The Impact of Leadership Styles on Lean Implementation in Service Organizations: An Empirical Investigation

Abstract

The Lean management, which is a product of the Toyota Production System and first codified to manufacturing by Womack et al. (1990) has experienced a long-term migration into the service industry over the last 30 years. The rationalisational logic of lean, which is focused on generating maximum customer value by progressive extinction of the activities that do not add value and thus consume resources is sector-neutral in principle but highly context-specific in practice. Healthcare, banking, hospitality, retail, and the public sector service organizations have documented their operational efficiency, cycle time decrease, and customer satisfaction improvements when adopting lean (Henrique and Filho, 2020). Nonetheless, the failure rates of implementation are tough to go and industry estimates indicate that half to two-thirds of lean transformation projects cannot maintain initial improvements after three years (Bortolotti et al., 2021).

There is increasing evidence that leadership is the key difference producer between those organizations that are successful in establishing lean and those that revert to pre-lean periods (Tortorella &Fettermann, 2018). Leadership influences the psychological safety, goal clarity, resource commitment, and cultural norms that jointly define the engagement of employees with lean tools and principles as a genuine problem-solver or an actor complying. The current literature on lean leadership has however disproportionately prioritized manufacturing-based studies and narrowly-defined leadership based on the transformational-transactional paradigm, but has not focused much on servant leadership, laissez-faire dynamics, or cross-sectoral comparisons of service sectors (Danese et al., 2022).

Service industry has unique challenges to lean implementation that draws a striking line of difference between the service industry and manufacturing. Services are immaterial, differentiated, and co-created with clients and waste identification and standardization of processes is always more complicated than it would be in a cyclical manufacturing process. Service delivery requires a certain level of human capital intensity, making the implementation of lean just as much of a socio-cultural change as it is a process engineering operation, putting exceptional pressure on leaders to encourage, empower and maintain the engagement of the workforce in multi-year span of change (Antony et al., 2021). These attributes imply that the nature of leadership can even have a greater impact size in service lean settings than in manufacturing.

This research fills the identified gap by empirically examining the extent to which four theoretically based leadership styles transformational, transactional, servant, and laissez-faire affect the implementation of lean in various sub-sectors of the service industry. The study is set within four objectives: (a) to find out the relative size and statistical significance of each leadership style in terms of overall lean implementation and sub-dimensions; (b) mediators of leadership impact on lean on the organizational level; (c) presence of significant differences in leadership-lean relationships across service sub-sectors; and (d) to provide evidence-based recommendations about leadership development and lean strategy in service-based organizations. The paper contributes to theoretical knowledge and the practical implementation of leadership in the lean service frameworks, addressing the demand to focus the empirical research in the lean area on sector-specific studies (Danese et al., 2022; Bortolotti et al., 2021).