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Lean Organizational Structure

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  • 0:01 Organizational Structure
  • 0:34 Lean Organizational Structure
  • 2:31 Value Stream
  • 3:46 Lesson Summary
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Lesson Transcript
Instructor: John McLaughlin
In this lesson, you will learn how the structure of a lean organization differs from the structure of a traditional organization and the benefits organizations with lean structures have over organizations with traditional structures.

Organizational Structure

When the Patterson brothers were growing up, they always competed with each other. Jim Patterson, the older brother, was always faster and stronger than his little brother.

Younger Slim got better grades in school than Jim and was always looking for ways to outsmart his older brother.

Slim and Jim Patterson still compete with each other all the time because they both run companies that make the same thing: banjos. And although their two organizations do the same thing, they do it very differently.

Lean Organizational Structure

The structure of Jim's business is traditional. His organization uses many functional departments, Supervisors and people in his organization are taught to focus on their individual jobs.

Slim, on the other hand, uses a lean organizational structure to run his business. Slim uses only three levels of management: top management that focuses on strategy, mid-level management that focuses on problem solving and line managers who concentrate on finding ways to improve the banjo making process.

A lean organizational structure is a structure that is designed to create more customer value using fewer resources than a traditional organizational structure. The goal for all members of an organization that utilizes a lean structure is to constantly find ways to improve the processes of the organization and to make the organization more efficient.

In Jim's traditionally structured organization, he uses a large number of job classifications. Jim's workers focus on their individual jobs and do not typically consider how their job affects the overall operation of the company. They also rarely interact with anyone outside their department.

Slim's lean organization uses few job classifications to organize the workers. Members of his organization are more broadly skilled and flexible and are empowered to look for and solve problems as they occur in the day-to-day operations of the business. Instead of functional departments, Slim's workers perform in self-managed work teams. Working as teams, members of Slim's organization are constantly looking for ways to improve their work processes and eliminate waste. These work teams have regular meetings to discuss new ideas and solutions to current problems they face in their day-to-day jobs.

Value Stream

A major difference between Jim's traditional structure and Slim's lean structure is that while members of Jim's traditional organization concentrate only to their task at hand, members of Slim's organization are constantly trying to deliver value to their customers by focusing on the value stream produced by the organization.

A value stream is the sequence of activities required to design, produce and provide a good or service. Members of lean organizations are taught to view the value that their organization produces from the customer's point of view.

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