Fit of technical and socio subsystems in lean context, and its impact on operational performance indicators 1

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1 Fit of technical and socio subsystems in lean context, and its impact on operational performance indicators 1 Dávid Losonci (david.losonci@uni-corvinus.hu) Corvinus University of Budapest, Department of Logistics and Supply Chain Management Fővám tér 8., Budapest, H-1093 Abstract This study following socio-technical approach of lean production seeks to clarify (1) how the use of lean production practices influences socio subsystem, and (2) how different matches of work organization and production organization (i.e., production systems) influence operational performances. According to the results, implementation of lean production practices enhances the extension of HRM best practices. However, this association is quite weak. Considering (2) the study presents clear evidences that lean production organization and formalized / empowered work organization lead to superior performance. However, their excellence is not unique: same work organizations integrated with process-focus production organization leads to the same operational outcomes. Keywords: lean production, human resource management, operational performance, IMSS 1. Introduction production has become a focal point in operations management research (OM) in the last decades (Slack et al., 2004; Pilkington and Fitzgerald, 2006). The academic interest reflects that organizations have recognized its potential. Many firms implement lean production to enhance competitiveness, but the majority of them reports disappointed results (Anand et al., 2009; LEI 2004). One of the challenges companies face is to create the supporting infrastructure, using this term in a broad sense (Koenigsaecker, 2005; Womack and Jones, 2003). A major concern is to build social subsystem or work organization that fits lean production. The organizational logic of lean production leads to fundamental changes in human resources (HR) policy as well (MacDuffie, 1995; Liker, 2004; Sugimori et al., 1977). The set of human resource management (HRM) practices (e.g., team work, quality circles, problem solving groups, job rotation etc.) associated with lean production is well documented, at least conceptually. However, the use of and the operational performance effects of these HRM practices are rarely in focus of empirical works (Forza, 1996; Macduffie, 1995; Ahmad et al., 2003), or the findings are ambiguous. In contrast, quality management s knowledge is more valid on the potential synergy between HR and TQM (Bayo-Moriones and Merino-Díaz de Cerio, 2001; Jiménez-Jiménez and Martínez-Costa, 2009). In spite of its importance in OM, even today, lacks a clear picture of lean production s social side. This topic is also deemphasized in human resource management. This study follows multidisciplinary research direction, highlighted by Ahmad and Schroeder (2003) and Birdi et al. (2008), and using socio-technical approach of lean production aims to answer: (1) 1 The participation in the conference is supported by TÁMOP-4.2.1/B-09/01/KMR

2 whether technical and human subsystems of lean production evolve together; and (2) how different matches of work organization and production organization (i.e., different production systems) influence operational performance indicators. After the introduction the paper is organized as follows. Section 2 introduces the theoretical framework, and hypotheses are also formulated here. Then, in Section 3 the database is described, and in Section 4 lean production s technical and social subsystems are operationalized. Section 5 contains the results, and paper is closed with conclusions and limitations (Section 6). 2. Literature review and hypotheses 2.1. Socio-technical view of (lean) production system The study is based on the concept of functional fit and considers the socio-technical approach of lean production. In this view (lean) production system consists of two subsystems: (1) the first subsystem, related to technical side, is determined by production elements, so it is called production organization; (2) the second subsystem, related to socio side, is determined by HR practices and called work organization. (This structure with related research steps is summarized in Figure 1). Theoretical framework Empirical work Emphasis General Patterns of practices in lean context Patterns of work organizations Fit of production and work organization in lean context Operational impact of fit of work organization in lean context Production system Technical subsystem: Production elements Socio subsystem: Human resource elements production system Technical subsystem: production practices Socio subsystem: Best practices in human resource management production system Production organizations: Based on the extent of lean production elements Work organizations: Based on the extent of best practices in human resource management production system Production organizations: beginner, process-focus, lean Work organizations: traditional, formalized, empowered - manufacturing conformance - product quality and reliability - product customization ability - volumen flexibility - mix flexibility - delivery speed - unit manufacturing cost - manufacturing lead time - labor productibvity - inventory turnover Research steps Defining elements in literature review (Section 2.2. and 2.3. and Table 1) Operationalization and classification of work organizations (Section 4.1. and 4.2.) Figure 1 Structure of the study Hypothesis 1 in Section 5.1. Hypothesis 2 in Section 5.2. The work organization are integrated in every production system, and each of them represents a consistent set of related practices. In this study the presence and the extent of lean production practices lead to different production organizations. Similarly, the presence and the extent of HR practices lead to different work organizations. From OM, and especially from lean production point of view, changes in the production organization will be followed by changes in the work organization. So, theoretically technical and socio subsystems evolve integrated. In other words, implementing and deepening lean production practices lead to lean production organization. These changes are followed by the intensification and extension of HRM practices, leading to a work organization that fits lean 2

3 can be characterized by empowerment, team work and skilled workforce. Altogether, these changes results in improved operational performance. In the following paragraphs the study reviews HRM practices employed in lean environment (2.2. and Table 1) and it also touches upon the performance effects of lean production system (2.3) Human resource practices in modern manufacturing systems MacDuffie (1995) is the first author who empirically supports the socio-technical approach of lean production. He concludes that lean producers apply high-commitment HR practices and that firms with this integrated approach consistently outperform traditional mass producers. Oliver et al. (1996) emphasize that work organization in high performing automotive companies is in line with lean principles. According to Power and Sohal (2000) JIT firms are more focused on particular HRM management policies and see the human factors as critical to the success. Wood (2000) explains that Japanese companies are more advanced in applying high commitment practices due to their JIT efforts. Patterson at el. (2004) presents that integrated manufacturing is positively associated with empowerment, skill enhancement, and job enrichment. Other authors do not find convincing differences between lean and traditional manufacturers HR practices. Oliver et al. (1994) compares world class and average automotive parts suppliers and reports no difference in work system and human resource management. Forza (1996) finds that lean plants compared to traditional ones use more problem solving teams, take employees suggestions more seriously, have more flexible workers and rely on quality feedback. But there is no difference in supervisors role and empowerment between the groups. OM literature suggests that a well defined set of HRM practices (high commitment work practices, best practices in HRM) fit lean production (Table 1). However, reviewing the literature a number of concerns reveal: the number of empirical studies confirming this relationship is limited, and findings are ambiguous. Even studies supporting this view do not agree what HRM practices belong to lean production socio subsystem. Based on the theoretical framework it is assumed that firms enhancing lean production organization will alter their work organization to fit that. In other words, these firms use HRM best practices to a greater extent. Hypothesis 1. Firms enhancing lean production organization use HRM best practices to a greater extent Impact of human resource practices on operational performance in lean production In mainstream OM literature it is evident that lean production (i.e., firms relying more heavily on lean production elements) leads to operational excellence. Similar arguments pervade HRM literature (Wall and Wood, 2005), but the HR authors usually present that HR practices result in significant performance improvements. The socio-technical approach of lean production also draws attention to the influence of HR practices regarding operational excellence. The studies argue differently: (1) HRM integrated with production contributes to operational performance; (2) HRM alone can explain performance in modern manufacturing setting; and (3) production practices result in performance improvement. As noted, MacDuffie s (1995) findings support that in lean production fit between socio and technical subsystem leads to operational excellence. Shah and Ward (2003) also support that HR practices (as HR bundle ) contribute to operational performance in lean production. 3

4 JIT Cellular man. JIT JIT JIT, TQM, TPM JIT IMS (TQM, JIT, AMT) IMS (TQM, JIT, AMT) Ahmed et al. (1991) Huber and Brown (1991) Oliver et al. (1994) MacDuffie (1995) Oliver et al. (1996) Sakakibara et al. (1997) Power and Sohal (2000) Lewis (2000) Cua et al. (2001) Ahmad et al. (2003) Shah and Ward (2003) Patterson et al. (2004) Birdi etl al. (2008) de Menezes et al. (2010) Current study Table 1 Modern production management manufacturing practices, human resource management practices, and operational performance measures Sources Manufacturing programs Human resource management practices Reduces status distinction X X X Employment security Job rotation X X X X X X X X Flexible workforce X X X X X X X X Extensive communication X X Teamwork (functional, crossfunctional) X X X X X X X X X X X Empowerment (decentralization of decision making, group problem solving, suggestion X X X X X X X X X X X X X X system) Extensive training X X X X X X X X X X X Compensation X X X X X X X X Selective of hiring X X X X X production practices (internal focused) Setup time reduction X X X X X X X X X X Reduction in lead time X Inventory reduction X X X X Preventive maintenance X X X X X X X Schedule flexibility X X X Layout (cellular) X X X X X X X X X Pull system, kanban X X X X X X X X Quality management (TQM, SPC, continuous improvement) X X X X X X X X X AMT (computer based technology) X X X Other authors argue that HR practices bear the real opportunity of improvements in integrated production systems. Sakakibara et al. (1997) could not find significant relationship between JIT practices, alone, and manufacturing performance. In their work infrastructure by itself explains performance. Patterson et al. (2004) also highlights that integrated manufacturing practices do not show relationship with company performance, alone the extent of empowerment predicts it. Birdi et al. (2008) reaches to a similar conclusion: empowerment and training affect productivity and none of the operational practices show significant effect. Finally, for example Oliver et al. (1996) see interdependence between HR and production practices, but according to them the relationship between HR practices and performance is not so clear in lean companies (e.g., teamwork does not impact performance). The paper aims to analyze how production system impact operational performance. The study hypothesize that firms enhancing lean production organization and work organization, that best fits it, outperform other manufacturers. Even those that have lean production 4

5 Industries fabricated metal products machinery and equipment office, accounting and computing machinery electrical machinery and apparatus radio, television and communication equipment medical, precision and optical instruments, watches and clocks motor vehicles, trailers and semi-trailers other transport equipment Total Missing organization with less advanced work organization, or companies with the most advanced work organization but less advanced lean production organization. (The research is limited to study companies where the use of lean production practices is relevant.) Hypothesis 2. Producers that combine lean production organization with the most advanced form of work organization (empowered) outperform other manufacturers. 3. The survey International Manufacturing Strategy Survey (IMSS) data are used for analyses. IMSS is a global network of researchers with the objective to study international manufacturing strategies, their implementation and resulting performances in operations and related areas. IMSS-V is a cross-sectional data bank and extends to 719 valid observations from 20 countries from 2009/2010. Before testing hypotheses a homogenous set of firms was created. Altogether 421 plants remained in the final (Figure 2). Plants based on two conditions were excluded from the original sample. Number of employees. Previous researches (Cua et al., 2001; Forza, 1996; Shah and Ward, 2003) suggest that companies with more than 100 employees are more likely to implement lean production practices. According to this condition the paper only takes into consideration plants with more than 100 employees. Process types. Although lean production can be used in different production processes (e.g., mass production, batch production, and make to order), but to avoid confusion caused by differences in their appropriate work organizations (Hayes and Wheelwright, 1979; Hill, 1991) the study is limited to those plants where the batch and mass production is dominant (i.e., the portion of make to order is less than 35 percent). Original sample Condition (number of employees) Cua et al. (2001), Forza (1996), Shah and Ward (2003) Condition (process types) Hayes and Whellwright (1979), Hill (1991) 421 Final sample N Figure 2 The original and the final sample 4. Operationalization of variables and classification procedures 4.1. production practices and classification of production organizations In many cases the lean tool set also consists of practices managing external relations (customer, supplier), and product development. This wider focus of production practices is also present in HR-related empirical works. This study grouped producers on the basis of their internal and technical lean tools, applying all internal technical elements proposed by Shah 5

6 and Ward (2007) (Table 2). Each question was asked on a 1 to 5 Likert scale. It is assumed that companies starting their lean journey had to make steps in these listed action programs that are central to lean production. It also should be noted that many of the questions were single respond item. After standardization of variables K-means cluster method was chosen to classify. Means of three-cluster solution are presented in Table 2. Three types of production organization is defined. The three groups of firms are the beginner (B), the process-focus (PF), and lean (L) firms. It seems that basics of lean concept are embedded in manufacturing firms daily operations. The smooth pattern and low intensity of lean practices refers to the fact that beginner companies do not assign importance to the implementation. The second group of firms is more conscious: process-oriented practices are more emphasized than those serving quality (process stability). The extent of process-oriented practices is at lean companies level. group is highly committed in every aspect and rate quality and maintenance practices as the most important ones. The high proportions of partially or fully involved firms reveal that lean concept is widely spread in batch and process context. Table 2 Types of production organizations (mean (standard deviation) standardized value) Variables in the questionnaire Types of production organization production practices Controlled processes, quality improvement Productive maintenance Flow Pull low setup Beginner (N=107) 2.26 (0.828) (0.949) (0.789) (0.938) Processfocus (N=160) 3.23 (0.695) (0.764) (0.810) (0.890) (N=153) 4.36 (0.495) (0.489) (1.062) (1.085) undertaking programs for quality improvement and control (e.g. TQM programs, 6 projects, quality circles, etc.), undertaking programs for the improvement of your equipment productivity (e.g. Total Productive Maintenance programs), undertaking actions to implement pull production (e.g. reducing batches, setup time, using kanban systems, etc.), restructuring manufacturing processes and layout to obtain process focus and streamlining (e.g. reorganize plant-within-aplant; cellular layout, etc.). Number of employees (business unit) 1036 (2550) 1130 (2179) 3851 (1213) *Business units with more than employees are excluded; L Likert scale from 1 (no effort in the last three years) to 5 (high effort in the last three years) 4.2. HRM practices related to lean classification of work organizations As noted in the previous sections, OM papers present a comprehensive list of HRM practices (e.g., problem solving groups, job rotation etc.) that fit lean principles. The vast majority of these papers are either theoretically or non-hr-focused empirical works. However, even these sources reveal that these HRM practices mostly overlap with best practices in HRM (Pfeffer, 1998; Legge, 2006), also known as high performance work systems (HPWS) model (earlier high-commitment ). Table 1, summarizing practices in researches following the socio-technical approach of lean production, confirms that usually HRM best practices are related to lean productions work organization. So, the study classifies work organization of manufacturing firms based on the following HRM practices: (1) reduced status distinction (hierarchy), (2) job rotation, (3) flexible work force, (4) teamwork, (5) empowerment (decentralization of decision making), (6) compensation, (7) and extensive training. Similarly to production practices many of the questions were single respond item (see Table 3). The classification procedure is similar to the previous section (4.1.). Three distinct forms of work organization are defined. Means of three-cluster solution are presented in Table 5. The three groups of firms are the traditional (T), the formalized (F), and empowered (L) 6

7 firms. Table 5 reveals that almost half of the manufacturing firms, traditional, apply HRM best practices at a moderate level. This group lags behind the two other types, especially in empowerment, training and job rotation. Formalized firms highlights training, functional teamwork and compensation in work organization. Producers following the empowered model utilize their high proportion of flexible workforce, employ practices to empower workforce, and also emphasize cross-functional team work. HR practices Table 3 Types of work organization (mean (standard deviation) standardized value) Reduced status distinction Job rotation Flexible workforce Teamwork (functional, cross-functional) Empowerment (decentralization of decision making, group problem solving, suggestion system) Compensation Extensive training Variables in the questionnaire How many organizational levels do you have (from plant manager to blue collar wokers)? How many employees are under the responsibility of one of your first line supervisors? (on average, number of employees in fabrication) How many employees are under the responsibility of one of your first line supervisors? (on average, number of employees in assembly) How frequenlty do your production workers rotate between jobs or tasks? L1 How many of your production workers do you consider as being multi-skilled? (% of the production workers) What proportion of your total workforce works in teams? (in functional team %) What proportion of your total workforce works in teams? (in cross-functional team %) To what extent are employees involved in product or process improvement initiatives? L2 To what extent is your workforce autonomous in performing tasks? L3 Increasing the level of delegation and knowledge of workforce (e.g., empowerment, training, autonomous teams) L4 Implementing continuous improvement programs trough systematic initiatives (e.g., kaizen, improvement teams) On average, what proportion of your shop-floor employees compensation is based on incentives?( % of compensation) How many hours of training per year are given to the regular workforce? (hours per employees) Types of work organization Empowered (N=154) Formalized (N= 70) Traditional (N=197) 3.87 (1.146) 6.16 (3.13) 3.73 (1.02) (24.51) (16.32) (25.51) 0, (23.60) (0.85) (25.77) (30.63) (25.02) (0.78) (0.81) (0.75) (2.51) (11.77) (29.05) (37.16) (0.944) (24.26) (28.48) (15.49) (0.878) (0.863) (0.858) (0.917) (32.58) (68.01) (26.08) ,91 (,062) -, (24.13) (33.83) (26.19) (0.872) (0.848) (0.872) (0.846) (11.43) (13.43) Number of employess (business unit)* 1316 (2653) 2539 (3696) 978 (2250) *Business units with more than employees are excluded; L1 Likert scale from 1 (never) to 5 (very frequently); L2 Likert scale from 1 (no involvement) to 5 (continuous, deep involvement); L3 Likert scale from 1 (no autonomy, only execution) to 5 high autonomy, planning, execution and controll); L4 Likert scale from 1 (no effort in the last three years) to 5 (high effort in the last three years) 4.3. Operationalization of operational performance measures The study only considers a selected set of operational performance indicators. The significant positive impact of lean production on indicators listed in Table 4 is supported by empirical works. Each question was asked on a 1 to 5 Likert scale (see Section 5.2.). 7

8 Table 4 Operational performance indicators in lean production researches Operational performance indicators in the literature Variables in questionnaire Product quality Manufacturing conformance Product quality and reliability Flexibility (options) Product customization ability Reducing batch size, volume flexibility Volume flexibility Mix flexibility Delivery speed (flexibility) Delivery speed Manufacturing costs Unit manufacturing cost Lead time (flexibility) Manufacturing lead time Reduced labor content Labor productivity Inventory turnover Inventory turnover Sources: Crawford et al. (1988), Huson and Dhanajay Nanda (1995), Flynn et al. (1995), MacDuffie et al. (1996), Sakakibara et al. (1997), McKone et al. (2001), Cua et al. (2001) 5. Results 5.1. Fit of work organization (Hypothesis 1) Hypothesis 1 assumes that firm s production (technical) organization and work (socio) organization evolve together. Based on the three distinct forms of work organization respectively, altogether nine production systems are defined. At one extreme end of the subsystems matches is the combination of lean production organization and empowered work organization. At the other extreme end firms work with beginner and traditional models. The hypothesis indicates that the more companies emphasize lean production practices the closer they get to the empowered setting. However, the formalized model also presents outstanding results in some HR practices (e.g., training, compensation, teamwork), so its fit is also conceivable. Table 5 reveals that the traditional approach of work organization is very dominant in every type of production organization. Beginner production organization is widely (more than 70%) integrated with this form, and almost in third of lean producers work is also organized traditionally. The empowered work organization is mostly embedded in those firms production systems that apply several or all lean production practices. Its share is slightly over 40% in these contexts. The formalized form follows the reverse direction than the beginner : enhancing lean production practices (does not) favors ( beginner ) formalized model. Table 5 Matching production organization and work organization: nine types of production systems Work organization Production organization Beginner Process-focus Total Empowered Formalized Traditional Total 20 (18.7%) (13.1%) 67 (41.9%) (43.8%) 66 (43.1%) (43.1%) 153 (36.4%) (100%) 10 (9.3%) (14.3%) 24 (15.0%) (34.3%) 36 (23.5%) (51.4%) 70 (16.7%) (100%) 77 (72%) (39.1%) 69 (43.1%) (35%) 51 (33.3%) (25,9%) 197 (46.9%) (100%) 107 (100%) (25.5%) 160 (100%) (38.1%) 153 (100%) (36.4%) Statistically speaking, Hypothesis 1 is supported. There is significant association between work organization. (Pearson Chi-Square (41.284) is significant at 0.05 levels.) In other words, applying lean production practices will enhance the extension of HRM practices. Cramer V (0.222) and contingency-coefficient (0.299) are both significant (at 0.05 levels) and indicate that the association is quite weak. The proportion of uncertainty in work organization that is explained by production organization is between 5 to 7 percent (considering the value of lambda, Goodman and Kruskal tau, and uncertainty coefficient). These are rather low values, so other variables, not included in the study, can have 420 8

9 considerable impact. Comparing types of production organization in pairs ( beginner and formalized ; beginner and lean ) does not lead to more significant results Fit of work organization (Hypothesis 2) Hypothesis 2 assumes that firms with lean production organization and empowered work organization outperform other production systems. ANOVA analysis was applied to assess the impact of production systems on operational performance. As noted previously, the study is limited to companies where lean production practices are relevant (i.e., process-focus and lean ). Our results (Table 6, Table 7, and Figure 3) suggest that different production systems (distinct matches of work organization) lead to the same superior operational performance. production organization is effective both with empowered and formalized work organization. In statistical terms one can expect the same results from process-focus - formalized production system. Process-focus - empowered has only to improve few indicators: product quality and reliability (to reach lean and formalized and lean and empowered ), and labor productivity ( lean and formalized ). Variables in questionnaire Table 6 Operational performance indicators relative to main competitors lean traditional work (LT) lean formalized work (LF) lean empowered work (LE) process-focus traditional work (PFT) process-focus formalized work (PFF) process-focus empowered work (PFE) Manufacturing conformance Product quality and reliability Product customization ability Volume flexibility Mix flexibility Delivery speed Unit manufacturing cost Manufacturing lead time Labor productivity Inventory turnover Likert scale relative to our main competitor, our perfomance is (1) much worse, (3) equal, (5) much better Table 7 Significant differences in operational performance indicators relative to main competitors Sign. Sign. Sign. Sign. Sign. Sign. Sign. Sign. Sign. (LT) (LT) (LT) (LF) (LF) (LF) (LE) (LE) (LE) (LF) (LE) (PFT) (PFT) (PFF) (PFE) (PFT) (PFF) (PFE) Variables in questionnaire Sign. (PFF) (PFE) Manufacturing conformance n.s. n.s n.s. n.s. n.s n.s. n.s. n.s. n.s. Product quality and reliability n.s. n.s n.s n.s n.s. n.s. Product customization ability n.s n.s. n.s n.s Volume flexibility n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. Mix flexibility n.s. n.s. n.s. n.s. n.s. n.s n.s. n.s. n.s Delivery speed n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. n.s. Unit manufacturing cost n.s. n.s. n.s n.s. n.s. n.s. n.s. n.s. n.s. n.s. Manufacturing lead time n.s. n.s. n.s n.s. n.s n.s. n.s. n.s Labor productivity n.s n.s. n.s. n.s. n.s. Inventory turnover n.s. n.s. n.s n.s. n.s. n.s. n.s. n.s. n.s. n.s. significant difference at 0.05 levels, significant difference at 0.10 levels, n.s. not significant Even, lean - traditional production system only lags behind them in labor productivity and product customization ability. This form is not different from process-focus - formalized production system. Clear performance gap exists if one compares lean - formalized and lean - empowered production systems with production system that employs process-focus traditional work organization. This model does not differ from process-focus - formalized form. Finally, this fact together with the relations of production systems depicted in Figure 3 (all arrows are directed to lean ) suggest that lean - Sign. (PFT) (PFE) 9

10 formalized and lean - empowered production systems perform better than any other types. Their superior performance cannot be supported by statistical measures. & Formalized Process-focus & Formalized & Traditonal Process-focus & Traditonal & Empowered Process-focus & Empowered Figure 3 Operational performance indicators relative to main competitors 5. Conclusion and limitation The current paper dealt with fit of socio subsystem and technical subsystem in lean the impact of their match on operational performance indicators. Concerning fit of subsystems the study revealed significant association between production organization and work organization. This association suggests that implementation of lean production practices enhances the extension of HRM best practices. However, the association is weak. Furthermore, the research provided interesting inside into the distribution of work organizations. According to the results, traditional work organization remains influential in manufacturing firms. More than one third of firms enhancing lean production practices organize daily operations in traditional way. This remarkable proportion raises interesting questions about the performance outcomes of different production systems: how does the match (or mismatch) of work organization effect operational indicators? The study presented clear evidences that lean production organization and formalized / empowered work organization lead to superior performance. However, it seems reasonable that firms do not strive to achieve these models where the extent use of lean production practices is matched with HRM best practices. Matching formalized and empowered work organization with a production system that utilizes quality and maintenance practices at a moderate level and rely on process related lean practices to a great extent ( process-focus production organization ) leads to the same ( formalized ) or almost to the same ( empowered ) operational performance. In a business environment where product customization ability and labor productivity are not of first priority lean production organization matched with traditional work organization can also operate effectively. There are clear limitations to this research. The cross-sectional data limit the generalizability of these findings. Operationalization is another limitation, since the database does not cover all aspects neither of lean producers (Shah and Ward, 2003) nor of HRM practices (Pfeffer, 1998). Contextual factors (e.g., national culture, economic development, and industry (Ahmad and Schroeder, 2003; Cagliano et al., 2011)) and company decisions (e.g., strategic orientation (Legge, 2006)) also can influence HRM practices and the fit between HRM (Jayaram, 1999). None of these is considered in the study. Further studies should clarify the source of operational performance improvement (HR practices or lean production practices) in distinct production systems. 10

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