The role of the dutch business system in effectively implementing lean management - Free Essay Example

Sample details Pages: 26 Words: 7818 Downloads: 4 Date added: 2017/06/26 Category Statistics Essay Did you like this example? 1. Introduction 1.1 Problem Indication Nowadays lean management is being implemented in many organizations all over the world. Lean management is about reducing waste as much as possible and about doing things simple and thereby constantly improving those things (Slack, Chambers Johnston, 2007). Don’t waste time! Our writers will create an original "The role of the dutch business system in effectively implementing lean management" essay for you Create order It has been implemented effectively in many industries and organizations such as Wal-Mart and emergency departments (Dickson, Singh, Sheung, Wyatt Nugent, 2009; Schonberger, 2007). However, there is also evidence that lean management is often not effectively implemented or even considered as a failure (Schonberger, 2007). Multiple studies have been trying to explain what kind of factors influence the success or failure of implementing lean management in organizations (Bhasin Burcher, 2006). For decades authors have argued that organizations and industries are influenced by institutions in their environment (Tempel Walgenbach, 2007; Scott, 1995). It therefore seems important to have a better understanding of the institutions around us. The term institutions, however, is very broad. According to North (1991, p. 97) institutions are the humanly devised constraints that structure political, economic and social interaction. They consist of both informal constraints (sanctions, taboos, customs, traditions, and codes of conduct), and formal rules (constitutions, laws, property rights). Practical examples of institutions are the educational and the financial system. Formal institutions are easier to identify and to discern than informal institutions. In this study the focus will be on formal institutions, thereby limiting the field of investigation. Furthermore, this study follows the business systems approach developed by Whitley (1992b). According to this approach, business systems are explained by institutions. A business system is seen as particular ways of organizing, controlling and directing business enterprises that become established as the dominant forms of business organization in different societies (Whitley, 1992b, p. 125). In other words, the characteristics of a business system show how the economy is organized. According to Whitley (1992a) nations have a highly significant influence on their domestic institutions, because state actions determine the effectiveness and role of formal institutions in governing many important aspects of economic coordination (Whitley, 1999, p. 44).Therefore business systems are situated at the national level and this is also the reason why they are different among nations. A practical example of a business system is the compartmentalized business system, to which e.g. the U.S.A. belo ngs. It is characterized by a highly mobile workforce, shareholder control, well-developed capital markets, and an unregulated labor market. This is very different from the business system in the Netherlands, but its characteristics will be discussed later. It should be stated that some characteristics of the Dutch business system are quite similar to the characteristics of other business systems such as the German. Furthermore, this study recognizes that institutions are sometimes not situated at the level of the nation because e.g. EU institutions overrule national institutions (Koen, 2005). It focuses, however, on the institutional features and the business system in the Netherlands. The implementation of lean management in organizations has shown mixed results. Organizational and institutional studies have argued that organizations are influenced by institutions. It seems quite important for organizations to know how their institutional environment influences the effective implementation of lean management. However, little is known in research about how this is influenced by formal, societal institutions. The aim of this study is to show, by using the business systems approach, whether institutions in the Netherlands facilitate the organizational implementation of lean management effectively. The study will therefore look into the features of the Dutch business system and investigate if they fit with the characteristics of lean management. 1.2 Problem statement The aim of the study is to investigate whether the Netherlands facilitate an institutional environment where lean management can be applied effectively in organizations (see figure 1). In this study, a deeper understanding about institutions will be acquired to see how formal, societal institutions influence the implementation of lean management. These institutional features influence the way an economy is organized (business system) in a country. It therefore investigates the fit between the features of the business systems in the Netherlands and the characteristics of lean management. To this end, the following problem statement will be used: Do the Netherlands facilitate aninstitutional environment to effectively implement lean management in organizations? 1.3 Research Questions The following research questions will be used to answer the problem statement. The first two research questions have a somewhat broader scope, whereas the final research question has a narrower one. 1. What are the features of the Dutch business system? First, the study shows that institutions have an influence on the economic organization (business system) in a nation. Thereafter, the study is able to identify the distinct features of the Dutch business system, which is essential for this study. What are the characteristics of lean management? Here lean management and its characteristics are explained extensively. Furthermore, important coordination characteristics of lean management will be described. 2. How do the features of the Dutch business system influence effective implementation of lean management? This question links the features of the business system in the Netherlands to the characteristics of lean management. This question makes clear whether the business system in the Netherlands facilitates effective implementation of lean management in organizations. 1.4 Research Design and data collection Firstly, this study is a literature review on the effective implementation of lean management by taking an institutional perspective, more specifically a business systems approach. It makes use of secondary data sources to answer the problem statement. The advantage of a literature review is that it ensures no important variables are overlooked during the definition of the problem (Sekaran Bougie, 2010). A limitation of the literature review is that it requires a lot of finesse to identify useful resources (Marrelli, 2005). This study contains old as well as new literature. However, it is possible that data becomes obsolete; therefore the main focus will be on quite recently published literature. Secondly, little research has been done on how formal, societal institutions influence the effective implementation of lean management. Therefore this thesis is an exploratory research since it tries to better comprehend the nature of the problem, which is in this case the fit between insti tutions and lean management (Sekaran Bougie, 2010). Thirdly, this is a causal study that indicates the causal relationship between institutions and the effective implementation of lean management. 1.5 Structure of the thesis In the coming chapters the research questions mentioned earlier will be answered. In the next chapter the institutional features of the Netherlands and the Dutch business system are discussed. In the third chapter Lean management and its characteristics are defined. Thereafter, in the fourth chapter, the fit between on the one hand lean management and on the other the institutional features and the business system in the Netherlands will be discussed. Thereafter this study is able to tell to what extent the Netherlands facilitate a societal, institutional environment to effectively implement lean management in organizations. In the last chapter the thesis is completed with a conclusion, which discusses some limitations of this study and recommendations for future research are given. 2. The Dutch institutional environment Whitley (1999) argues that institutions are significantly influenced at the national level. This chapter will make clear that nations differ from each other because of different institutional features. There are e.g. institutional differences between countries with regard to the financial system (capital-based vs. credit-based), the regulation of markets, and ownership coordination. These different institutional features have as a consequence that nations have different forms of economic organization (business system) that fit with their institutional environment. Hereafter, the existence of institutions is explained. Furthermore, a clear overview of the four crucial institutions and their features will be given and the characteristics of business systems are discussed. Lastly, the Dutch institutional features and the characteristics of the Dutch business system are identified. 2.1 The existence of institutions Why do institutions exist in the first place? According to North (1993) human beings do not make rational decisions because they make decisions based on restricted information and furthermore they do not have the mental capacity to do this. In order to be able to structure interaction between human beings and thereby lowering the transaction costs between them, people have developed institutions. Thus, they are developed by people to diminish uncertainty by constraining human interaction (North, 1993). 2.2 Four crucial institutions Whitley (1999) has identified four formal, societal institutions, which are also interconnected to each other, that are crucial for organizing an economy (see figure 2). These institutions are identified as the state, the financial system, the skill development and control system, and trust and authority relations. Whitley (1999) selected these institutions because in his view they control access to critical resources, particularly capital and labor. Some examples may show what kind of features these four institutions have in the Netherlands. Furthermore, they show how these four institutions operating at the national level affect organizations (Tempel Walgenbach, 2007). 1. According to Whitley (1999) the first important feature of the state is to what degree it dominates the economy and shares risk. This determines to what degree organizations are dependent on policies and actions of the state. Secondly, there are significant differences to what extent nations regulate markets, such as the labor market (Koen, 2005). According to van Iterson and Olie (1992) labor mobility in the Netherlands tend to be quite low because of market regulation in the labor market. They state that changing jobs often causes a pension loss and furthermore the majority of promotions are done internally, thereby reducing the labor mobility of Dutch employees. Lastly, enmity of the state to intermediary associations, which could facilitate collaboration between firms, is considered as an important feature (Whitley, 1999). 2. The second institution Whitley (1999) discusses is the financial system. He makes a distinction between capital-market based financial systems, which depend on the market to effectively allocate resources, and credit-based financial systems, which mainly depend on banks to effectively allocate resources. Although most nations more or less fit into either of these financial systems, the Dutch financial system does not fit into one of these. Like in more European countries such as Germany, not only shareholders, but also other stakeholders are taken seriously. However, it is rather unique that Dutch organizations are also depending on the relatively well-developed capital-market in the Netherlands (van Iterson Olie, 1992). Here a limitation of the business systems approach is identified, because Whitley (1999) suggests that organizations in a specific business system are largely credit financed or capital financed. In the Netherlands and in some other countries, organizations make use of a mix of credit and capital finance. 3. Whitley (1999) states that the third key institution for structuring a business system is the skill development and control system. Here attention is given to how the educational system and the training system develop skills (Koen, 2005). It also focuses on to the functioning of the labor market, in particular the way it is organized and controlled. Whitley (1999) argues that national institutions differ from each in the strength of independent trade unions and labor organizations and in the centralization of bargaining power.In the Global Competiveness Report 2010-2011, written by Schwab, the Netherlands score very high on the quality of the educational system and on the extent of staff training (Schwab, 2010). This indicates that the Netherlands have a very well educated and trained workforce. Schwab (2010) also reports that wage determination is done at a high level of centralization in the Netherlands, which is an indication for high centralization of bargaining in the Netherl ands. Lorenz and Valeyre (2005) argue that higher-level forms of coordination are still important for determining wages in the Netherlands. 4. Lastly, Whitley (1999) considers authority and trust relations as a crucial institutional feature because it influences the governance structure of organizations. Hotho (2009) states that these relations influence how employees and employers interact with each other and how exchange relations between firms are structured. Both Hotho (2009) as Snderskov (2008) argue that the level of generalized trust appears to be relatively high in the Netherlands. Meaning that Dutch people are more likely to trust each other, even if they do not know each other. A high level of generalized trust facilitates transactions between people or organizations. 2.3 Business systems approach To analyze the societal, institutional environment in the Netherlands this study makes use of the business systems approach. In academic literature this approach is used for analyzing organizations from an institutional perspective. By using this approach salient features of the Dutch business system can be identified. As mentioned earlier, a business system is seen as particular ways of organizing, controlling and directing business enterprises that become established as the dominant forms of business organization in different societies (Whitley, 1992b, p. 125). Below the features used by Whitley (1999) to distinguish business systems will be discussed (see table 1). Thereafter we will stipulate the unique characteristics of the Dutch business system. 2.3.1 Work management and employment The first characteristic is to what extent employee-employer interdependence is long-term (Whitley, 1999). The question here is whether organizations rely on the external labor market for employees or that employees are trained and have developed skills within an organization, thereby increasing interdependence on each other. The second characteristic is to what extent employers delegate decision-making to employees and to what extent employers trust in them (Whitley, 1999). 2.3.2 Non-ownership coordination The second feature is the way non-ownership activities are coordinated between organizations, thereby taking a closer look at the relationships between organizations (Whitley, 1999). Whitley (1999, p. 37) identified extent of alliance coordination of production chains, the extent of collaboration between competitors, and the extent of alliance coordination of sectors as the key characteristics of a business system concerning non-ownership coordination. 2.3.3 Ownership coordination Whitley (1999) argues that the first characteristic of ownership coordination is the way ownership is coordinated, which is about the relationship between managers and owners. Whitley (1999) identified three different ways for coordinating ownership: By direct control, organizations are controlled by their managers, who usually also are the owners. By market control, organizations are controlled by their shareholders (owners). By alliance control, in which both owners and managers are involved in taking decisions with respect to managing organizations. Koen (2005) argues that the second and the third characteristic are the degree of the organizations integration into other production chains and sectors, which basically is the degree of horizontal and vertical diversification of organizations. Characteristics Work management and employment Employer-employee interdependence Delegation to, and trust of, employees Non-ownership coordination Extent of alliance coordination of production chains Extent of collaboration between competitors Extent of alliance coordination of sectors Ownership coordination Primary means of ownership control (direct, alliance, market contracting) Extent of ownership integration of production chains Extent of ownership integration of sectors Table 1: Key characteristics of business systemsSource: Whitley (1999, p. 34) 2.4 Studies about the Dutch business system Studies have come to different conclusions about the characteristics of the Dutch business system (Brookes, Brewster Wood, 2005; Hotho, 2009; Whitley, 1999). Whitley (1999), founder of the business system approach, concluded that the Netherlands are part of the collaborative business system, which is one of the six ideal business systems identified by him. They are ideal in a sense that, because of the interconnection of business system characteristics, only six business systems are likely to sustain for a longer period because its characteristics are balanced. According to Whitley (1999) collaborative business systems organizations are characterized by alliance control, high vertical integration and limited horizontal integration. Furthermore, he stated that organizations in this business system have limited vertical alliances and few horizontal alliances, but there is a lot of collaboration between competitors. Lastly, he states that there is some employer-employee interdependence ; in addition, there is high delegation to employees and high trust of employees. Hotho (2009), although agreeing on most institutional features, does not believe that the Netherlands fit into the collaborative business system because he has found evidence that the Netherlands have different institutional features as Whitley (1999) argues. Besides that, Hotho (2009) claims to have evidence that the Dutch business system is a distinctive one and is likely to sustain for a longer period. Hothos research seems to be more credible than Whitleys with regard to the Netherlands, because Hotho investigated the Netherlands much more thoroughly than Whitley did. Furthermore, he found empirical evidence confirming these institutional features. His research is also more recent, making it more reliable. Most importantly, Whitley argues in his research that the Dutch institutional environment is very similar to the German institutional environment. Although they have many similarities, there are some major differences which are better recognized and empirically supported by Hot ho (2009). This study takes this into consideration when finding contradicting information between the two researches. 2.5 Characteristics of the Dutch business system 2.5.1 Work management and employment Hotho (2009) and Whitley (1999) both agree that the generalized trust in formal institutions is relatively high in the Netherlands. Snderskov (2008) also shows in his article that the Netherlands, together with most Scandinavian countries, have a relatively high level of trust compared to other European countries, which fits with the results of Hothos (2009) paper. Moreover, the two studies agree that Dutch employers are very willing to delegate authority to employees. According to Schwab (2010) Dutch employers have a high willingness to delegate authority to employees; in fact, the Netherlands belong to the top five countries. Brookes et al. (2005) argue that in the Netherlands there is some employee-employer interdependence. However, this study concludes that there is a considerable commitment to each other. Firstly, according to Schwab (2010) the Netherlands have an excellent education and training system which according to Whitley (1999) has a positive influence on the employee-employer interdependence. Higher skilled employees are less easily replaced by new ones because of their acquired specialized skills. Secondly, Hotho (2009) argues that in the Netherlands unions are strong and thereby enhance the development of long-term interdependency of employees and employers. Lastly, van Iterson and Olie (1992) state that commitment and loyalty to an organization is rewarded in the Netherlands, which also increases employee-employer interdependence. However, employer-employee interdependence is not as high as in countries such as Japan, where it is normal for employees to stay at the same company all their w orking life. 2.5.2 Non-ownership coordination Alliance forms, both horizontally as vertically, are not common in the Netherlands according to Whitley (1999). He argues that in general, alliance forms are discouraged by a dominant and risk-sharing state because this threatens state dominance. Van Iterson and Olie (1992) and Klaver and Ypma (2006) show that state involvement and risk sharing in the Netherlands has always been low because of the consensus-based approach and international focus of Dutch organizations, thereby encouraging alliance forms. This is not consistent with the findings of Whitley (1999), who believes that in collaborative business systems there is considerable state dominance. However, the research of van Iterson and Olie (1992) seems to be a more reliable since it is much more focused on the specific institutional environment in the Netherlands. Besides that, Whitley (1999) acknowledges that high trust in formal institutions encourages alliance forms, as organizations are better able to rely on their commit ments to each other because they have trust in the institutions that oversee these commitments. In accordance with Whitley (1999), Snderskov (2008) argues that the general trust of Dutch citizens in formal institutions is high. Steijn (2001) argues that there are some alliance forms in the Netherlands, but that the number is growing steadily. Poot, Faems and Vanhaverbeke (2009) validate that the number of horizontal and vertical collaborations between is increasing. However, with empirical evidence they show that there is considerable vertical collaboration in the Netherlands nowadays. As in the case of collaboration between competitors, an increasing trend is found in the Netherlands (Steijn, 2001; Poot et al., 2009). Whitley (1999) argues that collaboration between competitors in the Netherlands is high because the Dutch institutional environment encourages collaboration between competitors. 2.5.3 Ownership coordination Hotho (2009) has shown in his paper that in the Dutch state is not dominant and has low willingness to share risk. Van Iterson and Olie (1992) argue that high trade and export and the consensus-based approach in the Netherlands have kept Dutch state dominance low. Furthermore, Hotho (2009) has shown that the strength and incorporation of intermediaries is considerable in the Netherlands. Van Iterson and Olie (1992) argue that there is considerable vertical and horizontal ownership integration in Dutch organizations, but it is quite instable. The Dutch structure of the economy is characterized by few, but very big multinationals complemented with an enormous number of small firms and very few medium-sized enterprises, thereby causing an instable environment for organizations to integrate ownership in other production chains and sectors (van Iterson Olie, 1992). The information in the literature on the formal regulation of markets is contradicting. Whitley (1999) argues that there is high market regulation in the collaborative Dutch business system. However, Hotho (2009) has found evidence for low market regulation in the Netherlands. In contrast, Schwab (2010) shows that there is some or maybe considerable market regulation. The Global Competiveness Report 2010-2011, written by Schwab, appears the most reliable source since it based on multiple indicators (Schwab, 2010). The Dutch labor and financial market are quite regulated, whereas the state regulations give a lot of freedom to the Dutch organizations. An overview is given in table 2. Characteristics Degree Work management and employment Employer-employee interdependence Considerable (declining) Delegation to, and trust of, employees High Non-ownership coordination Extent of alliance coordination of production chains Considerable (growing) Extent of collaboration between competitors Some (growing) Extent of alliance coordination of sectors Some (growing) Ownership coordination Primary means of ownership control (direct, alliance, market contracting) Alliance Extent of ownership integration of production chains Some/Considerable (instable) Extent of ownership integration of sectors Some/Considerable (instable) Table 2: Key characteristics of business systems of the Dutch business system 3. Lean management Nowadays lean management is a well known production philosophy all over the world. The development of lean management started in the famous Toyota Motor Company. Thereafter, Japan got acquainted with it and later the rest of the world. In short, lean management is about reducing waste as much as possible and about doing things simple and thereby constantly improving those things (Slack et al., 2007). 3.1 A definition of lean management Although lean management has its roots in the car industry and therefore is extensively being used in the manufacturing industry, Womack, Jones and Roos (1990) argue that lean management can be applied anywhere in the world. Because of its fundamental ideas with regard to managing operations, lean can also be seen as a philosophy which can be implemented in other countries, industries and businesses. It thereby shows the relevance of this study, since it investigates the role of institutions in the effective implementation of lean management in the Netherlands. It also shows the confusion concerning the different terminology with regard to lean. In their search for a clear definition for lean management Shah and Ward (2007) argue that the lean philosophy and the lean production method are not similar. They state that the lean philosophy is more about the theoretical principles of lean, which are mutually reinforcing, whereas the production method is about practical tools and techniqu es, e.g. JIT, which are visible in an organization (Shah Ward, 2007). Since this study investigates the fit between the Dutch institutional environment and the characteristics of lean management, it will focus more on the principles of lean philosophy/management. In other words, the study focuses more on the lean philosophy instead of the lean production method. This study therefore needs to identify salient characteristics of lean management in order to be able to compare it with the Dutch institutional features. Studies have used many descriptions for defining lean (Shah Ward, 2007). Shah and Ward (2007) argue that ambiguity in defining lean is caused by its long evolvement. Furthermore, they state that it is often mistaken with other approaches and that there is a disagreement over the exact content of lean management. In search for a suitable definition for lean management, Warnecke and Hser (1995, p. 38) came up with the following definition: a system of measures and methods which when taken all together have the potential to bring about a lean and therefore particular competitive state throughout the entire company. 3.2 Key elements of lean management 3.2.1 Elimination of waste According to Harrison (1992) the three key elements of the lean philosophy are: elimination of waste, involvement of everyone, and continuous improvement. Harrison (1992) argues that elimination of waste is the most important aspect of the lean philosophy. According to the lean philosophy eliminating waste is similar to eliminating everything which does not add value to a product, process or service. According to Hines and Rich (1997) important sources of waste are inventory, waiting time, transportation, inappropriate processing, over production, unnecessary motions, and defectives. Inventory e.g., is seen as a source of waste since it only adds costs and no value. Furthermore, problems will not immediately appear and throughput time is slow if inventory is high. By eliminating waste, all activities that do not add value for the costumer are eliminated. Hereby organizations remove activities that the costumer is not willing to pay for, which in the end saves costs for the organizati on (Sahoo, Singh, Shankar Tiwari, 2008). Furthermore, Womack and Jones (1996) argue that by eliminating waste the flow of goods or services is increased, allowing a lean organization to faster respond to changing customer demands, thereby making it also more flexible. 3.2.2 Continuous improvement Secondly, continuous improvement of products and processes, also known as kaizen, is argued to be of crucial importance (Harrison, 1992). Bhuiyan and Baghel (2005) see it as a culture in which everyone is involved to make improvements in order to eliminate waste in all parts of the organization. In this culture, performance targets are then also increased, making it necessary to keep improving. Bhasin and Burcher (2006) therefore argue that the ideal of continuous improvement is also the reason why many authors have stressed the point that implementation of lean management in an organization takes time. Continuously improving will eventually lead to improved quality. In lean management, it is essential that these quality improvements are perceived as added value by the customer. 3.2.3 Involvement of everyone Thirdly, everyone in a lean organization is encouraged and involved to look for improvements and tackle problems, with the goal of (continuous) improvement of processes and products and the elimination of waste. Employees are expected to think actively about solutions of encountered problems. Cappelli and Rogovski (1998) argue that employee involvement is increased by giving employees more responsibilities and authority, which is important in a lean organization to e.g. tackle problems instantly. They also have the opportunity to give suggestions for improvements. Hereby the organization hopes that employees in a lean organization are more committed to their organization. Training and skill development encourages employees to be more involved in team-based problem solving and doing multiple tasks, making them more skilful and flexible. However, not only employees are involved, also suppliers and customers are involved in a lean organization to improve operations and eliminate waste. 3.3 Implementation of lean management Bhasin and Burcher (2006) state that numerous academic articles have found empirical evidence for the increased competitiveness of organizations after the lean philosophy was implemented. However, they also state that implementing the lean philosophy is experienced as very difficult, which resulted in the low rates of successful implementation. According to Liker (2004) the lean philosophy is a way of thinking, in which workers are the most valuable resource of an organization. In an organization where lean management is being implemented, workers should no longer be seen as a pair of hands, but as analyzers and problem solvers (Liker, 2004). Scherrer-Rathje, Boyle and Deflorin (2009) argue that implementing the lean philosophy, the human side of lean, is a long-term process which requires full involvement of both managers as employees. If managers are not committed to the lean philosophy, chances of failure increase dramatically (Scherrer-Rathje et al., 2009). Hence, successfully im plementing lean management is highly dependent on the involvement and commitment of everyone in the organization. 3.4 Coordination characteristics of lean management 3.4.1 Delegation of authority to employees Delegation of authority to employees is considered as an important factor of successful implementing lean management in an organization (Scherrer-Rathje et al., 2009). Fairris and Tohyama (2002) argue that giving employees more responsibility should lead to quality improvements of products and higher productivity. Employees with more delegated autonomy will develop unique knowledge in their work field and are therefore better able to tackle problems in their work field than their managers. This idea of delegating authority to employees is crucial for the lean philosophy. Furthermore, it is widely recognized that multifunctional teams are important in the lean philosophy (hlstrm, 1998). In a lean organization, employees working in a team should be capable of performing multiple tasks in this team and even take over work from other team members. Each team is responsible for their work and they are therefore given some form of authority by their managers. It is therefore clear that not only at an individual level, but more importantly on a team level, employees are delegated authority in order to improve productivity and reduce waste. 3.4.2 Training of employees Part of the lean philosophy is constantly improving operations, which will lead to quality improvements. It is essential in the lean philosophy that these quality improvements add value for the costumer. Zu, Fredendall and Douglas (2008) argue that highly trained employees will most likely improve operations and thereby add value to products, services, and processes. Zu et al. (2008) found empirical evidence that highly trained employees had more awareness of quality related issues and they were able to make better decisions. Furthermore, lean management is known as a flexible production method. It allows organizations to be more flexible in reacting to the demands of costumers and to the changing circumstances in the economic environment, which eventually reduces waste. According to Fane, Vaghefi, van Deusen and Woods (2003) argue that organizations can be more flexible, when they have cross-trained employees who are able to perform multiple tasks. Fane et al. (2003) argue that employees must be highly trained and skilled in order to be able to perform multiple tasks in the organization. Besides that, employees in a lean organization should be able to identify and resolve existing and emerging problems, which will help to reduce waste (Vidal, 2007). In order to do this, organizations should have highly trained and skilled employees who are able to do this. 3.4.3 Supplier networks In lean management it is important to have tight relations with your suppliers and customers. It is of crucial importance for a lean organization to have reliable, trustable suppliers where it can depend on (Bhasin Burcher, 2006; Shah Ward, 2007). Information sharing between the supplier and the lean organization is very important to effectively cooperate. Lean organizations coerce that they are being supplied with flawless goods or services that meet the requirements of the organization (Warnecke and Hser, 1995). On the one hand it will therefore focus on fewer suppliers; on the other hand this will result in tight long-term relationships with them, thereby increasing involvement between the supplier and the lean organization. It will then not only be able to (continuously) improve collaboration with its suppliers, but the organization will then also be able to reduce or eliminate waste by this improved collaboration. The lean organization is e.g. able to reduce waiting time of su pplies and avoid unnecessary inventory by better coordinating the flow of supplies, so that they will come at the right place, at the right time. Furthermore, by tightly collaborating requirements of the supplies can be continuously improved to the ever increasing standards of the lean organization, resulting in a reduced amount of defects. Besides that, through intensive cooperation with its suppliers, a lean organization is able to ensure itself already in the design state of a service or good of a functional, reliable and simple design (Levy, 1997). Intensive collaboration and coordination with the supplier will in the end lead to increased customer-value in the final product through elimination of waste, involvement of everyone, and continuous improvement. 4. The role of the Dutch business system in effectively implementing lean management In this chapter, the features of the Dutch business system are linked to the characteristics of lean management. First, an introduction about the Dutch society with respect to lean management is given. After that, this study shows to what extent the features of the Dutch business system fit with the characteristics of lean management. 4.1 Introduction In Dutch organizations learning is promoted, which makes them very responsive to environmental changes (Lorenz Valeyre, 2005). This is also necessary in the Netherlands, because it is a small and open economy. Furthermore, Schwab (2010) argues that Dutch organizations are very competitive because of their unique capability to absorb new technologies that increase productivity, thereby making the Netherlands one of the most competitive countries in the world. Bhasin and Burcher (2006) indicate that lean management, if implemented with complete commitment, increases productivity spectacularly. Most likely Dutch organizations will not have major implementation problems with lean management, because they are experienced in adapting and learning. What further highlights the Netherlands is its consensual decision-making, also known as the polder model. The aim of the polder model is to reduce state regulation through consensual agreements (Klaver Ypma, 2006). Consensus is highly valued in the Netherlands and therefore also in Dutch organizations, which has resulted in a lot of compromises (van Iterson, 1997). According to Liker (2004) Toyota, the company in which lean management was invented, also extensively uses consensual decision-making to come to quality decisions. Everyone involved in the decision-making process can first give their opinion about it. After all opinions have been taken into consideration most likely a consensual decision will be taken at Toyota. At Toyota consensus is reached in a slightly different manner as in the Netherlands, but both Dutch organizations as Toyota trust on consensual decision-making to come a quality decision. This again shows that implementation of lean management in Dutch organizati ons could have a future. In the next part, this study investigates the fit between lean management and the Dutch business system more thoroughly. 4.2 Fit between the Dutch business system and lean management First of all, it should be noted that not every feature of the business system will extensively be linked to lean management because of the lack of relevance. Therefore this part of the thesis will look at the relevant features of the business system that can be linked to the characteristics of lean management. 4.2.1 Work management and employment vs. lean management As mentioned before, Liker (2004) argues that in the lean philosophy workers are seen as the most important resource. Also in the Netherlands, where considerable employer-employee interdependence is present, employees are regarded as a very important resource. Workers in a lean environment should be capable of doing multiple tasks and work in multifunctional teams. In these teams they are delegated relatively much autonomy from management in decision making and problem solving. Lean organizations are in need of highly trained and skilled employees who are able to work according to this philosophy (Fane et al., 2003). There appears to be a fit with the Dutch institutional environment, which has an excellent educational and training system, so that Dutch organizations have access to highly skilled workers (Schwab, 2010). Besides that, Schwab (2010) shows that Dutch employees are to a considerable extent trained further within the organization, resulting in well-trained workers. Zu et a l. (2008) argue that well-trained workers will most likely improve operations, which is essential in lean management. Lorenz and Valeyre (2005) and Schwab (2010) indicate that the Dutch labor market is quite regulated. The restricted labor market has led to low labor mobility in the Netherlands (Van Iterson Olie, 1992). The state has constrained labor mobility by imposed laws; laws that e.g. induce pension loss in case you change jobs or make it difficult and expensive to fire personnel have caused labor mobility to be low. This has supported Dutch organizations to invest in skills and training for their personnel. All together, this also has led to considerable employer-employee interdependence in the Netherlands. Besides that, the imposed laws that constrain the labor market have led to a relatively high job security for employees in the Netherlands. This results in the long run in more employee commitment and involvement in the companys goals (Dessler, 1999). Schrerrer-Rathje et al. (2009) emphasize that implementing lean management is a long-term process which requires full involvement and com mitment of everyone. It therefore appears personnel who enjoy relatively high job security are better suited to work in lean organizations (Womack et al., 1990). Furthermore, delegating responsibility to employees is crucial to effectively implement lean management (Scherrer-Rathje, 2009). Fairris and Tohyama (2002) argue that more responsibility should lead to increased productivity and quality improvements. Schwab (2010) has found evidence that Dutch employers have a high willingness to delegate authority to employees. Also Lorenz and Valeyre (2005) argue that most Dutch organizations demand high levels of autonomy and competence from their employees to solve problems and deal with complex tasks. Furthermore, a high level of trust is present, which is necessary for organizing work this way. This again is an indication that Dutch organizations have an institutional environment to effectively implement lean management. 4.2.2 Non-ownership coordination vs. Lean supplier networks In lean management it is important to effectively cooperate with suppliers. Womack et al, (1990) already pointed out that Toyota, the company that invented lean management, did not want to vertically integrate fully with its suppliers, but it also did not want completely independent suppliers. To effectively implement lean management in Toyota, it needed quasi-independent suppliers (Womack et al., 1990). This way Toyota could closely cooperate with their suppliers. Moreover, in lean management it is of high importance to develop supplier relations by collaborating and making alliances (London Kenley, 2001). To achieve these collaborations and alliances with suppliers, trust is required (London Kenley, 2001). As indicated before, a high level of trust is present in the Dutch society, making it more likely that these collaborations and alliances are achievable. Poot et al. (2009) has indeed found an increasing trend in the amount of vertical collaborations in the Netherlands. Besides that, Schwab (2010) indicates that the quality of local suppliers in the Netherlands is very high, making successful collaborations more likely. All these factors reinforce the successful implementation of lean management in the Netherlands. However, more vertical collaboration is needed to improve implementation of lean management in Dutch organizations. This will eventually lead to more clusters and subsequently increased productivity. In Japan, where lean management has been developed, cluster development is the highest of the world (Dutta Mia, 2009). Dutta and Mia (2009) argue that cluster development in the Netherlands is rather high, but not as high as Japan. In this aspect, the Netherlands do not have the most effective institutional environment for lean management. Furthermore, alliances with competitors are getting increasingly important in the Netherlands, but the number of horizontal collaborations is not very high (Poot et al., 2009). In lean organizations it is not uncommon to work together with your competitors. In the automobile manufacturing industry, in which the lean philosophy has been successfully implemented, there are multiple collaborations between competitors (Perez Sanchez, 2002). E.g., BMW and PSA (Peugeot and Citron) have collaborated in the development of a new engine. Furthermore, information sharing and being transparent is meaningful in a lean organization. Lean organizations do not believe that keeping unique information will lead to a sustainable advantage, but rather that successful collaborations are the key to keep a sustainable advantage. Alliances, not only with suppliers and customers, but also with its competitors are important to a lean organization. However, it should be stated that vertical collaborations are more important to a lean organization than horizontal collaborations because the organization will benefit more from these collaborations in the long run, since they are in the same value chain (Hitt, Ireland Hoskisson, 2009). Clusters facilitate effective implementation of lean management in organizations. Collaborations between sectors are not done in these clusters, because they belong to different clusters or networks, and are therefore rather uncommon in the Netherlands and in lean organizations. However, the invention of the Senseo is an example of this. The product has been developed by a collaboration between Philips and Douwe Egberts, which belong to completely different sectors. 4.2.3 Ownership coordination vs. Lean supplier networks Like Japan, where lean management has been invented, the Netherlands has a form of alliance control to coordinate ownership between owners and managers (Whitley, 1999). Just as in the case of Toyota, the use of consensus is conventional in the Dutch organizations. Shareholders should reach a consensus with stakeholders, in order to be able to come to a decision. In this aspect, the Netherlands have a comparable institutional environment as Japan, where lean management has been successfully implemented. The few, but very large businesses in the Netherlands, are mainly responsible for the instable vertical and horizontal integration in the Netherlands. However, empirical data about the exact degree of horizontal and vertical integration in the Netherlands are missing in the existing literature. In lean management collaboration is more important than integration. Therefore the degree of horizontal and vertical integration should not be too high, so that lean organizations are able to concentrate on its core competences. However, there is still some integration in lean organizations, especially in the form of cross-shareholding. This is rather uncommon in the Netherlands, which is caused by the restricting laws imposed by the government. Hostile takeovers are rare in the Netherlands and furthermore the Dutch Competition Authority is very strict in safeguarding healthy competition in the Netherlands (Roosenboom van der Goot, 2003). Takeovers and mergers are therefore carefully being ob served, to prevent that organizations become too powerful. Although, it should be stated that the relative number of mergers and acquisitions in the Netherlands is still higher than in most EU countries, in which the relatively well-developed capital market plays a role. 5. Discussion This concluding chapter draws conclusions and discusses some limitations. Thereafter the chapter makes suggestions for future research and it provides some recommendations. 5.1. Conclusions From this thesis it can be concluded that the Netherlands facilitate a societal, institutional environment to effectively implement lean management. Not all features of the Dutch business system match the characteristics of lean management, but overall most features of the business system are in line with the characteristics of the Dutch business system. Firstly, the human side of lean is in line with the Dutch institutional environment, which is the basis for the organization of an economy. The organization of the Dutch economy, with regard to employment relations and work management fits very well to the characteristics of lean management. Employer-employee interdependence is rather high in the Netherlands. Also delegation to employees and trust of employees is very high in the Netherlands. These features are of high importance to effectively implement lean management because employees should be able to tackle problems, solve problems and work in multifunctional teams with a rather high degree of delegated authority. These features of the Dutch business system are mainly being supported by the highly developed skill and training system, considerable regulation of the labor market by the state, and reliable trust relations in the Netherlands. Secondly, long-term reliable alliances are necessary to effectively implement lean management, especially alliances with customers and suppliers. By tightly collaborating waste can be eliminated, problems can be tackled and solved, and quality can be improved. The degree of vertical collaboration in the Netherlands should improve to better fit with lean management. Although, it should be stated that the degree of vertical collaboration is quickly growing in the Netherlands, just as the degree of horizontal collaboration and the degree of collaboration between sectors. It is necessary that these degrees of collaboration increase in the Netherlands, so that lean management can be implemented more effectively from an institutional perspective. However, with the current degrees of collaboration in the Netherlands it is not insurmountable to effectively implement lean management. Furthermore, Steijn (2001) argues that collaboration is getting more structural in the Netherlands, which posi tively influences effective implementation of lean management. According to Whitley (1999) the well-developed trust relations and the low state dominance and risk sharing of the state in the Netherlands should support alliances. The way to coordinate ownership does not seem to be important for the effective implementation of lean management. Although, it has to be recognized that e.g. Toyota and other Japanese companies have an alliance form to coordinate ownership, just as all Dutch companies have. So there appears to be a fit between that. Furthermore, we conclude that horizontal and vertical integration are not that important anymore in the Dutch business system, the emphasis nowadays is on collaborating. Just as in lean organizations, the emphasis is on collaborating and not on integration. However, there is still some vertical and horizontal integration present in lean organizations and in Dutch organizations. 5.2 Limitations The primary limitation of this thesis is that it is solely based on secondary data; no research has been conducted on the influence of business systems on the effective implementation of lean management in Dutch organizations. Using primary data would make this study more reliable. Furthermore, research about the extent of horizontal and vertical integration in the Netherlands is very scarce, thereby making it difficult to draw conclusions with regard to this aspect. Besides that, it is hard to measure to what extent the Dutch business system and Dutch institutions influence the degree of ownership integration because ownership integration is not limited by national borders and is therefore also dependent on other national institutional environments, while this research focuses on the Dutch institutional environment. It is not uncommon that ownership integration in the Netherlands goes across borders, because it is a small and open economy. The same problem applies to the degree of collaborations. Besides that, the thesis is quite dependent on the findings of Whitleys (1999) business systems approach. It therefore depends heavily on the features of a business system and the institutions identified by Whitley. Although the approach is widely recognized and published, not that many academic authors have made contributions to this approach. Furthermore, there are contradicting findings with regard to the Dutch institutional environment, making it hard to get a clear view of it. 5.3 Future research and recommendations Little research has been done in this field of investigation, thereby making this thesis an exploratory study. Therefore a lot of future research is necessary to get a better picture of the Dutch institutional environment and the features of the Dutch business system. In particular, more research is needed with regard to vertical and horizontal ownership integration in the Netherlands. Then more reliable conclusions could be drawn about the effective implementation of lean management in the Netherlands. Furthermore, lean management researches in the Netherlands that focus on industries and sectors are abundant; however, research about lean management in the Netherlands as a whole is very scarce and is in need of future research. If lean management is effectively implemented it increases competitiveness (Bhasin Burcher, 2006). This thesis concludes that organizations should definitely consider implementing lean management because the institutional environment in the Netherlands facilitates its effective implementation. Organizations should recognize that the way the Dutch economy is organized in the Netherlands positively influences the effective implementation of lean management and it could thereby increase competitiveness.