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Two of the major characteristics of the new production paradigm known as lean production are. the pursuit of excellence in terms of a suitable mix of performance and continuous improvement[1,2]; rethinking work organization in order to gain a flexible and effective organizational structure.
In this article we show that the pursuit of excellence and the organizational change required by lean production leads to a management-by-process organization, and that management by process influences the performance measurement system (PMS).
The case study presented as an example is Zanussi-Electrolux - the largest European producer of domestic appliances, which has introduced management by process into most of its plants. The article provides a detailed analysis of the organizational change and its effects on performance measurement.
Lean production and management by process
The pursuit of excellence (obtained in particular by superseding performance trade-off logic) and the changes in work organization (teamwork, job enrichment, etc.), suggested by the lean production paradigm, lead to the adoption of management by process.
In particular, management by process is selected because: there is a need to link all the activities in order to pursue a unified objective (customer satisfaction in all its aspects); and the overall performance (especially non-cost performance such as quality, timeliness, flexibility) results from an integration and co-ordination of the activities.
Thus the primary justification of management by process is to overcome functional organization rigidity ("the functional silos"), where single functions or units often have different and contradictory performance objectives (e.g. manufacturing efficiency vs delivery punctuality). Traditionally each function or unit tries to maximize its own performance and considers good local performance as the only condition for good overall performance. Management by process co-ordinates the efforts so several performances are achieved simultaneously.
A process - a sum of activities, each composed of operations consuming resources - can be looked on as the place where the added value develops. Each process is moved and directed towards the customer and contributes, together with others, to his/her satisfaction.
The management-by-process organization is task-oriented and determined by the aggregation of competence and activities; responsibility is linked to the role and not the level, the career is transversal, the organization becomes horizontal, the unified objective is a mechanism of integration which facilitates learning and permits flexibility.
So management by process is intrinsically oriented to interfunctional effectiveness instead of functional efficiency. The objective can be reached by a harmonic composition and integration of sub-tasks, with functional responsibilities but co-ordinated by the process logic: the performances are the result of the synergetic and synchronous effects of the single contributions along the operations value chain[12,13].
Management by process and performance measurement
Considering a production process as a chain of activities, each phase characterized by a customer/supplier (or internal client or customer-in) logic implies that everyone has a customer - even those far from the downstream activities - and everyone is served by someone else. So a poor performance in a single link in the chain is sufficient to spoil the overall performance. Moreover, to evaluate the performance of a link in the value chain, the constraints (backward-dependent along the chain) and the opportunities (forward-dependent along the chain) in each phase must be considered.
In other words, management by process gives rise to a network of independently focused sub-factories, each with its own management criteria and responsibilities, but strictly linked together according to the customer/ supplier logic. The above-mentioned sub-factories can also be related to other processes.
Emphasis is on inter-functional effectiveness (overall quality of the product offered, process efficiency (productivity as a consequence of quality) and system flexibility, furthermore, using process analysis, cost drivers can be understood better.
Performance measurement itself is a process: "the process of quantifying the efficiency and effectiveness of action".
The effects of management by process on the requirements of the (PMS) can be summarized as follows:
* Overall indicators must be constructed. These must be able to measure the effectiveness of the process in accomplishing the primary task of the process itself.
* The performances that measure the attainment of the sub-tasks (converging to ensure that the primary task s achieved) must be identified. They should be evaluated not only in absolute but also in …