EFQM vs Lean Enterprise Model - Comparisons

Assessment of the interaction between the Business Excellence Model and the Lean Enterprise Model Introduction In

1991,

the

European

Foundation

for

Quality

Management

developed the European Model for Total Quality or as it was named later, the Business Excellence Model (BEM) as a management framework for improving business performance. At the same time, in the USA, the military aircraft industry was developing its own approach

to

business

performance

improvement,

the

Lean

Enterprise Model (LEM)1. The LEM, or Lean model, was introduced to the British military aircraft manufacturers in 1998 by the UK Lean Aerospace Initiative (UK LAI), an initiative analogous to the original US LAI. One of the UK LAI’s concerns is to explore the role that LEM can play for the British military aircraft industry. Since other models have been implemented before, it is important to identify the interaction that the Lean model could have with them. The EFQM model is one of the models that could possibly co-exist with the LEM in the future. This thesis is an effort of exploring this interaction and it is focused on the identification, assessment and analysis of the interaction if the two models were to be implemented in parallel, within the same management framework. The thesis objectives are focused on four main directions: 1. To produce a comparative study of the two models’ structures 2. To produce an analytical study of the two models interaction 3. To identify the characteristics of a framework on which a company could implement the two models in parallel

1

LEM is a copyright of the Massachusetts Institute of Technology (MIT)

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4. To suggest improvements for the parallel implementation process The

benefits

for

an

organisation

having

a

framework

for

implementing both models in parallel are that it would acquire a better understanding of the models’ interaction and therefore it would be able to implement them quicker and with less conflicts or duplications of activities. Moreover, the two models’ synergies could produce superior results. The implementation could also be more economical since only one team will be needed for carrying it out. The Lean Enterprise Model The LEM is the systematic framework for organising the findings of the US LAI’s research. It provides a codification of Lean principles and practices, as well as the basis for integrating them within a framework that makes their relationships readily apparent. The model comprises six principles, twelve overarching practices and a number of metrics. The basic framework for the implementation of the model is its twelve practices: 1. Identify and optimise enterprise flow 2. Assure seamless information flow 3. Optimise capability and utilisation of people 4. Make decisions at lowest possible level 5. Implement integrated product and process development 6. Develop relationships based on mutual trust and commitment 7. Continuously focus on the customer 8. Promote Lean Leadership at all levels 9. Maintain challenge of existing processes 10.

Nurture a learning environment

11.

Ensure process capability and maturation

2

12.

Maximise stability in a changing environment

An organisation can implement the LEM by following the directions highlighted from the above practices therefore the practices are, in a way, the enablers of the Lean model. The LEM has four basic functions. It can be used as: 

A Manufacturing Management Tool. It provides the

directions for managing the manufacturing aspects of the organisation 

Strategic Direction Tool. It is used for identifying

strategic directions for developing the organisation’s business policies and strategies 

An

Inside-Looking

Management

Framework.

It

provides a framework to the management team for identifying the organisation’s processes and functions 

A Performance Measurement Tool. It provides the

metrics for measuring the organisational performance The industrial paradigm: British Aerospace Plc The Military Aircraft & Aerostructures (MA&A) company of BAe Plc is currently the only UK manufacturer implementing the EFQM model and the LEM in parallel, within the same management framework. MA&A carried out a study concerning the relationship between the two models. The strongest connection identified was between the LEM practices and the criteria of Processes and Partnerships & Resources. The Lean practices having the highest impact on the BEM were to maintain challenge of existing processes, to promote Lean leadership, to develop relationships base on mutual trust and commitment and to implement integrated product and process development.

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In the MA&A approach it is highlighted that the EFQM model adopts a generic approach whereas the LEM is more manufacturing focused. The BAe experience shows how the models can co-exist within the same management framework with the LEM as a manufacturing management and strategic direction tool and the BEM as a self-assessment tool. Method of approach Business models, unlike the mathematical models, cannot be compared in a precise, quantitative way. The comparison can only be carried out through a qualitative method that inevitably is biased by the author’s perspective. Nevertheless, this method can still produce results that are indicative of the models’ interaction. The implementation of the models affects the organisational management activities therefore an estimation of how the models change the management activities provides a basis for assessing their interaction. The first step for identifying this interaction is to compare the models’ structures in order to find the common areas of activities that they affect. The structural comparison is followed by an interaction analysis and an assessment that is carried out through two perspectives. One looks at how the implementation of the LEM could affect a management perspective

environment considers

how

of

business

the

excellence.

satisfaction

of

The

the

other

business

excellence criteria could affect the parallel implementation of the Lean model. The structural differences of the models The EFQM model has a structure that could be described as “horizontal”, with two equal parts, the enablers and the results having the same overall weight of 50%.

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The Lean model’s structure is hierarchical, comprising different levels of information. At the top level, the principles and level metrics summarise the philosophy underpinning the model. At the bottom level of the structure stand the overarching practices as the means for implementing the LEM principles. The overarching practices are the enablers of the LEM and their implementation results are measured by the detailed metrics. Table 1. Differences between the Business Excellence Model and the Lean Enterprise Model

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Business

Excellence

Lean Enterprise Model

Model “Horizontal”,

balanced

Hierarchical structure

structure The weight of importance is

There

balanced

between the elements of the

between

the

is

no

evaluation

enablers and the results

model

Affects possibly all areas of

Affects mainly the strategic,

activities

manufacturing

and

resources

management

such

as

including

issues

Environmental

or

human

H&S Management

areas

Approach is based on five

Approach is based on 12

enablers

results

overarching practices and 64

criteria and 32 sub-criteria

supporting practices and as a

and gives general directions

result is more detailed than

therefore is not very detailed

BEM

and

four

6

There is direct connection

There is no direct connection

between

between the practices and

the

business

enablers and their results

their results

Common scope of the models A parallel implementation of the two models may cause conflicts and confrontations, therefore it is wise for the implementers first to speculate and measure the models’ interaction and then proceed into actions. Figure 1. Structural comparison of the EFQM model and the Lean model Business Excellence Model

Lean Enterprise Model

Enablers criteria

Lean principles

Activity Orientation Enablers sub-criteria

Overarching practices

Organisational Management Activities

Results criteria

Level metrics and detailed metrics

Results Assessment Results sub-criteria

In the above figure is illustrated the way that the two models affect the organisation’s management activities. The models are placed in parallel so that their similarities are visible.

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The BEM’s enablers criteria and the LEM’s principles define the general directions that the strategic management should be aligned with. At a lower and more detailed level, the BEM’s enablers subcriteria and the Lean model’s overarching practices provide a more detailed orientation of what an organisation should do. The results are assessed against the BEM’s results criteria whereas in the LEM the performance is measured by the Lean metrics. Area of comparison The enablers sub-criteria are the part of the EFQM model that affects the organisation’s management activities in a way similar to the Lean overarching practices. The implementation of the Lean model is carried out through the implementation of the Lean practices. The BEM implementation is based on following the directions that the enablers sub-criteria highlight. Therefore, the activities that derive from the implementation of the Lean practices and the satisfaction of the BEM enablers sub-criteria, define a wide area of interaction between the BEM and the LEM. The thesis is focused on the interaction between the LEM practices and the BEM enablers sub-criteria because this interaction is happening at an operational level. Other interactions between the different levels of the models exist, as it is visible at figure 1, but do not directly affect the parallel implementation. The interaction analysis The organisation, for the implementation of the two models, undertakes some activities and actions in order to satisfy the models’ requirements. On this basis, when the two models are implemented in parallel they interact in four different ways and the author assesses the interaction by allocating a grade from 0 to 3. The assessment allocates arithmetical figures that reflect impact estimations and not mathematical results.

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The estimations are based on the logic of how the implementation of a LEM practice affects the implementation of the BEM sub-criteria and to which extent it satisfies their requirements. Moreover, the effect

of

how

the

business

excellence

culture

affects

the

implementation of the Lean practices is examined. When the two models share the same activities then the relationship has an “impact 3”. An example could be activities related to an employee-training scheme where both models could support such activities. When they share some activities and/or activities of the one model support the implementation of the other, the relationship has an “impact 2”. An example is when an activity initiated from BEM, like leaders supporting and communicating with the organisation’s people, assists the activities (caused by the Lean practice) of developing relationships based on trust and commitment. When the activities caused by the one model support the activities that satisfy the other model then the relationship has an “impact 1”. An example would be the assurance of information flow (in the LEM) and how this is supportive to the design of the organisational processes as this is defined in BEM.

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Types of relationship

Impact

Strong direct link

3

Some direct and/or indirect link

2

Indirect link

1

10

No connection

0

11

Interaction in Leadership The interaction between the two models relevant to leadership aspects is presented in table 2. The subtotals’ column is the impact of the LEM practices on the BEM sub-criteria. The subtotals’ row is the impact of the BEM criterion on the Lean practices. Table 2. Interaction analysis between the leadership subcriteria and the Lean overarching practices

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Lean Enterprise Model overarching practices

1

2

3

4

5

1

2 1

6

7

8

9

10 11 12 SUB-

1 2

1

2 3 2

5 9 4 2

TOTAL S

BEM 1a 1b 1c 1d

1 2

13

2

SUBTOTAL S

0

0

0

1

3

3

1

14

7

3

2

0

0

20

The strongest interaction between the two models occurs at the implementation of the management system and the involvement of the leaders in its development. The strongest impact of the BEM on the LEM is at the promotion of the Lean leadership at all levels (practice 8). Interaction in Policy & Strategy The implementation of the Lean practices satisfies to a large extent the requirements of the EFQM model of developing the policy and strategy based on the customers needs and expectations, on research and performance measurements and building the policy and strategy around the organisation’s key processes. Table 3. The interaction between the Policy & Strategy criterion and the Lean practices

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Lean Enterprise Model overarching practices

1

2

3

4

5

BEM 2a

2

2b

2e

2

7

1

3

8

3

3 1

2 1

1

10 11 12 SUB-

2

1

TOTAL S 7 8

2 3

2

16

9

3

1

2c 2d

6

5 9 4

SUBTOTAL S

2

3

0

1

3

1

6

17

2

5

2

3

5

33

Interaction in People In the illustration of the models’ interaction in table 4, it is clear that the LEM has a higher impact on the two first sub-criteria that relate to the people’s competencies and capabilities. Table 4. Interaction between the people sub-criteria and the Lean practices

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Lean Enterprise Model overarching practices

1 BEM 3a 3b 3c 3d 3e

2

3

4

5

3

1 2 1

3 3

6

7

8 1

9

10 11 12 SUB2 2

TOTAL S 7

1

8 4

2 2

2 2

19

4 4

SUBTOTAL S

27 0

0

0

3

4

4

0

20

1

0

4

0

5

The Lean model does not make any reference of the relationships between the organisation and its people. Therefore, it can cover only part of the BEM’s requirements. Lean manufacturing is a very demanding

manufacturing

system.

Working

with

minimum

inventories, continuously striving for perfection and fixing problems immediately as they occur are concepts that European workers are not familiar with. The approach of the EFQM towards the organisation’s people comprises concerns about the people and their relationship with the company. Therefore, it is more holistic and covers the needs of the European business in a more complete and satisfactory way than the LEM. Interaction in Partnerships & Resources The overall impact of the LEM on the EFQM criterion is high with its peak point at the Partnerships sub-criterion. Table

5.

Interaction

between

the

Partnerships

Resources sub-criteria and the Lean practices

21

&

Lean Enterprise Model overarching practices BEM 4a 4b 4c

1

2

2 2 3

2 1

4

5

6

1

3

7

8

9

2

10 11 12 SUB1

1 2

4d 4e

3

3

1 2

1

22

1 2 2 2

TOTAL S 12

2

8 7

3 1

6 7

SUBTOTAL S

7

6

1

0

4

3

0

23

2

2

2

7

6

40

The implementation of the Lean practices can cover most of the BEM’s requirements. The LEM provides more directions than BEM on how to manage the organisation’s partnerships and emphasises on the importance of the information management. Nevertheless, the systematic separation of different resources (information, finance, assets, technology and suppliers) in BEM, provides a framework for a better understanding and planning.

Interaction in Processes The illustration of the relationship between the BEM Processes criterion and the Lean practices in table 6 highlights the highest interaction between the two models. The highest impact of the LEM on the BEM criterion is on the designing and managing of the organisation’s processes. Also, a high impact exists in the area of satisfying the customers needs and expectations. The LEM practices that have the strongest relationship with the EFQM criterion are the implementation of IPPD and the focus on the customer. Table 6. Interaction between the Processes sub-criteria and the Lean practices

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Lean Enterprise Model overarching practices BEM 5a 5b 5c

1

2

2 1

1

4

5

2

3

6

7

8

1

2

1 1

5d 5e

3

1

9

3 3

2 2 3

3 1 2

25

10 11 12

2

SUBTOTAL 14 7

2

3 1

9 6 6

SUBTOTAL

3

3

1

2

7

3

7

2

3

2

5

4

42

The Lean metrics in the Business Excellence Model The Lean metrics is a measuring tool of the organisation’s performance against specified business indicators such as product development cycle time or number of organisational levels. These indicators

are

directly

connected

with

the

Lean overarching

practices. For example, the number of the organisational levels measures the company’s performance of promoting Lean leadership at all levels. The results of the performance measurement can be assessed against the performance targets set by the company and against the performance of other companies through benchmarking. A possible disadvantage of the LEM is the insufficient connection of the Lean metrics with the Lean principles. The performance measurement is not

linked with the

organisational

strategic

orientation but only with the Lean practices. The EFQM model is developed on a different structure that links the performance results with the enablers and therefore, provides the scope for reviewing the results and developing the policy and strategy according to them. The Lean metrics could be embedded in the organisational self-assessment process as detailed measures of specific business areas. The

Lean

metrics

are

connected

mostly

with

the

internal

performance indicators and the customer related performance indicators. There is a weak link with the people results and there is no link at all with the society results. Conclusions of the interaction between the BEM and the LEM

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Both models aim at the same target, the business performance improvement. Nevertheless, the BEM comprises aspects that are not covered by the LEM like people recognition, effective leadership or impact on society. LEM focuses its attention on the processes, the value delivered by the company, the information circulation and the flow of both information and value. The

EFQM

model

could

constitute

an

overall

management

framework, comprising all the organisational business aspects. The LEM could define the part of this framework that emphasises on the organisational processes and the value chain that they define. Both models could be used as strategic direction tools. The BEM’s advantage is that the enablers-results structure assists the process of developing the policies and strategies based on the performance results. Nevertheless, it does not offer any specific strategic directions. The LEM is more specific in providing strategic orientation to the company but its main disadvantage is that there is no systematic connection between the model’s principles and the organisation’s performance results. Therefore, the synergy between the LEM and the BEM could partly cover the company’s strategic management. It is arguable whether models with such generic features can define the strategic directions of a company, since these directions depend on

changing

factors

that

a

model

cannot

always

cover.

Nevertheless, the BEM and the LEM can imply general directions for the organisation’s policies and strategies because these directions are the result of intense industrial information gathering and they reflect current industrial needs. The cumulative results of the interaction analysis are illustrated in the following table. Table 7. Total results of the interaction analysis

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Lean Enterprise Model Practices

1

2

3

4

5

6

7

8

9

10 11 12

1

3

3

1

7

3

2

1

3

1

6

2

5

2

3

4

4

1

4

3

2

2

2

7

3

2

3

2

BEM Criteria Leadership Policy & Strategy

2

3 6

People Partnerships & Resources

7

6

1

Processes

3

3

1

2

28

7

Tota l 20

3

5

33

5

27

7

6

40

5

4

42

4

Total

12 12

8

7

21 14 14 14 13 12 15 20

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By examining table 7 it is easy to observe that the LEM’s impact is not equally distributed among the business excellence enablers. The enabler that seems to be most affected by the implementation of the LEM is the processes’ enabler whereas the least affected is leadership. Nevertheless, an adjustment should be made. All the numbers representing the impact of LEM practices on the BEM criteria are multiplied by the overall weight of each criterion in the BEM. This is done in order to assess the overall impact that the LEM practices have on the EFQM model. The adjusted impact factors would be:

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20 x 1.0

Leadership:

= 33 x 0.8

Policy & Strategy:

= 27 x 0.9

People:

= 40 x 0.9

Partnerships & Resources:

=

31

20 27 24 36

42 x 1.4

Processes:

=

32

59

Lean impact on the business excellence criteria From the results it is evident that the Lean practices’ application has the highest impact on the Processes enabler. That result is expected, since the LEM is a process-focused model. The second highest impact of the Lean model on the BEM enablers appears in the Partnerships & Resources criterion. This impact is caused mainly by the importance that both models allocate to the organisation’s partners. The least impact of the LEM is on the leadership criterion, followed by the people criterion. The Lean model does not give directions of what

the

organisation’s

leadership

should

do.

Although

the

implementation of the model is underpinned by the use of “middlelow” leaders, the model itself does not describe the way that these leaders should serve the company. The implementation of LEM cannot cover all of the BEM requirements. The LEM looks at the people as part of the organisation’s value chain. The BEM’s approach to people emphasises not only on the use of people’s abilities but also on the communication with the people and on their satisfaction. Like in the leadership criterion, the BEM criterion of people covers the Lean practices and enforces the implementation of the LEM. Business excellence impact on the Lean practices The strongest impact that the BEM has on the LEM is on the implementation of the integrated product and process development and the maximisation of the operations’ stability in a changing environment. The least impact of the BEM on the Lean practices is in optimising the capability and utilisation of people and in making decisions at the lowest possible level.

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The parallel implementation: Lean excellence The initial mixing of the BEM and the LEM could cause frustration and confusion. Then the organisation could get into a phase where the models are better understood and are used in a separate, not conflicting way. Finally the organisation might start integrating them in a holistic approach. In that case it implements the best features of the two models while it uses elements of other models too that suit the organisational needs, in order to serve the company’s needs. The Lean model could offer a company the focus that the BEM lacks, and the BEM could offer the framework for an overall organisational view and a basis for self-assessment that it cannot be provided by LEM. The LEM could initiate activities that satisfy the BEM’s requirements and therefore the Lean model could be a method of approach for satisfying the BEM requirements. A potential danger for a company implementing the models in parallel is to perform activities that satisfy only the Lean model. The implementation of LEM is a route-map for the organisation that shows the way to improvement and perfection. The BEM is a powerful tool that shows where the organisation stands on this map. Nevertheless,

LEM

covers

only

part

of

the

EFQM

criteria

requirements so it cannot be a complete map towards perfection. The BEM can highlight the weaknesses as well as the strong points that stem from the implementation of the Lean model. The full implementation of both models in parallel covers possibly all the areas of activities that an organisation has. Nevertheless, in the author’s opinion they cannot cover the link between the strategic decision level and the performance results. The BEM is very general and does not provide specific strategic directions whereas the LEM structure does not clearly link the results with the strategic planning.

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Suggestions for future developments This thesis examined only the theoretical aspects of the two models’ interaction.

A

more

systematic

analysis

would

comprise

implementation data from companies. For the moment only BAe has provided this kind of information therefore it is impossible to reach objective conclusions about the actual parallel implementation of the models in the UK military aircraft industry. At this stage the UK LAI is gathering information for identifying which are the important aspects of a European Lean model. It is a remit of the UK LAI project (Society of British Aerospace Companies SBAC) that the LEM be reviewed and updated. These changes are likely to be discussed with MIT and the US LAI program and hopefully a united, improved LEM will emerge. The EFQM model is the codification of information collected from many different organisations around Europe. Therefore, its criteria highlight

the

most

important

business

aspects

of

European

companies. The future UK LAI could benefit by these findings and form a reference document that could be built around the US LEM but could also encompass all these important business aspects. From the EFQM model point of view, the implementation of the Lean model justifies the anticipation of many management professionals that the Lean philosophy will expand to the European businesses sooner or later. Therefore, it is high time for estimating the effects that the LEM will have on the European management culture. The BEM comprises general aspects of business so it would be possible to embed some of the Lean aspects in the future. The EFQM model always strives for being up to date with the European management developments and evolutions. If Lean is one of these evolutions maybe the BEM should be adjusted.

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