of companies - to a situation where all were being used in more than 80% of companies with exception of just-in-time production, which was used in 73% of companies.
The average of the total number of practices used in 2009 was 8, compared with a figure of 4 in 1996. By 2009, 75% of the companies were using all seven, and 60% , six or five, with no company using either only one or none at all.
Beyond Fashion
Advocates of modern management practices have tended to represent them as universally applicable recipes for overcoming past problems and ensuring the continuous improvement required in an increasingly competitive future. As such, any increased use of practices would be a natural reflection of their optimality. In 1990 James Womack, founder and president of the Lean Enterprise Institute, when launching with colleagues the lean production concepts proclaimed that it would become" the standard global production system of the 21st century". Nonetheless, some saw such methods as yet another fad in an increasingly questioned spread panaceas for managerial practice that would be found wanting and soon replaced by the next fashion.Such views implies that after an initial enthusiastic take-up of the prescribed practices we would expect a decline in the use of these practices, which the study did not find. Overall the study suggests that the adoption of modern manufacturing practices was not ephemeral. They were not simply being adopted on the say- so of the latest management guru or consultants. This is more consistent with the view gained from our intensive observation of manufacturing over the period of the study that managers have approached modernization more in the spirit of experimentation rather than as gullible recipients of the latest management guru's ideas. In fact, they have improved on the rather modest success rates for the practices that they had reported in 2001 as they developed their use of them. More tellingly, the study has shown that the practices were increasingly being used together. Management thought has long advocated a systematic approach to change and adoption of holistic management perspectives in contrast to a piecemeal adoption of practices. Concepts such as integrated manufacturing , lean management and world-class manufacturing which came to the fore in 1990s all stressed the importance of integration.
The argument for integrated manufacturing was that the objective of just-in-time is to minimize work in progress and in stock, which requires each stage of production to be completed just when the next needs to start. As delay at any stage would be highly detrimental there must be no unforeseen quality problems , and thus total quality management is crucial to its success. Likewise, the minimization of work in progress means that products have to pass rapidly from one stage to the next, typically in smaller batches. This makes set-up and changeover times a critical issue, where the programmable nature of advanced manufacturing technology plays its part. In integrated manufacturing the three practices thus form a synergistic set, each having more effect when the others are used. The extreme argument is that adopting one or two practices without the others will have a minimal or no effect on organizational performance and may even have a negative impact.
The creators of lean production also considered that it entailed teamwork, intensive training and more challenging jobs. However,they tended to underplay their significance. Peter Wickens, an HR specialist at Nissan in the 1997 , argued that the emphasis being given to operational management techniques created a danger of neglecting the social aspects of production. "It is people , not robots who continuously improve both products and processes., " he said. It is typically stated that lean production depends on multi-skilled operators, organized into small teams, being responsible for quality, problem solving and continuous improvement. This requires the organizational practices in the study.
Our study revealed that operational manufacturing practices tend to be used together and more tellingly in conjunction with key organizational or HR practices. It appears that managers have either heeded Wickens' warnings or his fears were unfounded. Moreover, the longitudinal data allowed us to examine integrated use over time, which revealed an increasing integration of the operational and organizational practices overtime.
The benefits of integration
The integration may be the norm but this does not necessarily mean it pays off over and above piecemeal adoption. With leading edge statistical analysis as described in figure 2, the study was able to address the economic benefits of integrated use. The information on when practices were first introduced was matched with performance data acquired from a company for 15 years period. This enabled the measurement of a key indicator of productivity -value added . It is therefore possible to see whether the degree of integrated use in any year was correlated with value added.Figure2:Latent variable model
Latent variable models are used to assess whether a set of observed variables or indicators are linked to an underlying variable that is not readily observable. In statistical terms, the association between these variables is explained by one or more common factor and they are assumed to be independent but for this underlying factor.
Latent variable models can be used to assess whether a set of items thought to form a unity do in fact reflect an underlying trait, attitude or orientation and to identify and develop measures of such underlying factors.
The most common model is factor analysis, where both the manifest and latent variables are continuous, and are used to develop scales from items measuring responses to questions concerning knowledge, abilities, attitudes and behaviors. One such examples is job satisfaction scales that are typically created from items on the degree of employees satisfaction with particular facets of a job.
In this study the items are the use of the seven practices, measures dichotomously with"1" allocated to where the practice was used at all, regardless of its degree of use, and "0" allocated to no use. Lean and total quality management are treated as an integrated philosophy with guiding principles and overarching goals, that both dictate and are reflected in the use of certain practices. Latent variable modelling was used to assess whether the association in practice use is indeed a reflection of this underlying philosophy. Latent class models were used , and companies were classified according to an ordered categorical scales.
Latent class growth models, an extension of latent class models for longitudinal data, were used to classify the companies by the evolution of their use of practices, that is whether they were early, intermediate or late adopters.
Examining the trajectories of the growth in use , three clusters of companies were identified: early adopters who made integrated use of practices early, intermediate adopters who began to use the practices in an integrated fashion later but intensified their use in a short period of time, and late adopters that only began to adopt quality practices in earnest after 2001. Interestingly, by the end of the study period , the probability of firms in the second group having each of the practices was greater than that of those in the first group, and the probability for the late adopters was not significantly different from the early adopters.
In all 15 years the extent of the use of the integrated lean approach was associated with higher levels of added value. However, the early adopters of the integrated approach continued on average to outperform even those that subsequently adopted it to a greater extent. This result supports the claim underlying modern quality and operational management that a cohesive system built around quality management and employee engagement can produce continuous improvement and give forms competitive advantages.
Overall, the research shows that the HR aspects of organizations are vital to making total quality and management work. In socio-technical systems terms the social is as important as the technical. Empowerment, teamwork and intensive training would appear to have a catalytic effect on all other practices. The message is clear that without these the potential returns on investing in total quality management, just-in-time and supply chain partnering will not be fully realized
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