Experience of lean transformation in Indian MSMEs shows that people-related factors matter more than technical ones for long-term improvement. This paper investigates how leadership behavior and employee participation shape the success of lean practices in MSMEs. Evidence was collected from machining, assembly-line, forging and foundry units through surveys, interviews and workplace visits. The study examines leadership orientation, regular communication, skill development and empowerment practices and their influence on lean preparedness and execution. Results show that firms whose managers lead improvement efforts, and whose employees are encouraged to take part in systematic workflows, problem solving and waste reduction, achieve stronger lean outcomes, while resistance to change, skill gaps and limited managerial participation continue to restrict adoption. Based on the results, the paper proposes a people-centered lean transformation framework for MSMEs, offering an action plan for building a productive and sustainable lean culture. The findings offer lessons for practitioners, consultants and policymakers seeking operational excellence in smaller manufacturing organizations.