THE CHANGING ROLE OF MANAGEMENT ACCOUNTANTS IN A LEAN ENTERPRISE: In lean enterpris es , management accountants are moving from adminis trative roles to being tr ue members of the operations team who are cr ucial to delivering cus tomer value.

FROM “BEAN COUNTER” TO DELIVERING CUSTOMER VALUE M A R K P I C K E R I N G A N D VA N E S S A BY R N E S

..............................................................

38

I

mple me nt i ng le a n i n orga n i z a tions requires significant changes for all managers and staff, including support staff such as cost and m a n a ge me nt a ccou nt a nt s . L e a n e nte r pr i s e s ut i l i z e d i f fe re nt for ms of control and have different management infor mat ion requirements than t radi-

tional organizations. Specifically, lean accounting calls for managerial and cultural focus on customer value, continuous improvement, and eliminat ion of w a s te , w h ich c re ate s a de m a nd for adapted management accounting. This article first explores the traditional roles of m a n a ge me nt a ccou nt a nt s . A br ie f

M A R K P I C K E R I N G is a principal at Pickering Byrnes Consulting, an Australian consulting firm, and an adjunct research fellow at Sw inburne University. Mark is a chartered accountant in Australia and is qualified as a CPA in California. Mark has a doctorate of business administration from RMIT University and an MBA from the University of California at Los Angeles. Mark has been consulting for government and private industr y organizations for over 20 years in areas such as cost and profitability analysis and enhancement, process improvement, and organizational design. Mark can be contacted at m p i c ke r i n g @ p i c ke r i n g b y r n e s . c o m . a u or P.O. Box 92, Hawthorn, Vic 3122, Australia. VA N E S S A B Y R N E S is a principal at Pickering Byrnes Consulting. Vanessa has a master’s deg ree in public health from Sydney University and a bachelor’s deg ree in commerce from Melbourne University. Vanessa has been consulting for government and private industr y organizations for almost 20 years in areas such as strateg ic planning, cost and profitability analysis, and enhancement and process improvement. Vanessa has a particular interest in costing and process improvement in the health sector. Vanessa can be contacted at v b y r n e s @ p i c ke r i n g b y r n e s . c o m . a u or P.O. Box 92, Hawthorn, Vic 3122, Australia.

COST MANAGEMENT

JANUARY/FEBRUARY 2016

ROLE OF ACCOUNTANTS

over view of lean concepts is provided, w hich includes the nature of cont rols and information requirements in these organizations. Limitations of traditional management accounting in supporting le a n orga n i z at ions a re ex plore d . T he concepts of account ing in lean enterprises are discussed. These concepts are also discussed in the context of changes in the roles and skills of management and cost accountants. Finally, the example that successful lean accounting can provide to management accountants in non-lean organizations is considered.

While in some organizations the roles of management account ant s and cost accountants are separate, in many companies cost-related activities are included i n t h e b r o a d e r r o l e o f m a n a g e m e nt accountants. These accountants gener-

ally repor t to the financial controller in t he f i na nce f u nc t ion w ho lo ok s af te r management and financial accounting — e f fe c t i ve l y, t h e h e a d m a n a g e m e nt accountant. Alt hou g h t he roles of m anagement accountants can differ across organizations, the position typically includes the follow ing activ ities: • collecting and coding product-cost information from financial transactions, developing product-cost standards, repor ting the cost of products (on both a unit and a total basis), and valuing inventor y in financial accounts; • administering the annual planning and budget cycle, developing and populating budget templates, and consolidating div isional budgets into an enter prise-w ide version; • producing monthly management repor ts, including income and balance sheets for the month, compari-

ROLE OF ACCOUNTANTS

JANUARY/FEBRUARY 2016

The traditional role of management accountants

COST MANAGEMENT

.............................................................................................................................................................................

EXHIBIT 1 The Change from “Bean Counter” to Business Partner

39

.............................................................................................................................................................................

40

son and analysis of monthly performance against budget, identification of variances against standard costs, and researching and repor ting variances against budget and standards; • performing ad hoc financial analysis to suppor t operational manager and senior executive decision-making; and • assisting w ith change projects, such as the implementation of new systems or the development of new products. Historically, management accountants have been tagged w ith the stereot y pe of “bean counters” due to the sheer volume of time spent recording and inputting data and producing repor ts w ith little time spent supporting operational decisions. 1 Over the last 20 years, many organizations have attempted to transform management accountants into business par tners who suppor t operational managers by providing relevant management information and insightful ad hoc analysis. 2 This change is show n in Exhibit 1. I n s o m e o r g a n i z at i o n s , m a n a g e m e nt a c cou nt a nt s a re n ow a b l e to prov i d e h i g h e r l e ve l s o f s u pp o r t du e t o t h e automat ion of some of their cost colle c t ion a nd d at a i nput ac t iv it ie s as a result of enter pr ise resource planning systems. In many organizat ions, operat ional managers are disappointed with the value prov ided by management accountants who remain bogged dow n in time-consuming budget processes (e.g., performing detailed variance analysis) and thereby are removed from operations. L e a n accou nt i ng ha s t he p otent i a l to change this.

Lean is a continuous improvement system that developed out of the Toyot a Production System. 3 Originating in manufacturing, the lean approach is increasingly being used in service industries, such as government, health care, and financial ser v ices. While lean has continuous improvement tools — such as 5S (i.e., order, cleanliness, and visibility in work spaces), the 5 Whys (i.e., root cause analysis),

and value stream mapping — it is much more than these tools. Lean is an enterp r i s e - w i d e m a n a g e m e nt p h i l o s op hy involv ing changes in management systems, culture, organizational structures, processes, performance measures, and employee skills and rewards. Lean focuses on prov iding customer value to meet expectations of product and ser v ice att r ibutes, qualit y, and t imely deliver y. A core principle of lean is continuous improvement through enhancing pro cesses, eliminat ing waste, and reducing inventor y levels. A production system of flow is developed w ith onepiece flow as the ideal and w ith batch sizes minimized. Production is pulled through the system from customer demand rather than being produced as inventor y for later sale. Under lean, the organization is restructured f rom the tradit ional, funct ional construction into v a lu e s t r e a m s , OVER THE LAST 20 YEARS, which include all MANY ORGANIZATIONS HAVE ATTEMPTED TO of the resources, TRANSFORM such as manageMANAGEMENT m e nt a c c o u n ACCOUNTANTS INTO tants, required to BUSINESS PARTNERS WHO produce a family SUPPORT OPERATIONAL MANAGERS BY of products from PROVIDING RELEVANT order to deliver y. MANAGEMENT P r o du c t i o n i s INFORMATION AND o r g a n i z e d i nt o INSIGHTFUL AD HOC cells. This strucANALYSIS. ture enables a g re ate r fo c u s on c u s tom e r v a lu e a n d reduces the silos and conflic t ing performance measures of traditional organizations. A key plank of lean is respecting e mp l oye e s , w h i ch e mp owe r s t h e m to improve processes and solve problems. The attributes of lean result in lean organizations hav ing different forms of cont rol and management infor mat ion requirements than tradit ional organizations. As control moves from hierarc h i c a l m a n a g e m e nt t o t h e w o r ke r s , information that is timely and relevant to the work performed and comprehensible by non-account ants is required. Ma n a g e m e nt i n f o r m at i o n n e e d s t o address organizational objectives, such as customer value, qualit y, continuous improvement and elimination of waste,

COST MANAGEMENT

JANUARY/FEBRUARY 2016

A brief introduction to lean

ROLE OF ACCOUNTANTS

Cr it icisms of t radit ional management accounting systems and information are ne it he r ne w nor cons t r a i ne d to t he i r application in a lean enterprise. Johnson and Kaplan published many of the issues r a i s e d by l e a n a c c o u nt i n g a d v o c at e s almost 30 years ago in Relevance Lost. 4 Howe ve r, t he i n ade qu a c y of t r ad i tional management accounting is greatly magnified in lean enterprises due to specific management information requirem e nt s a n d t h e f o c u s o n c o nt i nu o u s i mp r ove m e nt a n d w a s t e e l i m i n at i o n across all processes, including accounting processes. Traditional management accounting simply does not prov ide the infor mation required to suppor t the lean princ iple s of c u s tome r v a lue , cont i nuou s improvement, and employee empowerment. For example, many manufacturing companies still use standard costing syst e m s . Mo nt h l y re p o r t s a re p ro du c e d weeks into the next month, which is too late to identify and resolve problems that may have occurred six or seven weeks earlier. Complex variance repor ts are difficult to understand, even by accountants, so they prov ide limited value to workers on the floor. The costing standards include arbitrar y allocations (especially overhe ad ) , t re at dire c t lab or cos t s as variable even though they are often fixed in the shor t term, and do not differentiate between fixed and variable costs. These issues can result in flawed management decisions when standard costs are used. This is particularly an issue in lean organizations that have freed up substantial capacit y and are analyzing opt ions to produce special orders, bring outsourced pro duc ts back in house, or int ro duce new products. Traditional management repor ts prov ide little insig ht into key objec t ives such as deliver y reliabi lit y and capacit y constraints and availabilit y. In some organizations, this has been augmented by nonfinancial performance

measures using methodologies such as the balanced scorecard. Traditional management accounting can cont r ibute to decisions and reinforce b ehav iors t hat opp ose le an concept s. Full absor ption costing motivates overproduction and large batches in order to re duce rep or te d p er- u nit cos t a nd i n c re a s e p e rc e i ve d e f f i c i e n c y, w h i c h results in high levels of inventor y. This in turn causes space issues, obsolescence, and lack of f lex ibi l it y. Al lo c at ions of overhead based on direc t labor hours can make managers focus on reducing staff, rather than the overheads themselves, which conflicts with the lean philosophy of respecting people. Tr ad it i on a l s t at i c bu d ge t s a re a l s o problematic in a lean environment. Budgets are often set in the months prior to the beginning of the year and seldom accurately forecast customer demand. This can result in managers overproducing inventor y in order to avoid unfavorable budget variances if customer demand is less than budgeted. It can als o dampen the fo cus on cont inuous i mp r ove m e nt i f b u d g e t s a r e achieved. Traditional budgets and per for mance measures can result in each depar tment seeking to optimize their performance to the detriment of the enter prise. Financia l st atements c an prov ide a misleading v iew of performance. In the early years of implementing lean, even though customer per for mance was improv ing significantly and cash flows were increasing, the financial accounts indicated that performance was getting worse due to the decrease in inventor ies. Overhead prev iously included in t h e v a lu e of i nve ntor y w a s e x p e n s e d when incurred. In lean organizations, all processes, including accounting processes, are subj e c t to cont i nu ou s i mprove m e nt a n d elimination of waste. Traditional management accounting involves significant waste. With control mov ing to the factory floor and issues arising involving the use of standard costs to support decisions, the value of recording hundreds of transactions and spending weeks on variance

ROLE OF ACCOUNTANTS

JANUARY/FEBRUARY 2016

Limitations of traditional management and cost accounting information

COST MANAGEMENT

.............................................................................................................................................................................

reduction of inventories, increased available capacit y, and suppor t decisions on the utilization of freed-up capacit y.

TRADITIONAL MANAGEMENT ACCOUNTING SIMPLY DOES NOT PROVIDE THE INFORMATION REQUIRED TO SUPPORT THE LEAN PRINCIPLES OF CUSTOMER VALUE, CONTINUOUS IMPROVEMENT, AND EMPLOYEE EMPOWERMENT.

41

.............................................................................................................................................................................

42

EXHIBIT 2 Sample Lean Monthly Income Statement by Value Stream for a Manufacturing Plant

analysis is called into question. A major pur pose of standard costing is to allocate costs between the cost of goods sold in the income statement and the inventor y asset in the balance sheet. In lean enterprises, inventor y levels are reduced substantially, to the point where simpler and less wasteful approaches to inventor y valuation can be implemented without m ater i a l ly af fe c t ing t he f ina nc i a l statements. Traditional budgeting, along w ith spending thousands of hours over the course of months creating and reporting against out-of-date budgets, is of litt l e v a lu e i n o r g a n i z at i o n s i n w h i c h p r o du c t i o n i s d r i ve n by c u s t o m e r demand.

The focus here is on management accounting and how it can provide infor-

mat ion to manage lean organizat ions r at h e r t h a n i mp l e m e nt i n g l e a n c o n cepts to improve al l account ing pro cesses such as financia l repor t ing , p ay rol l pro cess ing , and accounts p ayable. Account ing in lean organizat ions is a relat ively new and evolv ing field, and it has b een t he subjec t of a number of books over the last dozen or so years. 5 Recent academic studies of 244 U. S . comp a n ie s h ave fou nd t h at le a n account ing and other cont rol pract ices work toget her and t hat t he implement at ion of lean account ing improves the performance of lean enterprises. 6 When introduced into lean organizations, lean accou nt i ng is gener a l ly i mplemente d g r adu a l ly w it h asp e c t s of t r ad it iona l a ccou nt i n g s i mpl i f i e d or d ropp e d a s lean cont rols and repor t ing are int roduced into the organization and as management is comfor t able that such cont rols are adequate. 7

COST MANAGEMENT

JANUARY/FEBRUARY 2016

Management accounting in lean organizations

ROLE OF ACCOUNTANTS

ROLE OF ACCOUNTANTS

• financial measures (such as revenues, material costs, conversion costs, and return on sales). Intensive annual budgeting processes a re re pl a ce d by rol l i ng fore c a s t s a nd monthly sales, operations, and financial planning. This reduces the significant effort of developing budgets that are static and w ill soon be out of date before the year begins. Instead of working to explain variances in these irrelevant budgets, time is spent each month updating rolling forecasts in addit ion to developing and rev ising action plans. Product costing is usually simplified under lean account ing . In t r adit ional manufacturing organizations, standard costing is used as a form of control, both to value inventor y for financial repor ting and to suppor t management decisions. Lean emphasizes alternative and more timely controls, such as increased v is ibi l it y, st aff p e er cont rol, and f requent performance measurement. A key focus of lean is manufacturing to customer demand, which results in significantly lower inventor y levels and enables less complex methods of inventor y valuation. Consequently, standard costing is often elimi n at e d o r g r e at l y s i mp l i f i e d , w h i c h substantially reduces the time spent processing transactions and analyzing variances. Often, repor ted actual per-unit produc t costs for a per iod are simply value stream costs divided by the volume of product shipped. While this becomes less meaning ful when there is significant diversity in products or service produced by a value st ream, or when the value stream does not include all organizat iona l pro cesses, lean account ing proponents arg ue that recorded costs are of limited value to support decisions. Product costs for decision-making are considered next.

Lean accounting: Product costs for decision-making In l e a n a ccou nt i ng , t he re a re s e ve r a l aspects of product costs for decisionmaking, including the follow ing. T h e m a r k e t , r a t h e r t h a n c o m p a n y c o s t s,

The assumption is that the markets for most products are sets the price of products.

JANUARY/FEBRUARY 2016

COST MANAGEMENT

.............................................................................................................................................................................

Lean income statements are repor ted by value stream and include actual costs rather than standard costs and variances; see Exhibit 2 as an example. Movements in the value of inventor y are repor ted separately to isolate the implications of re du c i n g i nve ntor y l e ve l s . T h e v a lu e stream includes suppor t staff assigned to that value stream, w ith labor reported in total rather than broken dow n into direc t and indirec t components. This simplifies administration. As most staff work in value streams, cor porate overhead (often consisting of the plant manager and a few functional leadA KEY FOCUS OF LEAN IS ers) is quite low MANUFACTURING TO and is generally CUSTOMER DEMAND, WHICH RESULTS IN not allocated to SIGNIFICANTLY LOWER v a lu e s t r e a m s . INVENTORY LEVELS AND While the objecENABLES LESS COMPLEX t i ve i s t o l i m i t METHODS OF INVENTORY a p p o r t i o n m e nt VALUATION. of co s t s , s om e t imes large, cost ly equipment is used across mult iple value streams. In lean speak, these assets are know n as monuments. The costs of these monuments are appor tioned to value streams based on usage, w ith the objec t ive to phase monuments out and replace them w ith machines in the value streams. Financia l and nonfinancia l per formance measures form an important component of controls in lean accounting. Measures are strategically aligned, linked, and reported at the following levels: company, location (monthly), value stream (weekly), and cell/department (daily and hourly). Value stream and cell measures are repor ted in a form that is ver y v isible and understandable to workers: They are posted on a notice board on the shop floor. Measures include: • operational, including customerrelated measures (e.g., on-time customer shipments) and qualit y-related measures (e.g., firsttime through, throughput measures in units per person and dock-todock); • inventor y measures (e.g., inventor y turnover); • capacit y measures (e.g., productive, nonproductive, and available); and

43

.............................................................................................................................................................................

44

highly competitive and that the abilit y to set pricing is highly constrained, which limits the value of putt ing sig nificant resources into recording product costs. In our exper ience, when the company and competitors are producing a diverse r a nge of pro duc t s for m a ny d if ferent customer markets w ith the potential for c r o s s - s u b s i d i z at i o n , t h e r e a r e o f t e n oppor tunities for those that understand their product and customer costs. The level to which product costs should be understood depends on the degree of product and customer diversit y. However, under lean, as in all organizations, the detail and f re qu e n c y of co s t a n a l y s i s / re p or t i n g needs to consider the value of the information for decision-making versus the cost of producing it. Ta r g e t c o s t i n g. It is impor tant to consider customer value up front in designi n g o r r e d e s i g n i n g p r o du c t s a n d processes. Specifically, this includes identif y ing target customer markets, competitor offerings, and required product features and pricing. This is then backed into a target production cost to which the product is designed. I n - h o u s e p r o c e s s e s. Incremental and marginal costing for analyzing special orders is implemented, and outsourced productions and processes are brought back in-house. As st ated earlier, lean f re e s up sub s t a nt i a l c ap ac it y. In le a n accounting, instead of using a full absorption standard cost for these decisions, total value stream revenues and costs are modeled under different scenarios. This is important as many costs in the company are fixed in the shor t ter m (including direct labor), and pricing above the marginal cost w ill prov ide benefits to the company. Of course, capacit y needs to be carefully monitored (as it is in lean accounting), and the potential long-term impac ts on pr icing should be considered.

t h r o u g hp u t h o u r c o mp a r i s o n . T h i s requires a good understanding of bott l e n e c k c o n s t r a i nt s t h r o u g h o u t t h e process.

Changes to the role of management accountants in lean organizations

In lean pro duc t ion, c e l l s h ave re l at i ve l y c o n s i s t e nt t e a m staffing. Decisions on which products to produce when capacity is constrained s h ou ld t a ke i nto a ccou nt t he volu m e throughput as well as the contribution of each of product in a contribution per

This ar ticle star ted w ith a discussion of t h e t r a d i t i o n a l r o l e o f m a n a g e m e nt accountants followed by the demands of operational managers and ambitions of management accountants to move from administrative “bean counters” to business partners. Success in a lean enterprise w ill require management accountants to go fur ther, beyond the business par tner role to being true members of the operations team who deliver customer value. Management accountants move from being isolated in a suppor t function to becoming par t of operations in a value st ream st r uc t ure and are exp ec ted to contribute as such. Many of the activ it ies t r adit iona l ly p er for me d by management accountants are eliminated or g reat ly s implified in a lean comp any. This i n c lu d e s s i mp l i f i e d a n d THE INEVITABLE FREEING m o r e r e l e v a nt UP OF CAPACITY monthly income THROUGH IMPLEMENTING LEAN WILL OPEN UP s t ate m e nt s , s i g MANY OPPORTUNITIES n i f i c a nt l y l e s s FOR THE COMPANY TO effor t on stanUTILIZE THAT CAPACITY dard costing and TO CREATE MORE variance analysis, CUSTOMER VALUE. and replacement of the cumbersome and time-consuming planning and budgeting cycle w ith more f requent rolling forecasts and ac t ionoriented sales, operations, and financial planning. Enlightened management accountants can make an even bigger contribution to the success of an organization despite the removal and reduction in traditional management accounting activities. Elimi n at i n g a n d re du c i n g t h e s e w a s te f u l , time-consuming activities will give mana ge me nt a ccou nt a nt s t he t i me to u s e their skills to enhance customer value. Continuous improvement requires constant analysis of operations and repor ti n g o f r e l e v a nt , t i m e l y p e r f o r m a n c e information. The inev itable freeing up

COST MANAGEMENT

JANUARY/FEBRUARY 2016

Throughput costing is important in product mix decisions.

ROLE OF ACCOUNTANTS

of capacit y through implementing lean w ill open up many oppor tunities for the company to utilize that capacit y to create more customer value. This will include del iver i ng sp e c i a l orders , de velopi ng new products, and taking on both new customers and a greater portion of existing customers’ businesses. It w ill enable currently outsourced processes and product ion to be brought back in-house. The financial analysis skills of management accountants can add substant ial value to value streams by assisting w ith continuous improvement and suppor ting value stream leaders through these product and production decisions. While lean accounting greatly simplifies mana g e m e nt a c c o u nt i n g , m a n a g e m e nt accountants can help shape the appropriate level of understanding of product costs, which is dependent on the diversit y of products made by value streams. While a g reat oppor tunit y exists, it w ill require the acquisition of new skills and knowledge in addition to a difficult unlear ning process for many manage-

ment accountants. Management accountants w ill need to embrace the lean philosophy and tools, both on the operations side of the business and in lean accounting. This involves lear ning about lean through reading and attending internal and/or external training. It means participating in lean activities, such as facilitat ing kaizen events (i.e., cont inuous improvement sessions) and attending ge mb a ( workplace ) w a l k s . It re qu i re s lear ning ab out lean account ing , b ot h producing timely, relevant information to suppor t the business and remov ing waste f rom account ing processes. For some, it w ill require unlearning much of what they had lear ned and applied previously in standard costing and reporting. They w ill need to gain a real unders t a n d i n g o f op e r at i o n s , i n c lu d i n g processes through cells, capacit y, and bottlenecks. They w ill need an understanding of the real behav ior of costs (fixed and variable) and w ill need to be able to model the financial implications of different scenarios while remaining cog-

ROLE OF ACCOUNTANTS

JANUARY/FEBRUARY 2016

COST MANAGEMENT

.............................................................................................................................................................................

EXHIBIT 3 A Lean Call to Action for Management and Cost Accountants

45

.............................................................................................................................................................................

46

n i z a nt o f c a p a c i t y c o n s t r a i nt s . T h i s includes learning and apply ing throughput and target costing techniques.

marked against those on the lean journey, thereby highlighting the potential benefits to be gained (see Exhibit 3).

Relevance of lean accounting to management accountants in non-lean enterprises

Conclusions

The limitations of traditional accounting are not limited to organizations that implement lean, as indicated in Relevance Lost. 8 The infor mat ion requirements of lean (the focus on continuous improvement, the elimination of waste, and the restructuring to value streams) magnif y the issues associated w ith traditional accounting and build the impetus for change. It i s n o t a pp rop r i at e fo r n o n - l e a n organizat ions to move to f ull lean accounting without a value stream struct u re or w it hout replac i ng t r ad it iona l cont rols w ith those emb edded in lean and st il l repor t ing hig h inventor y leve l s . Ho w e v e r, t h e r e a r e s t i l l l e s s o n s to b e lear ned by management account a nt s i n ot he r orga n i z at ions . As le a n account ing advo cates have indicated, many of the aspec ts of lean account ing are not new and have b een applied in non-lean organizat ions. 9 For example, beyond budgeting has been a movement aw ay f rom t r adit iona l budge t i ng a nd toward rol l ing fore c as t s a nd t he b a l anced scorecard, made popular by the use of var ious categor ies of financial a n d n o n f i n a n c i a l p e r fo r m a n c e m e a sures to aug ment per for mance repor ti n g . 1 0 L i ke w i s e , t h e n e e d to cons i de r relevant costs and capacity in new product and make-versus-buy decisions has long b een advocated for al l organizat ions. 1 1 The lean account ing movement prov ides insights and successful examples of gett ing r id of s ome t radit ional m a n a ge me nt a ccou nt i ng pr a c t ice s to motivate and guide the way for improvements in other organizat ions. While the implementation of lean must come from the top, management accountants can perform a significant role in building the momentum for the move to le an . Us ing s ome of t he p er for m ance measures common in lean organizations enables non-lean companies to be benchCOST MANAGEMENT

Adapt ing to the requirements of a lean e nte r pr i s e w i l l b e d i f f i c u lt for m a ny management account ants. Not al l w i l l b e able to adapt to the new role. Those that can develop the new skills required w ill gain an in-depth understanding of oper at ional pro cesses and w i l l p ar t icip ate in improv ing the pro duc t ion of p r o du c t s a n d s e r v i c e s t o b e t t e r a d d value for customers. The underst anding gained of the b ehav ior of costs in the organizat ion, cel l and value st ream capacit y, throug hput, and bottlenecks, along w ith acquir ing st rong analy t ical sk i l ls, w i l l enable them to assist company execut ives and value st ream leaders w ith important decisions. Moreover, t h e y w i l l b e a b l e t o u t i l i z e f re e d - u p capacit y, such as pricing special orders, br ing ing outs ourced ser v ices back inhouse, and int ro ducing new pro duc ts. For management accountants in non-lean organizat ions, lear ning and exper iment ing w ith aspec ts of lean accounting and common ly used per for mance measures w il l prov ide insig ht into how management account ing can b e improved and w i l l potent ial ly make a case for implement ing lean. n NOTES 1 The bean counter stereot ype for management account ants has been explored by accounting academics. Some examples include: Friedman, A.L. and Lyne, S.R., The beancounter stereotype: Towards a general model of stereot ype generation, Critical Perspectives of Accounting 12, no. 4 (2001): 423–445; Jar vinen, J., Shifting NPM agendas and management a c c o u n t a n t s’ o c c u p a t i o n a l a g e n d a s , Ac c o u n t i n g , Au d i t i n g a n d A c c o u n t a b i l i t y J o u r n a l 2 2 ( 2 0 0 9 ) : 1187–1210. 2 For more on management account ants evolving into business advisers see for example: Sorenson, J.E., “Management accountants in the United States: Pract i t i o n e r a n d a c a d e m i c v i ew s o f r e c e n t d eve l o p m e n t s ,” H a n d b o o k o f M a n a g e m e n t A c c o u n t i n g Re s e a r ch . C h a p m a n , C . S. , H o p wo o d , A . G . , a n d Shields, M.D. (Eds.), (Amsterdam: Elsevier, 20 09): 1271–1296; Goretzki, L., Strauss, E., and Weber, J., An institutional perspective on the changes in management account ants’ professional role, Management Accounting Research 24 (2013): 41–63. 3 This article gives a ver y high-level description of lean. There are many books that give a more detailed treatment, including: Wormack, J. and Jones, D.T., Lean Thinking: Banish Waste and Create Wealth in Your Corporation. (New York: Free Press, 20 03).

JANUARY/FEBRUARY 2016

ROLE OF ACCOUNTANTS

Johnson, T. and Kaplan, R.S., Relevance Lost: The Rise and Fall of Management Accounting . (Boston: Har vard Business School Press, 1987). 5 The following books provide further information on lean accounting: Cunningham, J.E., Fiume, O., and Adams, E., Real Numbers: Management Accounting in a Lean Organization. (Durham, NC: Managing Times Press, 20 03); Maskell, B., Baggeley, B., and Grasso, L., Practical Lean Accounting: A Proven System for Measuring and Managing the Lean Enterprise. (Boca Raton, FL: CRC Press, 2012); McVay, G., Kennedy, F., and Fullerton, R., Accounting in the Lean Enterprise. (Boca Raton, FL: CRC Press, 2013). 6 Ro s e m a r y Fu l l e r t o n , Fr a n c i s Ke n n e d y, a n d S a l l y Widener studied management accounting, controls, and performance in 244 U.S. manufacturers with an interest in lean manufacturing . Their findings are published as: Fullerton, R., Kennedy, F., and W idener, S., Management accounting and control p r a c t i c e s i n a l e a n m a n u fa c tu r i n g e nv i r o n m e n t , Accounting , Organizations and Societ y 38 (2013):

ROLE OF ACCOUNTANTS

50–71; Fullerton, R., Kennedy, F., and W idener, S., Le a n m a n u fa c tu r i n g a n d f i r m p e r fo r m a n c e : Th e incremental contribution of lean management accounting practices, Journal of Operations Management 32 (2014): 414–428. Their findings may be impacted by the selection of sample companies from attendants at a lean accounting conference. 7 Op. cit. note 5 Maskell. 8 Op. cit. note 4. 9 Op. cit. note 5 Maskell. 10 Hope, J. and Fraser, R., Beyond Budgeting: How Managers Can Break Free from the Annual Performance Tr a p . ( B o s t o n : H a r v a r d B u s i n e s s S ch o o l P r e s s , 20 03); Kaplan, R.S. and Norton, D.P., The Balanced Scorecard: Translating Strategy into Action. (Boston: Har vard Business School Press, 1996). 11 Kaplan, R.S. and Norton, D.P., Cost and Effect: Using Integrated Cost Systems to Drive Profit abilit y and Pe r fo r m a n c e . ( Bo s t o n : H a r va r d B u s i n e s s S ch o o l Press, 1998).

JANUARY/FEBRUARY 2016

COST MANAGEMENT

.............................................................................................................................................................................

4

47

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.