1   Lean  in  Sweden’s  municipalities                               Lean  in  Swedish  municipalities      A  study  of  Swedish  municipalities  that  are  practicing  the  lean  concept.     Oskar  Andersson  &  Emma  Sjöblom     School  of  Business,  Economics  and  Law,  University  of  Gothenburg   June  2011,  Gothenburg,  Sweden   Objectives:  Lean is a management control concept that has become popular within service producing organizations. This study focuses on municipalities, among service organizations, and aims to investigate the presence of lean in Sweden´s municipalities. Through a literature review we will identify different focus areas from the lean literature based on the most common used variables of the concept. With the ground in these variables that are relevant for a service purpose we will examine which variables within these focus areas that the municipalities have adopted and have chosen to practice, and if, to which extent they are practicing them. Finally, the study will examine lean in municipalities from a Public Management Perspective, to se how the employees that practice lean, value the different variables in the aspect of becoming effective and thereby if the concept can contribute to more effective processes in the public sector. Methodology:  We carried out an examination of the municipalities in Sweden. The municipalities were contacted over telephone to find out whether the municipality practiced lean. If so, they were emailed our web survey with questions about the lean concept. Thereafter, the answers were collected, the result was compiled and finally analyzed.   Findings:  We got in contact with 242 out of 290 existing municipalities. Out of the 242 contacted municipalities; 64 of them answered that they practiced the lean concept; 36 of them answered our web survey. The municipalities had either implemented lean in the whole municipality or in different departments. The results showed that municipalities have to a high extent adopted the lean concept in a similar way. All respondents answered that they practiced all the variables of lean to same extent, with a few exceptions. The different variables were also practiced to more or less the same extent. The respondents answered that all the different variables had a high importance of becoming more effective and that the lean concept had contributed to more effectiveness where it was practiced.   Originality:This is not the first essay to examine the lean concept in Swedish municipalities. However, the lack of research that focuses on an overall perspective among municipalities inspired us to fill this gap. Keywords:  Lean, New Public Management, Municipality, Service Organization, Sweden.   Paper  type:  Bachelor thesis, business administration.   Supervisor:Johan Dergård Acknowledgements     We would like to thank all respondents who took time from their schedule to answer our survey. Without them, this thesis could not have been compiled. A thank to the persons who have helped us during the process of this thesis, especially to our friends and families who have been helping and understanding. Finally, we would like to thank Johan Dergård, our supervisor that has helped and supported us during the whole process. Gothenburg, May 31st 2011 Oskar Andersson Emma Sjöblom 3   Lean  in  Sweden’s  municipalities                               Tabel  of  content   1.   Introduction  ..............................................................................................................................  4   1.1.   Background  ......................................................................................................................................  4   1.2.   Problem  Discussion  .......................................................................................................................  5   1.3.   Objectives  .........................................................................................................................................  6   1.4.   Disposition  .......................................................................................................................................  6   2.   Theoretical  Framework  ........................................................................................................  7   2.1.   New  Public  Management  .............................................................................................................  7   2.2.   The  Lean  Concept  ...........................................................................................................................  7   2.2.1.   Understanding  the  lean  concept  ........................................................................................................  7   2.2.2.   A  literature  review  ...................................................................................................................................  8   2.2.3.   Definition  of  construct  ............................................................................................................................  9   2.2.4.   Eight  focus  areas  .......................................................................................................................................  9   3.   Reserch  Method  ....................................................................................................................  15   3.1.   Sample  selection  &  choice  of  method  ...................................................................................  15   3.2.   Email  distribution  &  online  questioner  ..............................................................................  15   3.3.   Measuers  of  construct  ...............................................................................................................  16   3.4.   Process  of  data  .............................................................................................................................  17   4.   Result  &  Analysis  ..................................................................................................................  19   4.1.   Descriptive  statistic  &  findings  from  telephone      interviews  .......................................  19   4.2.   Where  &  when  lean  was  implemented  ................................................................................  19   4.3.   Comparision  between  different  focus  areas  ......................................................................  20   4.4.   Comparison  between  different  time  since  implementation  ........................................  23   4.5.   Comparison  between  different  departments  within  the  municipality  .....................  24   4.6.   Comparison  between  the  different  focus  areas  in  aspect  of  becoming  effective  ..  25   4.7.   Improved  &  more  effective  processes  .................................................................................  26   5.   Discussion  &  conclusion  .....................................................................................................  26   5.1.   Limits  of  study  &  suggestion  for  further  research  ...........................................................  27   6.   References  ...............................................................................................................................  28   7.   Appendix  .................................................................................................................................  31 4   Lean  in  Sweden’s  municipalities                               1. Introduction   1.1. Background   The external pressure of becoming more effective, increase the flexibility and raise the quality affects the service organizations and they have to rethink their strategies (Piercy et al., 2009). Within service organizations, studies have shown that there is room for improvements; services that are delivered do not meet the customer demand in terms of quality (Eriksen, Fischer & Mönsted, 2008; Piercy et al., 2009), there is a wide variation in the customer’s demand and therefore a need of flexibility (Braun & Kessiakoff, 2005; Piercy et al., 2009) and major production losses occur because resources are focused on editing errors of defective services. Another aspect is the employees’ lack of engagement, which can have a negative impact on the delivery of the service. (Eriksen et al., 2008) Municipalities, known as a service organization, are facing the same challenges. Society has become accustomed to the public sector´s limited and insufficient resources. The citizens have high expectations on high quality services meanwhile; they demand reduced taxes and fees. This has forced the public sector to reflect on how they can become more efficient and face tougher competition. (Rombach, 1997) New techniques and methods to enable a more leanness work have therefore arisen in the public sector (Abdi, Shavarini & Hoseini, 2006). In the 1980s the New Public Management (NPM) emerged, a management philosophy used by the governance. It can be explained in a broad and complex term of how the governance used the philosophy to modernize the public sector, through the implementation of private business management accounting theories and methods. (Lapsley, Brown, Jackson, Oldfield & Pong, 2003; Christensen & Laegreid, 2007; Heyer, 2010) The purpose was to give the public sector a more market-orientated management and also to create a performance management system, which aimed to improve the efficiency and effectiveness. Balanced Scorecard, Key Performance Indicators, and Activity Based Costing among others were methods used. (Gruening, 2001; Heyer, 2010) Lean, with its heritage from Toyota Production System (TPS), a manufacturing management concept, is one among many management accounting concepts that have been developed during the last decades. (Liker & Morgan, 2006; Womack, Jones & Roos, 1991) TPS became popular with the success of Toyota in the 80’s, which made the concept attractive and other organizations were inspired by the concept (Liker et al. 2006; Womack et al, Jones & Roos, 1991). The concept evolved within the manufacturing industry (Atkinson, 2004; Knuf, 2000) and in the 90’s the concept became known as Lean Production, which is an American interpretation of TPS (Atkinson, 2004; Hines, Holweg & Rich 2004). Lean is a way of working and thinking whose purpose is to increase the efficiency and quality in organizations through the reduction of waste in processes that largely takes place on an operational level (Worley & Dool, 2006). Lean is about doing more with less and give the customer exactly what it wants, eliminate waste in the value stream, strive for perfection 5   Lean  in  Sweden’s  municipalities                               (Womack & Jones, 2003) and see the organization as a whole, with all its individual elements; people, processes and technology, as an integrated system (Liker et al., 2006; Seddon, 2008; Womack et al., 2003). When lean was implemented within organizations and research proved that it could have a significant impact on organizations’ wealth, health and competitiveness, (Atkinson, 2004; Knuf, 2000) the interest of lean spread beyond the manufacturing industry. Which lead to debates whether; the lean concept was applicable on services (Seddonand & O’Donovan, 2010). In the mid 90’s, researches pointed out the benefits of practicing lean within service producing organizations (Avery, 2003; Hines et al., 2004; Piercy & Rich, 2009) and with a rapid spread, the concept gained popularity beyond the manufacturing industry and became practiced within the service industry among others (Avery, 2003; Hines et al., 2004; Knuf, 2000; Liker et al., 2006). 1.2. Problem  Discussion   The introduction of private control instruments has led to the development of the public sector (Krafcik, 1988; Rombach, 1997). Municipalities have increasingly become more market-like and similar to privately operated organizations (Rombach, 1997). Several government organizations have adopted lean to enable a customer-oriented work to configure resources and processes (Radnor & Walley, 2008). Denmark for instance, has for many years been inspired by lean in the provision of services and administration (Larsson, 2008). In recent years, the concept has been implemented in the public sector (Larsson, 2008; Stentoft Arlbjørn, Freytag & de Haas, 2010) and approximately 70 % of all Danish municipalities practice lean today (Larsson, 2008). The appropriateness of NPM utilized by the public sector has caused a rigorous debate, especially in regard to the public sector’s adoption of business specific principles from the private sector. This contention is based on the view that the public sector is vastly different from the private sector and as a result, the adoption of private sector attitudes and theories are therefore inappropriate. It is believed that the difference between the private sector operating environment, their business goals and objectives, and their structures and values are so different to those of the public sector. This makes it impossible to implement such managerial techniques successfully within the public sector and that the level of change required to implement the reform would be too complex. (Butterfield, Edwards, & Woodall, 2004) Studies of the diffusion and implementation of lean as a management accounting concept in municipalities in Sweden have not been made to a large extent. Though some studies have been made, these focus on a smaller number of municipalities (Brännmark, Halvarsson & Lindskog, 2011; Crnkic, 2010) and others on the success factors behind the implementing of lean in the public sector (Ögren & Rüte, 2009). However, the diffusion and adoption of the concept in different contexts have led to confusions of what lean is and what it is not (Hines et al., 2004). The confusion is based on 6   Lean  in  Sweden’s  municipalities                               the conceptual and operational explanations of the concept and also the gap between them (Shah et al., 2007). Various studies have been made with the aim to clarify the confusion of the concept and explain the different parts of the concept (Atkinson, 2004; Hines et al., 2004; Liker et al., 2006; Wood, 2004). Studies of how the lean concept can be applied within service organizations have also been made, with the aim to explain and create a better understanding of the concept and its objectives (Abdi et al., 2006; Malyeff, 2006) 1.3. Objectives   This study focuses on municipalities, among service organizations, and aims to investigate the presence of lean in Sweden´s municipalities. Since lean can be identified as concept with its origins from the private sector with the aim to create efficiency and effectiveness we have chosen to approach lean from a New Public Management perspective. Through a literature review we will identify different focus areas from the lean literature based on the most common used variables of the concept. With the ground in these variables that are relevant for a service purpose we will examine which variables within these focus areas that the municipalities have adopted and have chosen to practice, and if, to which extent they are practicing them. Finally, the study will examine lean in municipalities from a Public Management Perspective, to se how the employees that practice lean, value the different variables in the aspect of becoming effective and thereby if the concept can contribute to more effective processes in the public sector. 1.4. Disposition   The construct of this study is organized as follows. The second chapter gives a theoretical frame and reference of New Public Management, which is followed by a theoretical explanation of the lean concept divided into eight different focus areas based on a literature review. In the third chapter the research method for our empirical data is presented and discussed. The fourth chapter is where the results are presented and analyzed. In the last and fifth chapter, our conclusions are made and our suggestion for further research is presented 2. Theoretical  Framework     2.1. New  Public  Management     During the 70’s and early 80’s a change was made in the way of controlling the public sector and it’s activities. It started in Great Britain and was than spread to the rest of the world. The new way of controlling the public sector has retrospectively come to be called New Public Management (NPM) by researchers. (Gruening, 2001) NPM is mostly about an effort by its perpetrators to develop and improve the public sector, often at the heads of state and governmental level. The reason is to make it more competitive and in a larger part to respond to the public needs (Groot and Budding, 2008). The NPM philosophy has been described as a move towards a governance approach that places emphasis on transparency, performance management and accountability of public sector employees and managers. The philosophy has been identified as “one of the most striking international trends in public administration” that is capable of re-inventing government (Leishman et al., 1996, p. 26). The NPM is in the literature described to increase the market orientation, decentralization, a changed leadership that provides a strategic thinking and the introduction of concept that focuses on quality and organizational leadership (Gruening, 2001). The introduction of NPM has largely changed the public sector, however the change has been very different in different countries. In some countries, the development in the public sector has been the result of several on-going processes and local initiatives, which subsequently has been labelled NPM, while other countries clearly have been influenced by the NPM from the outside world (Christensen & Laegreid, 2007). In Sweden the NPM primarily had an impact in a decentralized level, particularly in the municipal sphere. It is also noted that Sweden is one of the countries where NPM largely has been implemented. NPM had its peak in the 90’s and there are scientist who believes that the government is moving towards a post-NPM-state. (Christensen & Laegreid, 2007) There are also those scientist who question the ability of NPM to survive and which effects it could provide the public sector in the future (Groot and Budding, 2008; Lasley, 2008) 2.2. The  Lean  Concept     2.2.1. Understanding  the  Lean  Concept     To create an understanding and to define the lean concept it is important to understand the fundaments, the historical perspective and how the concept has evolved over time (Shah et al., 2007). The fundament of the lean concept, established by Womack and Jones (2003), are the five principles; (1) Precisely specify value by specific product, (2) identify the value stream for each product, (3) make value flow without interruptions, (4) let the customer pull value from the producer, and (5) pursue perfection” (Womack & Jones, p.10, 2003). The different variables of the lean concept are needed to succeed with the optimizing of system and reach 8   Lean  in  Sweden’s  municipalities                               optimal effectiveness (Bicheno, 2008; Larsson, 2008). Practice the concept is more about develop a strong company culture and a way of thinking than practicing a number of tools (Larsson, 2008). Organizations must adapt both a way of thinking and a way of working (Larsson, 2008; Liker et al., 2006; Womack et al., 2003) The lean concept has its origin from the manufacturing industry it is often described from a manufacturing perspective, which can lead to confusion when implementing the practices into service organizations. Academics and users have developed different views of lean and the concept is often described from two perspectives: either a more philosophic or a more practical one. (Hines et al., 2004) The confusion is based on the conceptual and operational explanations of the concept and also the gap between them (Shah et al., 2007). Lean has become a concept that is applicable in a variety of contexts which has led to the development of different terminologies, such as lean administration (Larsson, 2008), lean service (Seddon, 2008) and lean healthcare (Warnin & Bishop, 2010) with the aim to be more suitable for different contexts (Shah et al., 2007). Various studies have been made with the aim to clarify the confusion of the concept and explain the different parts of the concept (Atkinson, 2004; Hines et al., 2004; Liker et al., 2006; Wood, 2004). Studies of how the lean concept can be applied within service organizations have also been made, with the aim to explain and create a better understanding of the concept and its objectives (Abdi et al., 2006; Malyeff, 2006 To follow through the study it is essential to understand how organizations adopt popular concepts. When introducing a concept into a new context it is often adopted and adjusted for its intended purpose (Rövik, 1988). To adopt a concept mean that you take a concept from the original context; you then reproduce an imitative idea and put it into practice in the new context with a few or no changes or that you either add or subtract some elements to a conceptual representation. (Rövik, 2007) Sometimes a fundamental or radical change is made in both form and content, in a way that the external idea is perceived as a local innovation (Rövik, 2007). Occasionally organizations believe that they have translated or adopted the concept identically, but in reality they have accidentally translated the concept in a different manner. This depends on various factors that make the organization unable to copy the concept identically. (Rövik, 1988) An identified practice can rarely or never transfer, at least not completely in their physical form from one organization to another (Lillrank, 1995). Lean is no exception, it has been applied and is constantly adapted into new contexts. However, since the concept is described in different it cause confusion. (Abdi et al., 2006; Atkinson, 2004; Larsson, 2008; Liker, 2004; Piercy et al., 2009; Swank, 2003; Wood, 2004). 2.2.2. A  Literature  Review     To define the most frequently used variables in the literature and to be able to compile our different focus areas, a research of what the lean concept is, have been done. Literature of lean has been read to create an understanding for the lean concept. The book of Womack, Jones and Roos: “The machine that changed the world” (1991) highlighted Toyota's way of working for the western society. They were among the first to give the lean concept an English 9   Lean  in  Sweden’s  municipalities                               explanation in the 90s (Hines et al., 2004). This was complemented with other literature end science articles, such as; Womack and Jones (1994; 2003); Liker (2004); Liker and Morgan (2006). This literature was mainly written from a manufacturing perspective, but indicated that it could be applicable in other industries as well. The more fundamental parts of the concept were explained in this literature, which gave a general description of the concept. For a better understanding of the concept the research was complemented with more science articles. The majority of these articles aimed to clarify and explain the lean concept, such as Wood (2004), Atkinson (2004), Hines, Holweg and Rich (2004) and Shah and Ward (2007). We also read other literature that explained how the lean concept could be applicable and implemented within the service industry and different service organizations, as George (2003), Abdi, Shavarini and Hoseini (2006), Maleyeff (2006), Bicheno, Anhede and Hillberg (2009) and Piercy and Rich (2009). Finally, some lean manuals and handbooks that gave a more practical explanation with more concrete facts of how to practice lean in service organizations; theses were Braun and Kessiakoff (2005), Bicheno (2008), Eriksen, Fischer and Mönsted (2008) Seddon (2008, 2010) and Larsson (2008). The practical perspective gave a set of management practices and techniques that directly could be observed (Shah et al., 2007). The lean literature is to a high extent referenced to the book of Womack, Jones and Roos (1991) and Womack and Jones (2003). 2.2.3. Definition  of  Construct     The research led to a creation of an understanding and knowledge of the lean concept. Which resulted in eight different focus areas that contain variables that are frequently reproduced in different literature and are a central part in this thesis. The focus areas are based on different variables, both in lean thinking and working. Much of the lean literature is referred to the Womack, Jones and Roos (1991) and Womack and Jones (2003), therefore our theoretical framework is also, to a high extent, based on their literature. Following in this chapter, an explanation of each focus area is given. The focus areas are also the base four the investigation of the municipalities in Sweden. However, due to the fact, that the concept is more of a philosophy than a toolbox, makes it hard to concretize the whole concept. Additionally, as the concept in many ways are seen as philosophy with quite abstract variables, it was not possible for us to cover the whole concept in our study. The eight different focus areas that was compiled are; customers, processes and system thinking, value- adding and non value-adding activities, visualization, standardization and demand driven production, leaders, employees and continuous improvements. 2.2.4. Eight  Focus  Areas     2.2.4.1. Customers     Lean literature discusses the importance to identify what value is for the customer and design the service from a customer perspective. The objective of a service is to solve the customer problem. (Womack et al., 2003) The customer should be in focus in all decisions that are 10   Lean  in  Sweden’s  municipalities                               made, both on a strategic and an operative level (Bicheno et al., 2009; George, 2003; Hines et al., 2004). To be able to maximize the customer’s value it is important to have an understanding for two things: who the customer is and what it demands and needs. It is therefore essential to investigate and chart the type of customer that exists, both externally and internally (Eriksen et al., 2008). Customers, owners, employees (Seddon, 2008; Womack et al., 2003) and the society can all be identified as a customer (Braun et al., 2005). When the customer is identified and mapped out the identification of customer value can be performed. This value should then be created for all different customers. The customer value should be described in detail and if possible in terms of needs, quality, quantity and price. The services should then be designed from a customer value perspective. (Seddon, 2010; Womack et al., 2003) Sometimes it can be complicated to design the service because of the customer’s different preferences. Aspects, such as, quality and time can be difficult to define and they can also be quite diversified. (Seddon, 2010) The service should also be delivered in the right time and place (Womack et al., 2003). After the identification of the customer and its demands and needs it is essential to continuously make examinations and evaluations since these aspects tend to vary over time. Continuously examinations can therefore prevent the production of non-demanded services and eliminate waste. (Eriksen et al., 2008; Larsson, 2008) 2.2.4.2. Processes  and  system  thinking     To see the different activities within the organization as a system is a crucial part of the lean way of thinking. The idea is to see the whole organization, the entire set of activities as one great system. (Seddon, 2010; Womack et al., 2003) It is also fundamental to understand how all the different parts are linked together and how they influence the customer value. Further, to understand how different activities are required to produce specific services (Womack et al., 2003). Because no matter how good an employee’s work is done it cannot be compensated if the customer is not satisfied with the delivery of the service (Eriksen et al., 2008). The great system contains of minor systems that are directly or indirectly related to each other. The activities together with the employees are important parts of the system and it is the people who provide the system with intelligence and energy (Liker et al., 2006, Womack et al., 2003). The system is sometimes also related to other systems outside the organization (Seddon, 2010). It is not always as easy to identify processes within a service organization as within a manufacturing organization. A manufacturing organization often has a material input and end up with a complete product as output (Larsson, 2008). However, to understand the customers and to organize the operations and activities from their perspective are essential. Through the understanding of the tasks characteristics and functions there is a possibility to coordinate the tasks in an effective way (Womack et al., 2003), something that is decisive for the ability to meet the customer´s need and to become more effective (Eriksen et al., 2008). In order to