Management SummaryStern Stewart Research // Volume 55

Originating with Toyota, the term “lean management” has become synonymous with efficiently organized production processes in all industries. With respect to the services of an organization, however, this approach is not widespread. Wrongly so. For while “lean” in the area of manufacturing has increased both productivity and the quality of the output, even in well-established organizations, the service functions are frequently only a third as productive, at best.
The reason is often the incorrect definition of roles and responsibilities inherent in the functions – producing a negative effect on dimensioning and output. Take Accounting and Finance for instance: It is not uncommon today to have most of their functions positioned as a “shared service.” Regardless of how effectively the shared service center actually is (capacity management, process design, quality, etc.); everything that typically remains in the holding company is not adequately scrutinized. Probably only a small share of 10-20% is actually officially handled, while the rest consists of expert services that have no place in a “Corporate Center” with its claim to leadership. On the contrary: this combination ensures that the function neither serves nor manages properly – thus not playing its role effectively. Three rules should be adhered to in order to establish organizations and services that are “lean”, in the best sense of the term, i.e., highly productive:

1. The holding company should focus on supervisory functions – thereby becoming sleeker (and at the same time stronger) 2. Based on this, the relationship between the holding company and the strategic business units should be designed to enable the latter to assume entrepreneurial responsibility with “top down” delegation of supervisory processes. 3. Expertise-driven functions should be bundled across all levels and converted into a critical mass with specialized know-how through the creation of so-called ‘Centers of Excellence’.