Management Decision

Exploration of internal service systems using lean principles

John Maleyeff
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John Maleyeff, (2006),"Exploration of internal service systems using lean principles", Management
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Received July 2005
Revised January 2006
Accepted January 2006
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Management Decision
Vol. 44 No. 5, 2006
pp. 674-689
q Emerald Group Publishing Limited
0025-1747
DOI 10.1108/00251740610668914
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0025-1747.htm
Exploration of internal service
systems using lean principles
John Maleyeff
Rensselaer Polytechnic Institute, Hartford, Connecticut, USA
Abstract
Purpose – The purpose of this paper is to attempt to provide insight into the management of an
internal service system derived from a perspective of Lean management. These internal service
systems would exist within professional service units of development, engineering, information
technology, human resources, and consumer affairs.
Design/methodology/approach – A meta-analysis of approximately 60 internal service systems
was performed. The objectives of the meta-analysis were: identification of structural similarities;
categorization of wasteful activities; tabulation of typical problems; and synthesis and exploration.
Findings – Internal service systems have numerous common structural characteristics, including the
importance of information, process flows across functions, many hand-offs of information, hidden
costs and benefits, and no explicit motivation for urgency. The wasteful activities can be classified into
seven groups: delays, reviews, mistakes, duplication, movement, processing inefficiencies, and
resource inefficiencies. The most common problems included a lack of standard procedures, long
service times, communication breakdowns, and poor personnel management.
Research limitations/implications – Critical insights valuable to a manager of an internal service
system are: it is likely that the main service provided is information; it is likely that cross-functional
coordination is required; and it is likely that people play a critical role in the system’s performance.
These insights can form the basis of cross-function cooperative improvement efforts.
Originality/value – The paper presents the first known large-scale assessment of problems and
opportunities in applying Lean principles to internal service systems.
Keywords Service systems, Internal control, Customer information
Paper type Research paper
Introduction
Any organization, whether it is classified as a manufacturing, service, non-profit, or
government entity, includes a number of internal professional service units that
ultimately affect its long term performance. Each unit provides one or more services to
internal customers, or to external customers, or to both. Examples of such units include
marketing, research and development, engineering, information technology, human
resources, and consumer affairs. Regardless of the organization’s size, almost all
professional staff members deliver an internal service, as either their primary or
secondary job function. A manager or staff member whose department’s primary
customer is internal would deliver an internal service as his or her primary job
function. Examples include a product designer whose customers include
manufacturing engineers; a marketing manager whose customers include product
designers; and a financial analyst whose customers include corporate executives. But
other personnel whose customers are external (e.g., consumers) also perform services
for internal customers. For example, managers perform annual performance
evaluations of their staff, customer service personnel report to appropriate
 departments on the types of complaints received from consumers, and manufacturing Exploration of
supervisors take part in continuous improvement efforts. internal service
The effect that these internal service systems have on the organization’s overall
performance is often difficult to quantify precisely. For example, it would be difficult to systems
measure the impact of a marketing department not identifying a potentially lucrative
opportunity to sell the company’s product since the lost opportunity may not be readily
apparent. Further, given the diverse sets of activities that take place in an internal 675
service system, their design and management would appear to be a challenge. The
term transformation has been used to describe the process that takes place when a
system converts inputs to outputs (Chase et al., 1998, p. 7). While a manufacturing
organization is strictly devoted to creating physical transformations, the
transformations that take place in service systems include physiological (e.g.,
employee assistance); exchange (e.g., company store); informational (e.g., education
and training); location (e.g., distribution); and storage (e.g., warehousing). Often,
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service organizations include a combination of two or three transformations. This

paper attempts to provide insight into the management of an internal service system
derived from a perspective of Lean management. Its primary purpose is to explore the
nature of these services to help practitioners avoid making decisions that address
symptoms, rather than underlying root causes.

Lean management
The Lean management approach, developed by Taiichi Ohno (1912-1990) at Toyota
Motor Corporation in Japan, forms the basis for the Toyota Production System. In the
USA, The Machine that Changed the World (Womack et al., 1990) described how
Toyota used lean production to change the nature of automobile manufacturing. Lean
Thinking (Womack and Jones, 1996) exposed many practitioners to Lean by focusing
on the application of five fundamental concepts:
(1) specify value (from the customer’s perspective);
(2) identify value stream (i.e. understand all activities);
(3) (flow (minimize interruptions during processing);
(4) pull (all work is initiated by customer demand); and
(5) perfection (the goal is zero waste).

Emiliani et al. (2003) detail how The Wiremold Company achieved success by applying
a Lean approach throughout their organization. In the eyes of many practitioners
observing a manufacturing system, Lean would be associated with cellular
manufacturing, kanban card inventory control, fast setup times, and periodic Kaizen
events (Imai, 1986). However, Lean is successful only when the entire company
infrastructure is consistent with the goals of Lean. Examples include compensation
based on global rather than local efficiencies, a system of continuous improvement, and
a culture that supports Lean (Emiliani, 1998).
Lean principles are increasingly being applied to service companies in an effort to
improve customer service thorough the elimination of waste (Bowen and Youngdahl,
1998). Service industries where Lean has been applied include insurance (Hammer,
2004), education (Emiliani, 2004), and environmental consulting (Ball and Maleyeff,
2003). In service systems, as contrasted with manufacturing systems, the five
 MD fundamental principles mentioned above (specify value, identify the value stream,
44,5 flow, pull, and perfection) do not always apply in obvious or explicit ways. For
example, many service systems, even those that are operated in a wasteful manner, are
by their nature pull systems because all work is initiated by the customer. Customers
of poorly designed or managed service systems are likely to experience long waits for
the service to be completed. Toyota’s product development process is considered by
676 many to be a model of product development effectiveness, even though it appears on
the surface to be a relatively unstructured process with seemingly ambiguous
communication that creates, for example, a disproportionately high number of
prototypes (Ward et al., 1995).
Spear and Bowen (1999) provide a conceptual framework that may be well suited for
understanding how Lean principles are generally applicable. This framework includes
four fundamental principles that would constitute a Lean approach:
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(1) all work should be highly standardized in terms of content, sequence, timing,
and outcome;
(2) every internal customer-supply contact must be direct and unambiguous;
(3) the flow of every product and service must be simple and direct; and
(4) improvements should be accomplished in a structured, scientific manner.

These principles are useful in providing guidance as to how service systems should be
structured and managed. However, they may be looked upon as representing a
conceptual framework rather than an implementation guide, thus limiting their
application.

Approach
This exploratory study reports the results of a meta-analysis applied to a number of
internal service systems, each of which was analyzed and critiqued using a Lean
viewpoint. Meta-analysis provides a means of synthesizing information contained in a
variety of credible if disparate primary sources. If effective, the analysis will result in a
generalization of information that will meet the needs of a particular audience.
However, biases may be present regarding the choice of primary sources and the lack
of control over both the primary study methodologies and the somewhat subjective
nature of the meta-analysis itself. This study eliminates the possibility of choice bias
and creates a controlled but open-ended methodology for each primary source. More
details regarding the meta-analysis technique may be found in Schulze (2004).
The internal service systems all existed within companies located in the southern
New England region of the USA during the period September 2002 to March 2005.
Each primary study was undertaken by a full-time professional employed within the
organization and was submitted as the main requirement of the graduate-level course
Service Operations Management at Rensselaer Polytechnic Institute (RPI). The
ultimate goal of the analysis was to develop knowledge to help managers of the
internal service systems make informed decisions. The focus was on common features
that could be expected in an internal service system, including structural
characteristics, wasteful practices, and typical problems. It was expected that a
specific set of objectives would be fine-tuned after a preliminary review of the primary
sources.
 The limitations of the approach are evident. The systems chosen by the working Exploration of
professionals were not a random choice, or a choice designed to span the entire scope of internal service
internal service systems. While guidelines were provided for authors of the primary
projects, the guidelines were of a general nature. For example, authors were asked to systems
list wasteful activities, but not to list the most common and not to place them in
predefined categories. So, for example, obvious activities adding no value may have
been overlooked while less common wasteful activities were listed. The ability to 677
quantify correlations among responses is limited given the non-standard response
format. It is hoped that these limitations will be offset by a comprehensive qualitative
analysis approach and the relatively large number of primary sources.

Source of primary research projects

The Hartford, Connecticut campus of RPI educates working professionals by
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providing graduate programs in engineering, computer science, and management.

Students can earn a Master of Engineering (M.Eng.), Master of Science (M.S.), or
Master of Business Administration (MBA) degree. The students average 10-15 years of
work experience and most hold management or executive positions in medium- to
large-sized corporations within a 75-mile radius of the Hartford campus. The Lally
School of Management and Technology is accredited by the Association to Advance
Collegiate Schools of Business (AACSB). The Service Operations Management course
is typically taken by students in the management school.
The course is designed to serve the needs of a working professional who provides a
service to internal or external customers, even if the primary focus of the company is
manufacturing. A professional employed as a design engineer, for example, works
within a system that provides a service mainly to the manufacturing floor or to the
purchasing department by providing part designs in the form of blueprint drawings. A
professional working in the accounting department provides a service to a division’s
manager by reporting accurate and timely data on the financial performance of the
division. Many engineers find themselves in the role of project managers, due to the
outsourcing of many component parts that is common in American industry, resulting
in more complex coordination requirements. And, manufacturing companies now
provide more than just goods to customers, including maintenance, repair, and other
after-market services. In all of these cases, the service systems within which these
professionals are employed are directly analogous to service systems that exist in
stand-alone companies.
The Service Operations Management course is tailored around individual and
independent projects that students use as the basis for applying course material to an
existing service system. The course covers a broad range of topics, such as operations
strategy, service system design, forecasting, customer satisfaction analysis, and
waiting line management. At the first class meeting, a general framework for the
course is presented, showing how three elements instructor lectures, the professional
literature, and each student’s experience combine to enable each student to complete
an individualized semester-long project involving a functioning service system. This
semester-long project serves as the focal point of the course.
Early in the semester, each student must choose a service system that should
include a number of interconnected business processes, but should be focused on
providing one type of service to one type of customer. A key requirement for choosing
 MD a service system is that the student must have precise knowledge of the system and
44,5 have direct access to customers, employees, and management. For example, a student
working in a consumer affairs department may choose the system used to reconcile
customer complaints. For many working professionals, the project represents a means
to take an analytical look at the activities they perform daily, and to evaluate whether
or not the system within which these activities take place is effectively designed and
678 managed. With rare exceptions, their supervisors welcome the projects, often
expressing satisfaction that their educational budget is being spent in a way that
directly benefits their organization.

Primary source specification

The primary research projects each included two phases:
(1) a thorough evaluation of the current service system; and
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(2) a review of professional literature and the generation of ideas for improvement.

While specific requirements were specified for each stage, the working professionals
performing the work were not provided with detailed instructions beyond the basic
requirements. It is the results of Phase 1 that forms the basis of the meta-analysis.
Phase 1 included the requirements listed below, of which the first and third are
particularly relevant to this effort:
(1) the development of a comprehensive process flow diagram for the current
system, with accompanying identification of value-added activities, wasteful
activities, and sources of uncertainty that affect performance;
(2) an evaluation and critique of the current method for forecasting customer
demand and a recommendation regarding the type of forecasting methodology
that should be implemented;
(3) an analysis of the strengths and weaknesses, using input from three
stakeholders customers, managers, and employees based on live interviews
or an open-ended written questionnaire;
(4) an evaluation of the current performance metrics that relate to customer
satisfaction and the recommendation of metrics that would be effective for
monitoring the various dimensions of system performance; and
(5) an evaluation and critique of the current complaint handling system and the
development of a customer satisfaction survey.

Phase 2 of the project is not important to this exploratory study, but mention of its
requirements provides an insight into the mindset of the primary authors. A literature
review helps the students view their system from a process-oriented perspective,
allowing them to find non-traditional ideas for improvement. Recently, a student was
working in a system that evaluated new business opportunities based on international
contacts (where communication took place almost entirely by electronic means). While
addressing communication in different contexts, the student was interested to learn
that literature on virtual communities (normally associated with Internet gaming)
could be a source for improvement ideas. Popular ideas for improvement include the
standardization of tasks to reduce variation, the removal of wasteful activities through
 a process redesign, the implementation of enhanced customer demand forecasting, or Exploration of
the design of a customer complaint handling process. internal service
systems
Study methodology
Seventy-one primary projects were available and a preliminary screening found 61
projects that were considered to have been completed with the quality and integrity 679
sufficient for inclusion in the meta-analysis. While the internal service systems were
diverse and varied, they can be placed into the following categories:
.
Systems that provide support to human resource functions; examples included
employee orientation, talent management, inducting new employees, on-campus
recruiting, and military leave approval.
.
Systems whose primary focus is external customer service; examples included
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product support and troubleshooting, complaint handling, repair/overhaul, trash

disposal site selection, and engineering design change.
.
Systems that provide technical support to internal functions; examples included
part blueprint development, inpatient pharmacy, quality system implementation,
product forecasting, measurement laboratory, and internal drug screening.
.
Systems that provide business support; examples included proposal writing,
creating financial statements, new business development, labor efficiency
reporting, sales and persistency reporting, and budget creation.

The preliminary screening also allowed for the development of a more detailed list of
objectives. The four main objectives were:
(1) Identification of structural similarities, that exist across internal service systems;
(2) Categorization of wasteful activities, based on a tabulation of similar wasteful
activities found in internal service systems;
(3) Tabulation of typical problems, based on a tabulation of weaknesses stated by
key stakeholders of an internal service system; and
(4) Synthesis and exploration, of the relationship among structural characteristics,
wasteful activities, and problems expected to exist in an internal service system.

The next four sections below report on the results of the four main objectives. These
sections are followed by a discussion of important management implications derived
from a Lean perspective.

Identification of structural similarities

Studying the process flow maps and flowcharts found in the primary reports
uncovered a surprising amount of common structural characteristics. These
characteristics are listed in Table I and discussed in this section. For managers, the
common characteristics provide a basis for developing a fundamental understanding
of underlying features of their internal service system. For Lean practitioners, the
common characteristics help to focus improvement efforts where they are most
needed.
 MD Importance of information
44,5 With a few rare exceptions, the most important transformation taking place within an
internal service system is informational. This characteristic can be overlooked in that
cosmetic issues relating to the physical appearance of a communicating device (e.g., the
written report or Web site) often becomes the main focus of attention. An engineering
drawing, for example, is valued for the information it contains rather than the paper on
680 which it is written. This common characteristic of internal service systems implies that
the focus of initial Lean improvement efforts should not be on document flow, even
though this most closely resembles manufacturing part flow and is among the most
obvious places to start. Perhaps initial improvement efforts should be focused on
whether or not the documents truly convey the necessary information in an
unambiguous and complete format that is easily understood by all personnel, including
customers.
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Significant task variability

Unlike many manufacturing systems, the duration of specific tasks that take place in an
internal service system is very often highly variable. Effective systems appear to take
advantage of the positive characteristics of an employee (e.g., intelligence, flexibility)
while controlling the variability associated with how multiple people may perform the
same task. This common trait has two implications for Lean practitioners. First, the type
of standard process map employed in manufacturing that includes activity setup and
processing times would be difficult to develop for an internal service system. Given the
need to provide not just average processing times but the amount of variation in the
processing times, the data collection effort may be unnecessarily comprehensive and
time-consuming. Second, the application of some Lean techniques, including take time
(Womack and Jones, 1996, pp. 55-6) where the entire factory produces parts according to a
standard cadence, would be impractical in an internal service system.

Process flow across departments or functions

A characteristic occurring frequently in the process flow maps was a myriad of
connections across functional entities with the organization. These connections were
sometimes found in the main process flow and often existed to obtain information. For
example, an analyst who creates a customer quote in response to an RFP (request for
proposal) will gather information from finance, operations, and marketing before
submitting a quote. It would appear, therefore, that improvement efforts would not be
effective without cross-disciplinary team creation. The implication is that a standard
Lean mechanism for team-based process improvement, known as Kaizen (a Japanese

Importance of information

Significant task variability

Process flows across functions or departments
Many handoffs of information
Numerous management and technical reviews
Table I. Hidden costs and benefits
Common structural No explicit motivation for urgency
characteristics No one size fits all solution
 term that is translated to change for the better) can be very effective. Kaizen teams Exploration of
have support from upper management to fundamentally change how a system is internal service
designed, managed, or controlled. The team typically consists of a leader (who may be
an external expert skilled in facilitating teams) and team members that include systems
everyone with a stake in the system, including customers.

Many handoffs of information 681

Often, the numerous “handoffs” of information become the root source of the problems
cited in the operation of an internal service system. Handoffs, for example, are known
to be a major source of medical errors (Wachter and Shojania, 2004, pp. 159-79).
Sometimes the basic definition of a term or phrase may have difference meaning in
different functions. For example, one project noted that “forecast error,” which was
used by a planning department to determine future levels of buffer inventory, was
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defined by the forecasting function to mean past absolute deviations between the
forecast and actual sales. So, when sales were lower than expected, the forecasting
department handed off a high forecast error to the planners who then mistakenly
scheduled the production of higher inventory levels. During classroom discussions,
many other examples of communications breakdowns were provided.

Numerous management or technical reviews

Whatever the motivation (e.g., seek approval, check accuracy, keep management
informed) service systems often include steps requiring one or more reviews by technical
staff or by management. The existence of these reviews increases costs and can delay
subsequent activities. Their use is an example of a long discounted industrial practice
that attempts to “inspect quality into the product.” (Deming, 1986, pp. 28-31). From a Lean
perspective, the entire review activity would be considered wasteful (even if needed in the
short term). Rather than make the review more efficient, Lean efforts would be aimed at
finding ways to mistake proof activities so that ultimately the need for the review would
no longer exist. For example, one of the primary projects concerned proposal writing for
an architectural firm, where senior management reviewed each proposal prior to its
submittal in response to an RFP. Rather than focus efforts on inspection as a mean to
assure quality (where efforts can often be devoted to finding errors and assessing blame
to the proposal writer rather than identifying the root cause of the error) a Lean effort
would focus on ways to prevent mistakes from occurring, perhaps considering the design
of a standard template by which to structure each proposal.

Hidden costs and benefits

Because the output of an internal service system is intangible, the quantification of
value can be difficult to estimate unless the service is paid for explicitly. In almost all of
the systems studied, no direct payment was made for services. Further, customers of
internal service systems consider value to be highly multi-dimensional. In this regard,
the work of Parasuraman et al. (1985) concerning the multiple dimensions of service
quality is appropriate to customers of internal service systems. For example, a
manufacturing manager who receives a part blueprint values not only the information
contained on the blueprint, but the ability of the part designer to help troubleshoot
problems (in both an accurate and timely manner), and the knowledge gained from
interactions with the part designer. Similarly, costs associated with an internal service
 MD system are typically classified as overhead (e.g., selling, general, and administrative
44,5 expenses) on financial statements and thus “hidden” from executive view except in the
aggregate. Managers who wish to consider costs versus benefits of decisions in an
explicit way will find this effort to be virtually impossible. Hence, it is often the case
that to improve profits, cost cutting may disproportionately affect an internal service
system. Finally, outsourcing decisions which tend to be justified based on reducing
682 labor costs have the potential to backfire if intangible benefits are lost.

No explicit motivation for urgency

Individuals working in an internal service system may be unfamiliar with the overall
system or may be unaware when prompt action is necessary. Often, the work of
developing and displaying the process flow map itself causes individuals to appreciate
how overall success is affected by their individual contribution. Systems that include
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many cross-functional connections would be particularly susceptible to this problem.

Classroom discussions supported this observation by providing numerous examples of
delays caused by providers of information who were not being aware of its urgency.
Lean practitioners alleviate similar problems in manufacturing using mechanisms
referred to as the visual factory, where highly visible displays are used to show the
current status of work so that everyone involved in the system gets a sense of the
relative priorities of tasks that they need to accomplish. In cross-functional service
systems, where personally may not be located in a concentrated area, perhaps
computerized version of these displays may be considered.

No one-size-fits-all solution
The common characteristics provide a generally applicable framework for
approaching internal service system analysis and improvement. But the wide
variety of tasks that take place would preclude the application of specific Lean
techniques in a cookbook fashion. Therefore, any approach to the management and
improvement of an internal service system must be application-specific and be based
on a conceptually-based fundamental understanding of Lean. The framework
mentioned earlier and attributed to Spear and Bowen (1999), summarized briefly as:
standardize tasks, create unambiguous connections, institute direct flows of
information, and apply a structured improvement methodology, would appear to be
appropriate. But application of these fundamentals requires improvement project team
members to be educated in Lean principles prior to their attempting to make
fundamental changes to how an internal service is structured or managed. And the
team leader needs to be particularly cognizant of the subtleties that the application of
Lean to an internal service system would entail.

Categorization of wasteful activities

Seen from a Lean perspective, a process flow diagram shows activities that fall into
three categories. Some activities are value-added, meaning that customers would be
willing to pay for these activities, such as when the customer cannot perform a task on
their own or without considerable time or cost. Other activities are considered wasteful
and can be separated into two categories: non-value-added but necessary activities
exist due to the current structure of the system and non-value-added and unnecessary
activities are wasteful even within the framework of the current system. In this section,
 all non-value-added activities, whether considered necessary at the time of the primary Exploration of
studies or not, are considered wasteful. internal service
A standard list of seven waste categories is well known to practitioners of Lean, but
appears to relate specifically to manufacturing due to an implicit assumption that a systems
tangible good is being processed as the main source of value. This list is provided
below (Ohno, 1988):
.
defects (including repair or rework); 683
.
inventory (in excess of current needs);
.
motion (unnecessary movement during processing);
. transportation (moving parts and material);
.
processing inefficiency (extra processing that does not add value);
waiting (idle time of resources); and
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.
overproduction (in order to create economies of scale).

While connections can be made between these categories of waste and those found in
internal service systems, many of the categories would be much less important in a
service system. The terminology used in service systems would also be inconsistent
with terms used typically in manufacturing. For example, while “defects” would
certainly occur in service systems, they would typically be referred to as “mistakes” or
“errors.” While “inventory” would be wasteful in any system, internal service systems
typically cannot inventory their service using excess capacity (e.g., a system that
generates customer quotations cannot begin working on a specific quotation prior to a
RFP being received into the department). Similarly, “overproduction” (analogous to
providing a service above the immediate needs of a customer due to a need to create
economies of scale) does not typically happen in internal service systems.
The effort made here to tabulate and categorize wasteful activities in internal
service systems is complicated by the open-ended nature of the primary analyses. That
is, no checklist of standard names or terms was provided to the primary authors as a
guide. The procedure for classification consisted of creating the exhaustive list of
specific wasteful activities mentioned in each of the primary analyses, tabulating how
often each specific activity was repeated across the analyses, then combining the
resulting list into similar categories. As a result, seven categories were created and
listed in Table II. The list is provided in no particular order. In the remainder of this
section, each category is described along with a brief definition and examples.

Categories of waste

A Delays
B Mistakes
C Reviews
D Movements
E Duplication
F Processing inefficiencies Table II.
G Resource inefficiencies Categories of waste
 MD (1) Delays include time wasted either directly in queue (e.g., paperwork placed in an
44,5 in-box) or waiting for information to be transmitted (e.g., an individual waiting
several days before responding to a voice-mail message).
(2) Reviews include activities that inspect completed or partially completed work
for errors or omissions. Examples include confirming that standard accounting
procedures are used, checking technical accuracy of an analysis, or creating a
684 presentation to obtain management approval before proceeding to the next
phase of a project.
(3) Mistakes include errors or omissions that, if found internally, cause work to be
redone or, if found by customers, also cause work to be redone but can result in
loss of reputation or customer defections. A secondary result of mistakes is the
disruption of normal activities that cause delay in other work activities.
(4) Duplication includes activities that are done elsewhere in the system or can be
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done more easily in another part of the system. Alternatively, an activity may
be performed more than once. For example, duplication occurs when the same
data are entered onto a form at two difference locations in the system.
(5) Movement includes the physical transport of information, personnel, or
equipment that is unnecessary. Examples include traveling to attend a meeting
to find the root cause of a mistake, or mailing reports to a customer.
(6) Processing inefficiencies includes the ineffective use of a resource in performing
a specific task. For example, generating reports without a standard template
can cause personnel to “reinvent the wheel” every time a report is generated.
(7) Resource inefficiencies includes the management of personnel, equipment,
materials, or capital in ways that are wasteful. Examples would be creating a
work schedule that did not coincide with customer demand or holding meetings
that do not result in enhanced value for customers.

Tabulation of typical problems

Each of the wasteful activities can have a detrimental effect on how a customer
perceives value. However, their relative importance may vary across various internal
service systems. Therefore, the analysis of strengths and weaknesses identified in the
primary project reports can provide a clue regarding how these wasteful activities
manifest themselves in noticeable ways. As mentioned earlier, each primary study
included open-ended questionnaires or live interviews with at least one customer,
employee, and manager. Tabulation of strengths and weaknesses was particularly
challenging given the wide variety of internal service system types and the
non-standard responses to the questions. Strengths in the service system typically
concerned the specific service itself (e.g., worker knowledge) or included the converse
of the weaknesses. Hence, this section focuses on weaknesses as stated by
stakeholders.
The top 10 weaknesses, each of which was mentioned in at least 25 percent of the 61
reports, were paraphrased to illustrate the tone of the responses. The list is presented in
Table III, sorted in descending order starting from the weakness listed most often. No
distinction was made regarding the source of the weakness (customer, manager, or
employee). The popular weaknesses provide insight into the problems typically
encountered in an internal service system.
 Exploration of
Top 10 weaknesses
internal service
#1 There is a lack of standard procedures systems
#2 The system takes too long
#3 Communication breakdowns with customer
#4 The system is not well defined
#5 Data and other information are inaccurate 685
#6 There is poor personnel scheduling
#7 Little or no flexibility exists
#8 There is inadequate training
#9 There is inadequate staffing Table III.
#10 Inadequate support from other functions Top 10 weaknesses

In order to determine if the list could be considered generally applicable to internal

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service systems, a series of statistical analysis of variance (ANOVA) tests were

performed. These analyses determined if a difference existed in the likelihood that a
weakness was listed in each type of interval service system (human resource support,
external customer support, internal technical support, or business support). Ten
ANOVA tests were run, one for each weakness from Table III. For example, the first
ANOVA determined if there was a difference in the likelihood of Weakness #1 being
stated across the four types of service systems. As a result of this analysis, only
Weakness #4 (“The system is not well defined”) had a significant difference in its
likelihood across the four types of service systems. The p-value for this ANOVA test
was p ¼ 0:018. Since p , 0:05, the confidence level associated with this conclusion
exceeds 95 percent. Specifically, “The system is not well defined” was more likely to be
listed for systems that provide either human resource support or internal technical
support as compared to systems that provide either external customer support or
business support. This difference may be a result of the political clout possessed by the
immediate customer of the service system (i.e. company executives and external
customers as compared to other internal constituents), or it may be the case that
systems servicing internal constituents are not designed in a structured manner. For all
other listed weaknesses, no differences existed in how often a weakness was listed
across the four types of internal service systems analyzed.

Synthesis and exploration

Both qualitative and quantitative analyses were performed to study relationships that
could provide insights helpful to a manager of an internal service system. The analyses
focused on the relationship among the structural characteristics (Table I), the waste
categories (Table II), and the weaknesses (Table III). It was expected that not all
relevant relationships would be identified due to the lack of control that existed in the
primary research projects and the relative small sample size of 61 projects.
The qualitative exploration noted that some weaknesses (Table III) could be the
obvious result of many of the structural characteristics (Table I). For example,
cross-functional communication requirements could result in lengthy service
durations, inaccurate information, poor scheduling, and inadequate support. And
communication breakdowns would be particularly problematic in the presence of
non-standard procedures, a poorly defined system, and inadequate training, which
 MD could also motivate the need for the extensive technical and management reviews.
44,5 While most of the weaknesses would appear to be mutually consistent, many of the
primary project reports listed both lack of standardization and lack of flexibility as
weaknesses within the same service system. Some weaknesses are a direct result of the
wasteful activities listed in Table II. For example, delays could result in a customer
believing that the service duration was excessive. Excessive duration could also be the
686 result of time spent in internal reviews, correcting mistakes, inefficient processing, and
communication breakdowns.
The quantitative analysis noted that among the top 10 weaknesses (Table III)
several pairs had statistically significant Pearson correlation coefficients with
confidence levels exceeding 95 percent. That is, a single primary project report that
included one weakness would be more likely than other reports to include a second
weakness (i.e. positive correlation). Or, a single primary project report that included
one weakness would be less likely than other reports to include a second weakness (i.e.
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negative correlation). Listing a lack of standard procedures as a weakness was

positively correlated with the listing of communication breakdowns with customers
(p ¼ 0:027) and the system being considered not well defined (p , 0:001). Further,
listing the lack of a well defined system was positively correlated with the listing of
data and other information being inaccurate (p ¼ 0:037). The listing of little or no
flexibility as a weakness had a positive correlation with the listing of two other
weaknesses: poor personnel scheduling (p ¼ 0:014), and inadequate staffing
(p ¼ 0:001). This result is particularly interesting. Management, responsible for
scheduling and staffing levels, appears to be considered by stakeholders to be the root
cause of a lack of flexibility. That is, the skill of the service providers may not be
considered a cause of inflexibility.
Interestingly, the only statistically significant negative correlation discovered in the
analysis concerned the listing of duplication as a category of waste and the listing of
communication breakdowns with customer as a weakness (p ¼ 0:048). That is,
systems with a higher occurrence of duplication had less communication breakdowns
with their customers. The negative correlation would make sense given the
incorporation of what would be considered essentially duplicate tasks in a system
where communications problems existed. For example, a service provider may attempt
to improve the ability for the service provider to understand a customer’s request by
implementing a process where the original request is translated to a standard
document that would be time consuming to create but useful to the service provider.
Finding a way to have the customer make their initial request using a standard format
would remove both the wasteful activity of duplication (translating the customer
request to the standard format) and Weakness #3 (communication breakdowns with
customers).

Management implications
Regarding the management of an internal service function, the analysis of the primary
research projects makes it clear that managers must appreciate three important points:
(1) it is likely that the main service provided is information;
(2) it is likely that cross-functional coordination is required; and
(3) it is likely that people play a critical role in the system’s performance.
 It is easy to overlook the first point and focus, for example, on document control rather Exploration of
than the controlling the information contained (and not contained) on existing internal service
documents. Overlooking the second point may result in change recommendations that
are not effective or cannot be implemented. Regarding the third point, management systems
must understand the key role played by employees and provide the support needed for
them to achieve the goals of the system. The establishment of cross-functional Kaizen
teams, mentioned earlier, would be an effective approach to improving an internal 687
service system.
In the Kaizen team improvement efforts, the results discussed earlier can form the
basis of improvement activities. Since individual service providers play such a primary
and direct role in servicing customers, issues such as the manner in which tasks are
performed, how information is communicated, and how the service provider reacts to
atypical circumstances will impact ultimate customer satisfaction. The granting of
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considerable responsibility to line workers is a standard feature of Lean manufacturing

and should be extended to service providers. For example, on a Lean production line an
“andon” cord may exist whereby a line worker can stop production when a task is not
finished within its standard time allocation. After the line is stopped, the reason for the
delay would be found and addressed immediately. In a Lean service system, workers
should have similar authority. But significant responsibility should only be granted
after management takes appropriate action to prepare their employees to work in such
an environment.
In a Lean system, all activities would be standardized to the extent possible without
sacrificing flexibility, an inherent skill of humans. While the benefits of standardizing
common tasks are well known, the relationship between standardization and flexibility
may not be well understood. That is, what customers may come to view as flexibility
can result from a standard approach. While flexibility resulting from standardization
may seem paradoxical, it has long been a component of Lean. It is only with a standard
approach that the service provider can understand precisely what should happen
under normal circumstances and thus recognize atypical situations. The standard
approach may extend to a variety of unusual circumstances, but at some point service
providers should be given autonomy to take extraordinary action when he or she
deems it necessary. Obviously, management should be aware that mistakes can occur
and should have a system in place to help the organization learn from errors and revise
its procedures accordingly.
The Kaizen team should find ways to ensure that each service provider understands
the operation of the entire service system and knows the relative importance of the
tasks they are asked to perform. Service providers are more effective when they
possess an understanding that goes beyond the task they perform, to other activities
that occur in the system. Again, the existence of standards is very helpful in two ways.
First, a set of standard procedures can be documented either in text form or in a display
format and used to educate the workers throughout the system. Second, workers will
have a better understanding of customer perception of system performance when their
knowledge extends beyond their narrow range of job responsibilities.
The discussion that took place during a recent classroom session dramatically
illustrated the type of problem that should be eliminated after the implementation of a
Lean approach. The discussion concerned the practice of arbitrary downsizing, which
can disproportionately affect a service system due to the service system’s hidden
 MD benefits. A professional in the class was discussing the ineffectiveness of the employee
44,5 orientation system at her company. She explained how its effectiveness had
deteriorated over the years due to downsizing and its effect on managers’ ability to
spend time with new employees. The next person to speak during the class detailed
how the lack of skills of new employees led to the incorporation of numerous technical
reviews. These reviews were put into place as a result of the increased occurrence of
688 mistakes. The reviews caused delays that, in turn, negatively impacted customer
satisfaction. Neither the instructor nor the rest of the class were surprised to learn that
these two students were employed by the same company.

Conclusion and future work

In an internal service system, information is likely to be the key component of value
provided to customers. Thus, the most efficient system of document control could fall
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short of satisfying customers if the information contained on the documents is

incomplete or misinterpreted. A Lean approach to managing an effective internal
service system would ensure that information important to the customer is provided in
a fast and effective manner. Management should be particularly concerned with
cross-functional information handoffs and consider the use of cross-functional Kaizen
teams to generate improvement ideas. Leave nothing to chance would be a suitable
mantra for internal service system managers.
Researchers interested in extending the work presented here have several options at
their disposal. One suggestion would be to determine a set of principles (similar to the
five Lean principles of value, value stream, flow, pull, perfection mentioned earlier) that
would provide an implementation guide to making improvements in internal service
systems. Another suggestion would be to perform similar studies to explore specific
sectors of the economy including (but not limited to) public policy, environmental
protection, and homeland security. Finally, it is suggested that specific internal service
systems be studied with the goal of suggesting a model that can be used as a
benchmark of best practices in that particular service. Examples could include (but not
be limited to) systems used to deliver important services such as forecasting product
demand, information technology implementation, and new employee orientation.

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