Impact of lean operations on the roles of finance functions and their application of lean

Abstract

Purpose

This paper aims to study the relations between lean operations, lean principles in finance functions and the roles of finance functions.

Design/methodology/approach

The paper uses structural equation modeling to analyze data from 408 different firms in the Danish production and services sectors. A dyadic approach is applied, as a sub-sample of 107 chief operating officers in the responding firms is used to investigate the construct validity, reliability and average deviation index of the instrument measuring the roles of finance functions.

Findings

The paper finds that lean-operation firms emphasize four different yet interdependent roles of finance functions. The paper also finds that lean operation leads to firms’ finance functions adopting lean principles.

Research limitations/implications

This paper characterizes lean-operation firms as contextually ambidextrous to predict relations between lean operation and roles of finance functions. The paper expands prior case study findings on the roles of finance functions in lean-operation firms, and the findings of the paper underline that finance functions continue to play an important role in these firms.

Practical implications

Decision-makers in lean-operation firms should not be hesitant with respect to integrating finance function workers into the lean operation. Furthermore, decision-makers should understand that a balanced emphasis of the roles of finance functions is necessary to avoid overemphasizing exploitation at the expense of exploration, or vice versa.

Originality/value

To the best of the authors’ knowledge, this is the first paper to provide large-scale evidence of the roles of finance functions in lean-operation firms and to show that lean principles diffuse to finance functions. Furthermore, the paper introduces a new instrument for measuring finance function roles, based on the competing values framework.

Citation

Nielsen, H. and Kristensen, T.B. (2020), "Impact of lean operations on the roles of finance functions and their application of lean", European Business Review, Vol. 32 No. 4, pp. 731-763. https://doi.org/10.1108/EBR-10-2019-0277