Organizational culture as a success factor: The moderation influence of
Organizational Culture on the relation between Lean Management and
Performance in the Professional Service Industry
Master thesis
MSc Supply Chain Management University of Groningen Faculty of Business and Economics
January 29th, 2018
XENIA SCHMIERER Student number: S2267500 x.schmierer@student.rug.nl
Dr. Ir. Thomas Bortolotti Supervisor/ University of Groningen
Prof. dr. Manda Broekhuis
Second assessor/ University of Groningen
Organizational culture as a success factor: The moderation influence of
Organizational Culture on the relation between Lean Management and
Performance in the Professional Service Industry
Abstract
Lean Management (LM) is a managerial approach based on integrated socio-technical practices aiming to eliminate waste and increase firm efficiency. Previous research highlights non-fitting organizational cultures (OC) as fundamental reasons for LM failure. Therefore, the purpose of this paper is to test if LM positively influences the performance of firms in the professional service industry, and whether OC has an impact on that relationship. This was achieved with help of a survey study, which was sent to several professional service companies. The results revealed that Hypothesis 1 is supported and Hypotheses 2 (a-h) are partially supported. Moreover, it can be highlighted that OC is the missing link in literature, which is able to explain the phenomenon of mixed results in professional services. For managers, it is stressed to build a working atmosphere which encourages open communication and information sharing that conforming to the path-goal theory (PGT), further improves LM implementation.
1. Introduction
Lean Management (LM) is an “integrated socio-technical system” developed with the main objective to increase the overall firm efficiency and ensure customer satisfaction by the elimination of waste (Shah and Ward, 2007, p.791). LM is measured as a set of socio-technical practices. Based on literature, the most important lean bundles are just-in-time (JIT), total quality management (TQM), total preventive maintenance (TPM), and human resource management (HRM) (Shah and Ward, 2003).
This managerial approach was introduced in the beginning of the 1990s and has its origins from the Toyota Production System (TPS) (Bhamu and Sangwan, 2014; Womack, Jones and Roos, 1990). It is known as one of the principal strategies for organizations, used in order to gain utmost operational performance (e.g Shah and Ward, 2003; Bhamu and Sangwan, 2014; Fullerton Kennedy and Widener, 2014). The performance measures selected for this study are efficiency, flexibility, delivery and service quality (Cua, McKone and Schroeder, 2001; Wadhwa and Rao; 2003). Bhamu and Sangwan (2014) state that firms applying lean practices like TQM and JIT clearly display improved delivery times, quality levels and customer satisfaction. Furlan, Vinelli and Dal Pont (2011) agree that significant evidence exists that the use of lean practices (e.g. HRM, JIT, TQM) improves the firm efficiency in terms of waste reduction, cost reduction and the recognition of problems. More importantly, the authors state that efficiency is maximized when lean bundles are used simultaneously, i.e. when HRM practices, (social-oriented) (Furlan et al., p. 845) JIT and TQM practices (technical-oriented) are used complementarily. Nevertheless, many organizations face difficulties in implementing LM successfully and managers misunderstand that the use of LM does not necessarily mean that the firm performance increases (Bozarth, Warsing, Flynn and Flynn, 2009; Bhasin, 2012; Leyer and Moormann, 2014; Suárez-Barraza, Smith and Dahlgaard-Park, 2012). Many LM failures happen because there is no “one best way” (Fullerton et al., 2014, p. 3) in implementing LM, but rather organizations need to be aware of the right timing, volume and intensity in order to achieve waste reduction and consequently reduce costs (Browning and Heath, 2009). In other words, LM cannot be applied to all environments and industries in the same way (Bortolotti, Boscari, and Danese, 2015).
time, with most value added in the front office, where considerable judgement is applied in meeting customer needs” (Silvestro, Fitzgerald and Johnston, 1992, p. 73). Empirical research on the lean-performance link in the professional service industry is crucial owing to the fact that the service sector generally accounts for a greater proportion of the GDP compared to manufacturing firms. Strikingly, professional services are lately increasing in importance, due to the growing need for professionals (Hitt, Bierman, Uhlenbruck and Shimizu, 2006). Hence, professional services play a critical role in the employability and have a high influence on the economic situation of most developed countries (Talib, Rahman, Qureshi and Siddiqui, 2011; Malmbrandt and Ahlström, 2013; Hadid, Mansouri and Gallear, 2016). Moreover, firms in the professional service sector face higher inefficiencies due to varying characteristics compared to manufacturing firms. Examples therefore are intangibility, non-transparent production flows and irregularities, and high customer involvement in the production process (de Koning et al., 2008).
Lately, many operation management studies provide empirical evidence that organizational culture (OC), defined as “a pattern of shared basic assumptions that the group learned… as the correct way to perceive, think, and feel in relation to problems” (Schein, 1992, p. 12), has an important role in organizations in general and more specifically in the implementation of LM practices (e.g. de Koning et al., 2008; Prajogo and McDermott, 2011; Naor, Linderman and Schroeder, 2010; Baird, Hu and Reeve, 2011; Wu, Melnyk, and Flynn, 2010). De Koning et al. (2008) believe that a fitting OC highly influences the use of LM practices in the professional service industry and calls for further research on the topic.
lack of information sharing (Hicks, 2007). This leads to lower efficiency and lower quality of services.
Therefore, it can be assumed that OC may be the reason for mixed results, because while a non-lean supporting OC has a negative effect on the non-performance relationship, a non- lean-supporting OC has a positive impact (Balazin and Stefanic, 2013; de Koning et al., 2008; Portioli-Staudacher and Tantardini, 2012).
A LM supporting OC contains factors like low Power Distance, high Institutional Collectivism, low Assertiveness and high Performance Orientation. Hence, it is crucial to put high consideration on an OC which is in line with LM in order to be efficient (Balazin and Stefanic, 2013; de Koning et al., 2008; Portioli-Staudacher and Tantardini, 2012).
The aim of this study is to find out if LM leads to a high performance in the professional service industry and if OC affects this relationship.
Thus, this paper addresses the following questions: Does LM positively influence the performance of professional service firms? And, does OC influence the effectiveness of Lean in professional services?
This study intends to contribute to both literature and managerial aspects by stressing the importance for managers to implement an OC that fits LM principals in order for the firm performance to excel in professional services.
This will be accomplished with a survey study using the GLOBE model (House, Hanges, Javidan, Dorfman and Gupta, 2004). Resulting, firstly in new academic knowledge and secondly, it can be used by managers to have a better overview of the different dimensions of culture and their relevance for operational performance.
This article has the following outline. In chapter 2 the literature background of lean management, performance and organizational culture in the service sector will be given. Chapter 3 outlines the utilized methodology. Additionally, in chapter 4 the results will be established, while chapter 5 will present the discussion, theoretical and managerial implication and the limitation of the research. Chapter 6 will finalize with a conclusion.
2. Literature Review
2.1 Lean in Professional servicestremendously rethinking of management operations (Piercy and Rich, 2009) the performance problems of service firms decreased, and the quality standards increased to offer better customer satisfaction (Bowen and Youngdahl, 1998). Nevertheless, the performance level in services is still relatively low (Piercy and Rich, 2009).
There are 3 main types of services, namely mass services, service shop and professional services, as is depicted in Figure 1 (Silvestro et al., 1992).
Figure 1
Service types (based on Silvestro et al., 1992)
customization and high contact time per transaction, in order to achieve the service, which customers desire. Moreover, the employees are highly skilled and mostly do not need permission for their action by supervisors. Professional services are the most distinct compared to manufacturing. Therefore, most varying and interesting results are expected, which are examined in this paper.
sector (Piercy and Rich, 2009; de Koning et al., 2008; Balazin and Stefanic, 2013). Hence, the following hypothesis, as is depicted in Figure 2, can be built:
Hypothesis 1: Lean Management has a positive influence on the performance of organizations in the professional service sector.
Figure 2
Conceptual Model
2.2 The GLOBE Culture Model
in operationalizing the principle of OC, resulting from the in-depth elaborated literature review and empirical tests. Those are gained from international collaborations, which enable transferability to varying settings (Bortolotti et al., 2015; Jung et al., 2009). This is desired because the research aims to compare companies from different settings. Compared to many other models, it includes both value and practice specific items in the questionnaire. This is to ensure its use for varying levels of analysis, namely national culture (NC) and OC. Even though its inspiration of analysis originated in NC, most NC models will lack validity when measuring OC (Jung et al., 2009). Therefore, it is especially relevant when measuring OC. This simplifies theory building by creating the possibility to compare NC and OC studies (Bortolotti et al., 2015). This is useful to compare the outcome of existing studies or analyze the effect of NC as a control variable. Moreover, the GLOBE model is an extensive model, including 9 dimensions, which are all measured with several items to gain broader knowledge. Another advantage of this model is that it is divided into several dimensions, which enables the researcher to focus on specific factors of his or her interest (Jung et al., 2009). Lastly, the measurement models developed by Quinn and Rohrbaugh (1983), Hofstede, Neuijen, Ohayv and Sanders, (1990), and O´Reilly, Chatman and Caldwell, (1991), are the most well-known OC models. The GLOBE model by House et al. (2004), is one of the newest models. It is grounded on Hofstede and adds additional knowledge by including more dimensions. Therefore, the GLOBE model has the advantage of measuring a broader range of the organizational culture.
Table 1
Definition of GLOBE culture dimensions adapted from House et al., 2004
GLOBE dimensions Definitions
Power distance The degree to which members of an organization expect and agree that power should be stratified and concentrated at higher levels of an organization or government.
Institutional collectivism The degree to which organizational practices encourage and reward collective distribution of resources and collective action. In-group collectivism The degree to which individuals express pride, loyalty, and
cohesiveness in their organizations.
Future Orientation The degree to which individuals in organizations engage in future-oriented behaviors such as planning, investing in the future, and delaying individual or collective gratification.
Assertiveness The degree to which individuals in organizations are assertive, confrontational, and aggressive in social relationships.
Uncertainty avoidance The extent to which members of an organization strive to avoid uncertainty by relying on established social norms, rituals, and bureaucratic practices.
Humane orientation The degree to which individuals in organizations encourage and reward individuals for being fair, altruistic, friendly, generous, caring, and kind to others.
Gender egalitarianism The degree to which an organization or society minimizes gender role differences while promoting gender equality
Power distance (PD). PD refers to the degree to which employees agree that power should be concentrated at a higher level of the organization (House et al., 2004). In a culture with a high level of PD it is typical for companies to be centralized. Moreover, employees follow strict rules and regulation, without the perception of unfair treatment, i.e. employees are in favor of not being involved in decision-making (Cole, Carter and Zhang, 2013). Additionally, communication between parties from different hierarchical positions is rare and freedom for decision making does not exist, due to hierarchical control (Cole et al., 2013). Therefore, employees face fewer opportunities to make a change in the company (Rother, 2010; Shah and Ward, 2007). On the other hand, a culture with a low level of PD reaches for fruitful communication and consultation throughout the firm (Cole et al., 2013). Additionally, employees expect an exchange of ideas on a frequent basis (Cole et al., 2013).
Hypothesis 2a: High PD negatively moderates the lean-performance link in professional services.
Institutional Collectivism (IC). IC is defined as the degree to which organizational practices encourage and reward collective distribution of resources and collective action (House et al., 2004). In a culture with a high level of IC, employees appreciate the same company values as their co-workers. Moreover, they aim for agreement in decision-making and are jointly seeking for solutions to problems (Bamford, Wong and Laschinger, 2013). This is accomplished by using all employee skills and capabilities in the best possible way, in order to achieve the firm´s goals (Dierdorff, Bell and Belohlav, 2011). High IC cultures imply that employees value the team above themselves, leading to a high willingness to support each other (Dierdorff et al., 2011). On the other hand, cultures with low IC, reward and foster the individual, while forborne to give responsibility to group achievements (Dierdorff et al., 2011).
A high IC cultural orientation helps a facility use LM practices successfully. First, in such cultures people focus on teamwork and value collectively aiming for solutions. Therefore, it is easier to successfully manage small-group problem solving activities. This is the case, because employees, on the one hand, feel that they can openly discuss about possible opportunities and their disadvantages (Hirzel et al., 2017). On the other hand, misunderstandings are decreased through open communication (Naor et al., 2010), which is crucial in services (Balazin and Stefanic, 2013). Moreover, employees value group achievements and see mutual support as essential. Hence, employee suggestions are taking seriously throughout the company, which enables improved continuous improvement tools. Accordingly, the following hypothesis can be posited:
Hypothesis 2b: High IC positively moderates the lean-performance link in professional services.
In-Group Collectivism (IGC). IGC is defined as the degree to which employees, express pride, loyalty and cohesiveness throughout their firm (House et al., 2004).
The more a culture values IGC, the more effective LM practices are expected to be. Singh and Singh (2013) state that cleanliness or ("Seiso") is an essential practice for continuous improvement which is a relevant matter organization-wide. Management should offer training to educate employees about the importance of cleanliness. Since employees in high IGC cultures are highly loyal and committed to their company, it is expected that they take training, and practices, like cleanliness in the company, seriously. Moreover, committed and loyal employees aim to improve company achievements (Hirzel et al., 2017). Therefore, they seek employee suggestions (employee empowerment), to actively come up with process improvement suggestions, in order to improve the continuous process improvements (Hirzel et al., 2017). Especially, for service firms, there is evidence that committed employees have a significant positive influence on the delivered services, because of the high interaction between customer and employees (Malhotra and Mukherjee, 2004). That implies the following hypothesis:
Hypothesis 2c: High IGC positively moderates the lean-performance link in professional services.
Future Orientation (FO). FO means the engagement in future-oriented actions (House et al., 2004). On the one hand, a culture with low FO focuses only on the impact of a temporary duration (House et al., 2004). On the other hand, a culture with high FO encourages the willingness to take risks and simultaneously accepts minor mistakes, resulting from launching new ideas (Naor et al., 2010). The more a culture values FO, the more prosperous LM will be. For example, managers encourage risk-taking and support employee suggestions (employee empowerment). In cultures with low FO, employee suggestions are perceived as potential risks. This is because increased freedom in decision making of employees without being an expert, can lead to bad decision making and lower firm efficiency (Hirzel et al., 2017). Nevertheless, strong evidence exists that in services, empowered employees positively influence the continuous improvement, due to the high customer contact (Hirzel et al., 2017).
Therefore, it is expected that a culture with high FO can positively influence the lean-performance link and the following hypothesis is stated:
Performance Orientation (PO). PO is defined as the degree to which managers reward employees for performance improvements when fulfilling demanding targets (House et al., 2004). In a culture with a high level of PO, employees are encouraged to act goal-achieving and in exchange, they receive rewards (Nordin, Deros, Wahab and Rahmen, 2012). Contrary, in a culture with low PO, firms do not use any methods in order to inspire goal-achieving behavior in organizations (Naor et al., 2010). Generally, receiving rewards is positively related to being more motivated, working harder and aiming for highachievements. A high PO cultural orientation helps a firm to use LM practices efficiently. For example, managers put higher attention to employee training in order to improve their skills and knowledge to enhance the improvement of the used practices. Cross-training methods are utilized to ensure that the organization has multi-functional employees, i.e. several employees know the same processes to ensure continuous flow in case of absent employees. Since training is more common in high PO cultures, employees in this culture are more motivated to participate in the sessions. Normally, multifunctional employees are compensated respectively for the skills learned, therefore they do not seek a one-time achievement but rather continuous improvements (White, Ojha, and Kuo, 2010). Since the last years, most service firms put higher attention to practices including the motivation factor, i.e. allocate rewards, when introducing LM, because there is evidence that it improves the organizational performance (Hadid et al., 2016). Hence, the following hypothesis can be built:
Hypothesis 2e: High PO positively moderates the lean-performance link in professional services.
Assertiveness (AI). AI refers to the degree, to which individuals in organizations are assertive, confrontational, and aggressive in social relationships (House et al., 2004). Cultures with low AI, value good communication throughout the company in order to work together on solutions for problems (Naor et al., 2010). Contrary to that, cultures with high AI matches extraversion behavior, like actively taking self-initiatives (Hofmann and Jones, 2005). Since assertive individuals are generally self-confident, they believe that their ideas are of great importance and are persuasive towards their co-workers (Pearsall and Ellis, 2006). This is acknowledged by Flynn and Saladin (2006), who state that an assertive decision maker is an aggressive decision maker.
players. As a result, communication and information sharing will decrease (Hicks, 2007) leading to less efficient continuous flows. Generally, customers of services are often directly involved in the production process, therefore fair treatment and good relationships are valued even higher than in manufacturing firms (Seiders and Berry, 1998; Skaggs and Youndt, 2004). However, individuals with high AI culture put a higher emphasis on individual aims and ideas, compared to organizational goals or customer needs, which increases the possibility of service failures (Chan and Wan, 2008). Accordingly, the following hypothesis can be posited:
Hypothesis 2f: High AI negatively moderates the lean-performance link in professional services.
Uncertainty Avoidance (UA). UA means whether an employee feels comfortable or uncomfortable in unknown situations, respectively low and high UA (Youngdahl, Kellogg, Nie, and Bowen, 2003). In a culture with high UA, employees have a low tolerance towards taking chances, i.e. they strongly avoid changes, and they feel unpleasant with opposing mindsets (Youngdahl et al., 2003). That implies that there is a high need for control, rules, and regulations. Contrary, employees in low UA cultures are risk proponents (Youngdahl et al., 2003).
The more a culture values UA, the less successful LM will be in the service industry. First, taking chances in LM, like introducing new ideas will lead to an unknown situation in the sense that the outcome is not known and can be either positive or negative (Lewis, 2000). In a culture with high UA employees avoid changes. Therefore, they are less likely to actively be involved in process improvement possibilities and employee suggestions (Hirzel et al., 2017), which will have a negative impact on continuous improvement methods. Due to frequently changing customer desires, services are constantly working on process improvement possibilities, leading to increased competition among service firms (Hirzel et al., 2017). Hence, contrary to the manufacturing industry, it is expected that a culture with a high UA negatively affects the efficiency in LM in services and the following hypothesis can be stated:
Hypothesis 2g: High UA negatively moderates the lean-performance link in professional services.
low HO, employees perceive the action of others towards their self-interest (Naor et al., 2010). Especially in service companies, where interaction with customers is inevitable, the importance of empathy (i.e. being kind and caring for others) is stressed (Wong and Sohal, 2003). The more a culture values HO, the more effective LM practices are expected to be. First, lean services need staff members with high interpersonal capabilities, including being fair and caring towards others, in order to encourage trust and respect for each other. Good teamwork is essential for JIT success and to ensure the work is done in the interest of the company (Bowen and Youngdahl, 1998; Spencer, Rogers and Daugherty, 1994). Secondly, efficient communication among the employees and customers is fostered. According to Spencer et al. (1994) a lack of good communication and information sharing throughout an organization will hinder the continuous flow of services. Therefore, it is expected that a culture with high HO positively influences the lean-performance link and the following hypothesis can be built:
Hypothesis 2h: High HO positively moderates the lean-performance link in professional services.
3. Methodology
3.1 ProcedureIn this research, a survey study is used, because there is already sufficient literature existing about the variables. The general aim of this study is to identify how the variables are related. Moreover, the main advantages of a survey study are firstly the generalization capability and secondly, the lower time and effort needed to collect and analyze data compared to other methods (Karlsson, 2016).
randomly sent to employees from different service firms, resulting into 22 respondents (a sample size of at least 12 participants is needed (Julious, S.A., 2005)) to check the sufficiency of the survey. This was achieved by firstly, including a question asking the respondents for feedback about comprehension and appropriateness of the survey questions, and secondly by testing the constructs for validity with SPSS. After analyzing the pilot study, the survey was slightly adapted to ensure best possible results. Then, it was send to more suitable and randomly chosen service employees via LinkedIn and E-mail. The survey was created in English, but also translated into Chinese to ensure that Chinese respondents had a good understanding of the questions and improve the meaningfulness of the study.
3.2 Sample description
Table 2
Descriptive Statistics
Variables N Missing Frequency Percent
Depository Institutions 58 3 23 57.4% Consultancy 58 3 19 31.1% Business Services 58 3 5 8.2% Public Services 58 3 10 16.4% Germanic 61 0 31 50.8% Confucian 61 0 30 49.2% size 61 0 3.3 Task description
The intention of this study is to find out if LM positively impacts the performance of professional service firms. Moreover, it is tested with help of 8 dimensions if OC has an impact on the lean-performance link.
The expected reaction of the participants on the main effect is, that LM indeed has a positive impact on the performance of service firms. Secondly, the interaction effect in the design is that OC has a positive influence on the relationship between LM and performance of service firms.
3.4 Measures
collectivism, in-group collectivism, future orientation, performance orientation, assertiveness, humane orientation and uncertainty avoidance, as used in the studies of Bortolotti et al. (2015) and Naor et al. (2010).
3.5 Content validity
The modified questions, based on the articles of Bortolotti et al. (2015a, 2015b); Rahman and Bullock, (2005); Prajogo and McDermott, (2005) and House et al. (2004) are stated in Appendix A, B and C. Examples of the items of LM are “Employees at this plant learn how to perform a variety of tasks” and “We take pride in keeping our plant neat and clean". With regard to the environment, the questions were task-specific adapted, i.e. that they got adapted for the service industry. Moreover, sample questions of performance and OC, respectively are "Quality conformance" or "On time delivery performance" and "Our supervisors encourage the people who work for them to work as a team”. In order to ensure content validity, the lean practices (Appendix A), organizational culture (Appendix B) and performance (Appendix C) measurement scales are based on literature and are validated in previous OM studies. Moreover, during the state of the pilot study experts were able to give feedback and evaluate the scales of the survey.
3.6 Reliability
Table 4 illustrates the means, standard deviations and the correlation between variables. Prior to the actual data analysis, the data set is checked for missing data, which leads to replacing a small number of missing data with the means. The Cronbach´s Alpha is used to assess the reliability of the scales. According to Flynn, Schroeder and Sakakibara (1994), a Cronbach´s alpha coefficient reflects an acceptable reliability of the data, having a higher value than 0,70. The Cronbach´s alpha scores in this research are all at least 0.70 as is depicted in Appendix A, B and C and hence have a sufficient reliability.
3.7 Construct validity
4. Results
4.1 Direct effectThe two models shown in Table 5 were used to investigate Hypothesis 1, more precisely, does LM influence the performance of professional service firms? Model 1 examines the relationship of the control variables on performance while Model 2 analyses the impact of both control variables and LM practices on performance.
The hierarchical linear regression analysis with SPSS revealed that the control and dummy variables, besides consultancy, do not have an influence on performance. Moreover, the R square is relatively low with a value of 0.186 in Model 1. This means that the explained variance of the control variables on performance is not good. Meanwhile, LM practices are significantly correlated with performance. It can be confirmed that LM practices have a significant and positive effect on performance as can be seen in Table 5 (B= 0.771, p=0,000). Consultancy has no impact anymore. Moreover, it can be seen that the R square significantly increases from Model 1 (R square= 0.186) to Model 2 (R square= 0.607), i.e. Model 2 explains a much larger variance of the dependent variable. Thereby, Hypothesis 1 is supported by the results, implying that LM practices positively impact the performance of professional service firms.
Table 5
Linear Modeling results of Lean Management on performance (direct effect)
Model 1 Model 2
Steps and variables B p B p
Intercept -2,103 .072 .022 .980
Control
Size
Dummy variables
.033 .851 -.081 .512
Germanic excluded excluded
Confucian .124 .703 .169 .461 Depository Consultancy Business Services Public Services Main effect 1.948 2.373 .929 1.861 .057 .030* .389 .076 -.153 .329 -.153 .103 .840 .681 .842 .893 LM practices .771 .000** R Square .186 .607 N= 61 ** Correlation is significant at 0.001. * Correlation is significant at 0.05.
4.2 Moderation effect
In order to measure the moderation effect, a hierarchical regression analysis is used with 3 Models. The organizational culture dimensions, future orientation (FO), humane orientation (HO), in-group collectivism (IGC), institutional collectivism (IC), and performance orientation (PO) are hypothesized to positively, while power distance (PD), assertiveness (AI) and uncertainty avoidance (UA) to negatively moderate LM’s effect on organizational performance. Every GLOBE cultural value dimension was tested in a separate Model (3a-h) as is illustrated in Table 6.
Table 7
Summary of tested moderation hypotheses Cultural dimension Hypothesized
moderating effect Actual moderating effect Conclusion
H2a: PD Negative n.s. Not supported
H2b: IC Positive Positive Supported
H2c: IGC Positive Positive Supported
H2d: FO Positive Positive Supported
H2e: PO Positive Positive Supported
H2f: AI Negative n.s. Not supported
H2g: UA Negative n.s. Not supported
H2h: HO Positive n.s. Not supported
5. Discussion
Lately, professional services, which are highly knowledge-intensive (Balazin and Stefanic, 2013), are rapidly increasing their importance due to their high economic significance (Hitt et al., 2006). Information sharing is related to dimensions of culture (Balazin and Stefanic, 2013), whereas those specific OC dimensions are related to lean bundles, which can ultimately increase or decrease the firm efficiency. This highlights the importance of a fitting OC in the professional service industry with the probability that OC is likely to be the reason for the mixed results. This is because, while a non-lean supporting OC reduces the relationship between LM and performance, a lean-supporting OC has a positive impact (Balazin and Stefanic, 2013; de Koning et al., 2008; Portioli-Staudacher and Tantardini, 2012).
following section, the results will be interpreted, the propositions will be discussed, the managerial implication will be highlighted, and the limitations and future research of the paper will be outlined.
5.1 Theoretical Implication 5.1.1 Direct Effect
The existing concept is that LM practices positively influence the firm performance. The data collection for this study was conducted with the intention to test this concept, with the change of being in a new environment, the professional service industry. This research included the variables of size, nationality and sector. This was done firstly in order to minimize potential biases and endogeneity that may affect the findings, and secondly to ensure the success of lean services is due to LM practices and not based on other factors. It can be stated that none of the control variables have an influence on the LM and performance relationship. The analysis clearly supports the proposition and confirms that LM positively influences the performance of service firms.
However, contrary to the assumption of dividing lean bundles into socio and technical practices, the results indicate that this research does not differentiate between them. A potential reason is that technical practices are more similar to socio practices in the professional service industry compared to the manufacturing industry, where technical practices are based on e.g. Kanban and flow-oriented layout. However, this is not applicable for services. This can be encouraged by the fact that other authors (e.g. Piercy and Rich, 2009; de Koning et al., 2008; Balazin and Stefanic, 2013) do not differentiate LM in different bundles in the professional service industry.
to create breakthroughs because lean practices distinctly deal with making flows visible. Moreover, de Koning et al. (2008) states that implementing lean practices like continuous flow, statistical process control, and autonomous maintenance all improve the service quality and decrease waste, costs and the delivery time. Moreover, based on Piercy and Rich (2009), LM practices enable large opportunities in the professional service industry to improve cost efficiency. This is achieved with the help of small lean investments, including value identification, value stream mapping and removing barriers to enable continuous value flow to the customer. This results in decreasing waiting times and improved efficiency (Piercy and Rich, 2009). Additionally, Staats et al. (2011) performed a research on a software service provider firm and concluded that that lean practices such as the continuous flow and small group problem-solving ultimately decrease defects, waste and delivery time while increasing quality and flexibility. Summarized, in concordance with previous research, this study reveals that LM has a positive impact on the performance of professional service firms.
5.1.2. Moderation Effect
Previous research states that a non-fitting OC is a frequent reason for LM failure (de Koning et al., 2008; Prajogo and McDermott, 2011; Naor et al., 2008). OC plays a more crucial role in professional services, where the importance of information sharing is highlighted (de Koning et al., 2008; Balazin and Stefanic, 2013). Information sharing is related to dimensions of culture (Balazin and Stefanic, 2013), whereas those specific OC dimensions are related to specific lean bundles, which can ultimately increase or decrease the firm efficiency. This implies that OC may be the reason for mixed results, because while a non-lean supporting OC has a negative effect on the lean-performance relationship, a lean-supporting OC has a positive impact (Balazin and Stefanic, 2013; de Koning et al., 2008; Portioli-Staudacher and Tantardini, 2012).
Based on operational literature, 8 hypotheses have been developed to test the moderation effect of OC on the lean-performance relationship. The analysis shows that Hypotheses 2b-e (IC, IGC, FO, and PO) are supported. Additionally, FO has a direct effect on performance, whereas the other 4 hypotheses [Hypothesis 2a, Hypothesis 2f, Hypothesis 2g and Hypothesis 2h (PD, UA, AI and HO)] are not significant.
moderator variable, is positive linear. This depicts that, for example, a low level of FO leads to a low lean-performance relation, while a high level of FO leads to a high lean-performance relation.
This is the first survey study on lean in professional services exploring the role of OC. A fitting OC is of high importance in the professional service industry. As the results of this study highlighted, OC is one of the missing links in literature, which can explain the phenomenon of mixed results in professional services.
The PGT fosters additionally employee empowerment (Zhang and Bartol, 2010), where management is encouraged to take employee suggestions seriously. Significant evidence shows that, while management is willing to take risks, its mutual trust and respect for employee’s ideas positively impacts information sharing and stimulates open communication throughout the company (Politis, 2002). Employee empowerment is in line with both high IC and high FO cultures, because open communication decreases misunderstandings and improves teamwork and future oriented planning (Naor et al., 2010, Politis, 2002). Firms with low IC and FO cultures will hinder employee empowerment, because they are risk averse and do not aim for open communication, thereby impeding the successful LM implementation and simultaneously decreasing the firm performance.
Contrary to the expectation, PD, UA, AI and HO do not have a moderation or linear effect on the lean-performance relationship. This means that those dimensions and their influence are not valuable for performance improvement processes in the professional service industry. Nevertheless, it is stated that PD in professional services is mostly linked to the inequality between customers and employees and not employee and supervisor related (Chan, Yim and Lam, 2010). Moreover, in order to decrease misunderstandings, Reimann, Lünemann and Chase (2008) highlight the importance of customer contact in professional services and respectively the significance of equal uncertainty avoidance perception between customer and service provider. This calls for future research in order to analyze weather NC is more vital in the professional service industry compared to OC, due to its high customer involvement.
5.2 Managerial Implication
(Politis, 2002). The combination of the two above-mentioned points will ultimately strengthen the loyalty of employees (Hirzel et al., 2017), which will change the OC towards a high IGC culture. Moreover, in order to change the OC towards a high FO and IC culture, it is suggested that managers foster pro-active and creative employee behavior, increase employee empowerment and take employee suggestions seriously (Politis, 2002). Lastly, in order to decrease the perception of unfairness, it is recommended that leaders make use of reward systems and explain it thoroughly to employees. This is expected to encourage employees to be more motivated and work harder to reach company goals (Fry, 2003), changing the OC towards high PO.
5.3 Limitation and Future Research
services and public services). Therefore, a repetition of the research in additional professional services facilitates the possibility for future research, testing whether the same OC dimensions have an impact on the lean-performance relation. Lastly, it is recommended for future research to include NC as an additional construct to compare the influence of NC and OC on the implementation of LM practices, and to further examine the interplay between both variables. This is crucial because previous research states the importance of PD and UA in terms of NC in the professional service industry (Chan et al., 2010; Reimann et al., 2008), due to the high involvement of customers in service processes.
6. Conclusion
Appendix A: Factor loadings and Cronbach´s Alpha for LM practices
All items are measured with Likert- scale question from 1 (strongly disagree) to 7 (strongly agree).*Reverse Code Socio Lean Practices
Variables Items Factor
Loadings
Cronbach´ s Alpha Multi-function
employees
1.Our employees receive training to
perform multiple tasks 0.84 0.86
2.Employees at this organization learn how to perform a variety of tasks
0.87 3.The longer an employee has been
at this organization, the more tasks they learn to perform
0.69 4.Employees are cross-trained at
this organization so that they can fill in for others, if necessary
0.75 5.Management believes that
continual training and upgrading of employee skills are important
0.82 Small Group
Problem Solving
1.Our organization forms teams to
solve problems 0.86 0.86
2.In the past three years, many problems have been solved through small group Sessions
0.87 3.Problem-solving teams have
helped improve service processes at this organization
0.91 4.Employee teams are encouraged
to try to solve their own problems, as much as possible
0.68 Continuous
Improvement
1.We strive to continually improve all aspects of services, rather than a static approach
0.90 0.87
2.We believe that improvement of a process is never complete; there is always room for more incremental improvement
0.83
3.Our organization is not a static entity, but engages in dynamically changing itself to better serve its customers 0.93 Top management leadership for quality
1.All major departments heads accept their responsibility for quality
0.92 0.91
2.Management provides personal leadership service quality and quality improvement
3.The top priority in evaluating
management is quality performance 0.82 4.Our management creates and
communicates a vision focused on quality improvement
0.89 5.Our management is personally
involved in quality improvement projects
0.74 Employee
suggestions
1.Management takes all process
improvement suggestions seriously 0.84 0.87
2.We are encouraged to make suggestions for improving performance at this organization
0.87 3.Management tells us why our
suggestions are implemented or not used
0.80 4.Many useful suggestions are
implemented at this organization 0.90
Technical Lean Practices
Construct Item label and description Factor
Loadings Cronbach´s Alpha Continuous
Flow
1.We have an efficient
communication flow 0.87 0.81
2.The layout facilitates continuous
flow of customer 0.86
3.We are happy with our customer
flow 0.87
Statistical Process Control
1.A large percentage of the services are currently under statistical quality control
0.77 0.87
2.We make extensive use of statistical techniques to reduce variance in services
0.91 3.We use charts to determine
whether our services are in control 0.82 4.We monitor our services using
statistical process control 0.92
5.Services in our department are
designed to be “foolproof” 0.61
Autonomous Maintenance
1.Employees are able to detect and
treat abnormal service conditions 0.78 0.80
2.Employees inspect and monitor the
performance of their own 0.72
3.Basic checks of equipment are
done by employees 0.79
4.Employees understand the cause and effect of equipment
deterioration
0.74 5.We upgrade inferior devices, in
Cleanliness and
Organization
1.Our organization emphasizes putting all tools and equipment in their place
0.84 0.88
2.We take pride in keeping our
organization neat and clean 0.96
3.Our organization is kept clean at
all times 0.90
Design for Quality
1.Departments work in a coordinated manner in the service development process
0.93 0.93
2.The quality of new services is emphasized, compared with other objectives, such as costs or schedule
0.86 3.Service specification and
procedures for new services are clear 0.89 4.Implementation and effectiveness
are considered in the service design process
0.86 5.Sales, customer service,
marketing, and public relations personnel emphasize quality of new services
0.86
Appendix B: Factor loadings and Cronbach´s Alpha for Organizational
Culture
All items are measured with Likert- scale question from 1 (strongly disagree) to 7 (strongly agree).
*Reverse Code
Variables Items Factor
Loadings
Cronbach´s Alpha In-Group
Collectivism
1.I am willing to put in a great deal of effort beyond that normally expected in order to help this organization be successful.
0.80 0.86
2.I would accept almost any type of job assignment in order to keep working for this organization.
0.66 3.I really care about the fate of this
organization. 0.81
4.I am proud to tell others that I am
part of this organization. 0.88
5.For me, this is the best of all
organizations for which to work. 0.86 6.I find that my values and this
organization’s values are very similar.
0.89 Power
Distance
1.Managers in this organization believe in using a lot of face-to-face contact with
Employees
2.Our manager is seen around the
organization almost every day 0.68
3.Managers are readily available in the organization when they are needed
0.86 Institutional
Collectivism
1.Our supervisors encourage the people who work for them to work as a team
0.93 0.90
2.Our supervisors encourage the people who work for them to exchange opinions
and ideas
0.95
3.Our supervisors frequently hold group meetings where the people who work for them can really discuss issues and share ideas
0.87
4.We believe that the need for cooperative relationships extends to both employees and external partners
0.64 5.Our organization works as a
partner with its surrounding community
0.79 Future
Orientation
1.We pursue long-range programs, in order to acquire service capabilities in advance of our needs
0.93 0.92
2.We make an effort to anticipate the potential of new service practices 0.95 3.Our plant stays on the leading edge of new innovation in our industry 0.91 4.We are constantly thinking of the
next generation of services 0.80
Performance Orientation
1.Our incentive system encourages us to vigorously pursue organization objectives
0.96 0.95
2.The incentive system at this organization encourages us to reach plant goals
0.96 Assertiveness 1.Our top management emphasizes
the importance of good inter-functional-
relationships
0.80 0.94
2.Our managers do a good job of
solving inter-functional conflicts 0.90 3.The functions in our organization
work well together 0.93
4.The functions in our organization cooperate to solve conflicts between them, when they arise
0.88 5.The functions in our organization
are well integrated 0.88
6.Our business strategy is implemented without conflicts between functions
0.87 Humane
Orientation
1.I believe that our employees are
2.In my view, most employees are more concerned with personal gain than with helping our organization accomplish its goals *
0.88
3.Some of our employees are probably only out to get what they can from this Organization *
0.86 Uncertainty
Avoidance
1.I believe that the scientific method provides a better input to decision making than intuition or opinion
0.72 0.70
2.In my view, organizations should use objective data as the basis for making Decisions
0.85 3.In this organization, management
is based on facts, not on intuition or tradition
0.84
Appendix C: Factor loadings and Cronbach´s Alpha for Performance
measurement
All items are measured with Likert- scale question from 1 to 5 (1 = poor, much worse than competitors, 5 = superior, much better than competitors)
*Reverse Code
Variables Items Factor
Loadings
Cronbach´s Alpha Quality 1.Conformance to service
specification 0.68 0.77
Delivery 1.On time delivery 0.81
2.Speed of delivery 0.83
Efficiency 1.Cost of service 0.51
Flexibility 1. Our customers select us because we deliver flexibility for their needs
Appendix D: Regression Variable Plots
Power DistanceIn- group Collectivism
Performance Orientation
Uncertainty Avoidance
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