The role of performance measures and incentive systems in relation to the degree of JIT implementation

The shift to world-class manufacturing strategies has necessitated complementary changes in management accounting systems (MAS). Using survey data obtained from top manufacturing executives at 253 US firms, this study empirically examines the relationship between the level of just-in-time (JIT) practices implemented by US manufacturing firms and the performance measures and incentive systems that are incorporated in their MAS. The statistical tests provide empirical evidence that the use of non-traditional performance measures such as bottom-up measures, product quality, and vendor quality, as well as incentive systems of employee empowerment and compensation rewards for quality production are related to the degree of JIT practices implemented.     

The use of organic models of control in JIT firms: generalising Woodward’s findings to modern manufacturing practices

Prior research indicates that technology plays an important role in the determination of management control systems. A fully developed JIT system represents a radical departure from the traditional approach to organising and managing mass production. In probing the management control implications of JIT, this study extends some well-established concepts from organisation theory to the modern manufacturing practices literature to develop a framework which suggests that mass production firms adopting JIT (a new technology) must abandon a mechanistic management control system and adopt an organic model of control. Findings from three case studies describing the control structures used in JIT firms are also presented as part of the theoretical and hypothesis development. In addition, survey results are reported which are highly consistent with the framework, indicating that Woodward’s findings (Industrial organization: theory and practice (2nd ed.). Oxford: Oxford University Press.) generalise (are robust) to a new technology. Finally, a preliminary examination into whether improvements in certain key areas are higher for those JIT firms utilising an organic model of management was performed and found to be consistent with expectations.     

Pedagogical cases in the strategic development of management accounting systems

Discussion of the ‘lost relevance’ of management accounting and the ‘gap’ between theory and practice has focused the criticism that management accounting education is built round a set of techniques applied in simplified settings. One reason for this may be the scarcity of case studies, discussing management accounting practices, which may be adopted in classroom situations. The recent promotion of ABC, throughput accounting, just-in-time (JIT) methods and performance measures to support modern manufacturing provide additional educational challenges relating to the integration of these into the accounting curriculum. There is a danger that these may also be developed as other techniques to be learned in isolated situations rather than to be applied selectively by organizations in appropriate situations. This paper offers two case studies which support class discussion of accounting requirements within a modern manufacturing and commercial environment. The cases emphasize that any one technique is inappropriate to all situations. They force examination of manufacturing and marketing policy and strategy in the development of appropriate management accounting information. The authors' experiences of using the case studies is evaluated, to determine the strengths and weaknesses of using the non-numerical cases as a basis for class discussion of contextual factors in accounting system design.     

Innovation in entrepreneurial organisations: A platform for contemporary management change and a value creator

PurposeThis article examines the significance of innovation to organisations following strategies of entrepreneurial orientation. In particular, the study looks at the significance innovation adds to the implementation of contemporary management control systems (MCSs) and to improved performance in these organisations.Design/methodology/approachA quantitative analysis was conducted based on a random sample of Australian manufacturing companies. A structural equation modelling approach was adopted to test the study hypotheses.FindingsResults suggest that innovation mediates the relationships between entrepreneurial strategy and each of participative budgeting, the balanced score card (BSC), total quality management (TQM), just in time (JIT), and organisational performance. The study does not indicate a significant relationship between entrepreneurial strategy and activity based costing (ABC), even when innovation is in place.Originality/valueThe study empirically tests the vital role of innovation in the organisational adaptive cycle to entrepreneurial strategies, described earlier by Miles and Snow (1978). Further, the study validates a multi-dimensional strategy model first suggested by Langfield-Smith (1997).     

JUST-IN-TIME PRODUCTION,AUTOMATION, COST ALLOCATION PRACTICES AND IMPORTANCE OF COST INFORMATION: AN EMPIRICAL INVESTIGATION IN NEW ZEALAND-BASED MANUFACTURING ORGANIZATIONS

This paper is based on an empirical study of the relationship between Just-in-Time (JIT) production, automation, cost allocation practices and the relative use of cost information for making and evaluating managerial decisions. The study uses a survey questionnaire to collect data from a random sample of New Zealand-based manufacturing organizations. Hypotheses were tested using bivariate tests and multiple regression analysis. The results indicate that the choice of activity-based cost allocations is negatively associated with the extent to which firms use a JIT approach to manufacturing, but positively associated with increased automation in the factory, as hypothesized. Furthermore, the increased use of JIT production is found to be associated with the decreased use of detailed costing information. The study found some support for the hypothesis that increased automation is associated with the increased use of costing information for managerial decisions.     

Management accounting and control practices in a lean manufacturing environment

A lean strategy is rapidly becoming the dominant paradigm in manufacturing. Kennedy and Widener (2008) use a case study to develop a theoretical framework of management accounting and control practices for firms following a lean manufacturing strategy. We build on Kennedy and Widener (2008) by examining a structural equation model that provides evidence on the extent to which a lean manufacturing implementation is related to five management accounting and control practices. Using survey data from 244 US companies with an interest in lean manufacturing, we find a direct positive relation between the extent of a lean manufacturing implementation and a simplified strategic reporting system, value stream costing, visual performance measurement information, and employee empowerment. We find a direct negative relation with inventory tracking; however, we find it is conditional on the extent of top management support for change in production strategies such that firms decrease reliance on inventory tracking in the presence of strong management support. We also conclude that the management accounting and control practices work together as a package in a lean manufacturing environment as evidenced by the many direct associations among the five management accounting and control practices.     

JIT performance effects: A research note

This paper uses a sample of 131 just-in-time (JIT) firms and their matched non-JIT firms to examine whether adoption of JIT improves firm performance. Tobin's Q and return on assets (ROA) are used to measure firm performance. Overall, the results indicate that statistically significant differences in Tobin's Q and ROA were observed in a pre- and post-test of JIT adopters and between matched non-JIT adopters.     

A LONGITUDINAL STUDY OF CHANGE IN THE ENGLISH NATIONAL HEALTH SERVICE

This paper reports the findings of a longitudinal comparative case study of three National Health Service (NHS) hospital Trusts in England, investigating the perceptions of clinical, managerial and accounting professionals towards changing cost accounting and performance measurement practices. It incorporates both qualitative and quantitative data analysis, and is based on a contextualist understanding of change management, utilising the content‐process‐context approach (Pettigrew and Lapsley, 1994) to investigate the influence of receptive versus non‐receptive contexts on change. The analysis reveals limited success in improving performance measurement practices (the content of change) in Trusts. Nevertheless the specific context within which change was operationalised was found to be very important, with central mangers playing a key role in influencing change. The process of change indicated slow shifts in clinical‐accountant‐managerial relations, partly driven by changes in financial flows within the organisations.     

Management accounting practices in Europe: a perspective from the States

I provide a perspective from the States on four questions primarily based on information inManagement Accounting: European Perspectivesedited by Al Bhimani (1996). First, seven factors are identified as having shaped management accounting practices in European nations—academics, education, government, professional associations, consultants, technology, and the inter-nation transfer of information. Second, evidence supports the view that, across European nations, more changes are occurring in management accounting practice terminology and techniques than in the purposes and styles of using management accounting techniques. Third, evidence indicates that there is convergence across European nations in management accounting practices, especially in terminology and techniques, but less convergence in the purposes and styles of using techniques. Fourth, management accounting practices in European nations, particularly terminology and techniques, is converging on a global management accounting practice model. I propose that management accounting practices—particularly terminology and techniques—is converging across nations (at least for those firms that are affected by the global economy)anddiverging across industries both within and between nations.     

Status and incentives

This article introduces status as reflecting an agent's claim to recognition in her work. This is a scarce resource: increasing an agent's status requires that another agent's status be decreased. Higher‐status agents are more willing to exert effort in exchange for money; better‐paid agents would exert higher effort in exchange for improved status. The results are consistent with actual management practices: (i) egalitarianism is desirable in a static context; (ii) in a long‐term work relationship, juniors' compensation is delayed; and (iii) past performance is rewarded by pay increases along with improved status within the organization's hierarchy.     

Constructing institutional performance: a multi-level framing perspective on performance measurement and management

Research on performance measurement and management (PMM) informed by institutional theory has proliferated over the past two decades. Much of this research has concentrated on the institutional effects on organisational PMM practices and their consequences for organisational behaviour and has only recently started to pay more focussed attention to the effects of such practices on the construction of the very conceptions of performance that come to dominate institutional fields. To further integrative theory development, I pull these strands of research together into an analytical framework pivoting on the concept of institutional performance. Institutional performance is defined as the socially constructed conceptions of organisational performance that become firmly institutionalised as legitimate aspects of achievement in institutional fields. Adopting a multi-level framing perspective, I develop a set of research propositions reflecting how contradictory PMM practices, emerging in response to the institutional complexity attributable to heterogeneous and competing constituency demands, shape such conceptions of performance and how this contributes to reducing or reinforcing institutional complexity over time. I discuss the implications of applying this framework in empirical research and the contributions to institutional research on PMM as well as institutional theory, more generally, that may emerge from such research.     

Ordering collective performance manipulation practices: How do leaders manipulate financial reporting figures in conglomerates?

This article explores some of the resources, tactics and skills used by managers involved in the manipulation of performance reporting by looking at management accounting practices in a conglomerate. Prior research on reporting manipulation in large corporations has focused on why executives manipulate figures. The present paper documents how BU leaders compensate for the uncertainties impacting the performance of their activities. Empirical evidence comes from a field study of a diversified French conglomerate. Performance reporting practices within and between a parent company and two subsidiaries are analyzed. The article shows that the conglomerate constitutes a strategic action field (Fligstein and McAdam, 2011) where skillful group leaders use the resources granted by their power position to frame other actors’ interests and identities to initiate stable cooperation around manipulation practices. This study clarifies the collective and collaborative dimensions of practices granting greater control over reporting figures.     

Adoption of activity management practices in public sector organizations

This paper examines the extent to which activity management practices are adopted by Australian public sector organizations at each of Gosselin's (1997) levels of Activity Analysis, Activity Cost Analysis, and Activity‐based Costing. The present paper replicates Baird et al. (2004), thereby enabling a comparison of the extent of adoption of activity management in the public sector with that reported in the private sector in Baird et al. (2004). The results reveal that the adoption of higher level activity management practices (Activity Cost Analysis and Activity‐based Costing) is less prevalent in public sector organizations, whereas they adopt Activity Analysis to the same extent as the private sector.     

The role of manufacturing practices in mediating the impact of activity-based costing on plant performance

We study the impact of activity-based costing (ABC) on adoption of world-class manufacturing (WCM) practices and plant performance. In contrast to earlier research that estimates the direct impact of ABC on plant performance, we develop an alternative research model to study the role of world-class manufacturing practices as a mediator of the impact of ABC. Analysis of data from a large cross-sectional sample of US manufacturing plants indicates that ABC has no significant direct impact on plant performance, as measured by improvements in unit manufacturing costs, cycle time, and product quality. We find, however, that WCM practices completely mediate the positive impact of ABC on plant performance, and thus advanced manufacturing capabilities represent a critical missing link in understanding the overall impact of ABC. Our results provide a different conceptual lens to evaluate the relationship between ABC adoption and plant performance, and suggest that ABC adoption by itself does not improve plant performance.     

Technologies of government in public sector's networks: In search of cooperation through management control innovations

In recent years, the public sector has been the subject of a thorough reassessment in a significant number of countries. During this process of modernization, issues such as inter-organizational collaboration and managerial innovation have been progressively placed at the forefront of practice and research. In particular, a number of countries have recently re-organized their public sectors around more or less formalized networks or hybrid inter-organizational forms, which are often led by a regulatory body and governed by a cooperation agreement. The literature on inter-organizational relationships in the public sector has evolved alongside the development of such cooperation agreements and innovative forms of organizing. Nevertheless, despite the fact that networks formed by public organizations, not-for-profit organizations, and private firms provide important services to their relevant communities, limited attention has been dedicated to studying the role of management control practices within inter-organizational relationships in public organizations. This is an important gap in the existing literature that this Special Issue intends to address. For this reason, and most importantly because public sector forms of inter-organizational collaborations are likely to differ significantly from those observed in the private sector, in the first part of this Editorial we draw attention to some of the themes that characterize the management and control of inter-organizational relations in the domain of public administration. Next, we introduce the six papers which comprise this Special Issue, and we briefly illustrate how each of them enhances our understanding of the role of control systems within public sector networks. Building on the empirical evidence and theoretical arguments offered by these studies, and after a brief review on the possible alternative ways of conceptualizing the process of adopting new management practices, we point to the further research that needs to be done if we are to understand the role that management control practices play in public sector networks. In particular, we suggest that there is a need to look inside management control practices, to explore what these practices are and, how and why they enable the cooperative “ideal” to become real, as well as to stimulate or hinder opportunities for public sector managerial innovation. It is concluded that there are a number of issues yet to be explored if we are to deepen our understanding of the formal and informal mechanisms of control which are the active elements of the so-called “regulatory hybrids” in the public sector.     

The relationship between strategic priorities,management techniques and management accounting: an empirical investigation using a systems approach

The study examines how combinations of management techniques and management accounting practices enhance the performance of organizations, under particular strategic priorities. Companies were identified as emphasizing product differentiation, low price strategies or a combination of both. Management techniques included in the study were improving existing processes; quality systems; manufacturing systems innovations; integrating systems; team-based structures and human resource management policies. Management accounting practices important in assisting managers implement management techniques were traditional management accounting techniques; activity-based techniques; balanced performance measures; employee-based measures; benchmarking and strategic planning. A systems approach, using cluster analysis, was used to examine hypothesized associations between performance and a range of management techniques and management accounting practices, under various strategic orientations. This provided a method to examine the way in which the entire range of variables combined to affect performance.     

Accounting for Fair Competition between Private and Public Sector Armaments Manufacturers in Victorian Britain

Failures in rifle supply during the Crimean War (1853–56) caused the British government to seek a more reliable method for procuring weapons for military use. Fact‐finding missions to US rifle manufacturers led to the introduction of the ‘American system of manufacturing’ at a purpose‐built factory in north London. The extension of gun‐making facilities at the Royal Small Arms Factory, Enfield Lock, was accompanied by major accounting innovations driven by society's desire for ‘cheap and efficient’ government and, within a laissez‐faire environment, the need to ensure fair competition between private and public suppliers of military goods. Accounting practices based on ‘strictly commercial principles’ were then disseminated to other government military manufacturing establishments located at the Woolwich Arsenal. The historical knowledge revealed in this paper adds a new dimension to existing accounting historiography, which focuses principally on the business sector as the driving force for accounting change in Britain.     

Customer-focused manufacturing strategy and the use of operations-based non-financial performance measures: A research note

This note follows and extends Abernethy and Lillis (Accounting, Organizations and Society, 1995) by examining: (i) whether firms which maintain a customer-focused manufacturing strategy also maintain an emphasis on non-financial (operations-based) measures in their performance measurement systems; and (ii) whether such an emphasis is associated with enhanced performance for those firms. Data are obtained via questionnaire survey of a random sample of manufacturing firms in Sydney, Australia. Support is found for the hypothesized association between customer-focus strategy and the use of non-financial performance measures (and hence for Abernethy and Lillis) but not for the link to organizational performance.     

Examining Management Accounting Change as Rules and Routines: The Effect of Rule Precision

This study examines change in management accounting practices as change in rules and routines. Informed by the institutional theory‐inspired framework of Burns and Scapens (2000) , the rules and routines relating to capital expenditure controls in a capital‐intensive organisation are analysed. We explain how preciseness of rules affects not only the coupling of rules to routines, but also the emergence of multiple routines, enhancing the understanding of how management accounting practices remain stable and/or change over time. These results extend and refine recent research relating to management accounting change and offer new empirical insights into practice.     

Management quality and the cost of debt: Does management matter to lenders?

This paper investigates the effect of organizational capital, typified by various management practices within a firm, on the cost of external debt financing. Using a sample of medium-sized manufacturing firms in the US, we find that better management practices enhance a firm’s external financing capacity by lowering the firm’s cost of bank loans. We do not find any evidence that the lower loan cost of a high-quality-management firm is associated with more restrictive non-price contract terms such as greater collateral requirements and stricter covenants. These results suggest that banks explicitly take into account the risk arising from poor management practices when pricing and designing debt contracts.