Mnagement Accounting Systems at Companies Adopting Lean Management

• In Event: Topics in Management Accounting

Abstract

Most managers and accountants recognize that accounting systems and measures, organizational strategy, and organizational processes and actions jointly influence one another. Consultants and leading practitioners stress the importance of changing the accounting system and performance measures to support organizational change. Standard cost systems do not provide information supporting lean transformations and in fact, relying on standard cost information can work against the lean transformation. A number of articles have been published describing changes individual companies have made to support lean management.
While case studies of leading in practice are helpful, we wanted a broader picture of the state of management accounting and performance measurement practices at companies engaged in lean transformations. We distributed an on-line survey assessing the level of lean management implementation, lean accounting implementation, and realized operational and financial performance related to implementing lean practices to individuals from 510 respondents at 370 different facilities. This paper summarizes the findings of our survey.
We find that companies that are realizing greater cost reduction and profitability improvements due to lean initiatives are placing a greater emphasis on financial performance measures than their counterparts who report less financial improvement. We find no evidence that the emphasis on financial performance measures is an obstacle to lean implementation and improvement. The facilities reporting the biggest gains are not replacing a traditional emphasis on financial performance with an emphasis on operating results. Rather, they are retaining their emphasis on financial performance while raising operational performance to be on equal footing with financial performance. We also find no evidence that the use of traditional accounting practices is an obstacle to lean improvement initiatives.
We found, as expected, that lean transformation of the accounting function lags the lean transformation in production. The reported adoption of lean accounting was much lower than the level of adoption of any of the manufacturing initiatives. In addition, fewer than 20% of the facilities reported their company having made significant changes to their accounting systems. Those facilities that did report having made changes to their accounting systems also reported significant operational and financial benefits accompanying the changes. So, while retaining traditional accounting does not appear to be stopping lean transformations, greater gains await those firms that extend their lean transformations to accounting.

Authors

• Lawrence P Grasso, Central Connecticut State University

• Thomas N Tyson, St John Fisher College

• Clifford R Skousen, Utah State University

• Rosemary Fullerton, Utah State University