Changing Accounting Systems to Support the Conversion and Management of a Continuous Improvement Business Culture

Abstract

While the need for, and the value of, Continuous Improvement (CI) Management in practice is well established; their successful implementation has proven problematic. Employee resistance, due to business cultural incompatibility, is considered a major cause. Unfortunately, current budgeting systems are not compatible with either implementation or management of CI. This paper uses innovative action research to combine research from production, accounting, and learning, to develop an accounting solution to this problem. The paper develops a theoretical justification for re-designing the accounting system to accommodate a formal continuous improvement process designed to teach employees a new business culture. The second part of the paper illustrates a process based product costing system designed for strategic decision making and planning in an 'in-process' improvement environment. By shifting from a scientific management strategy to a continuous improvement strategy the definitions of cost standards, product and period costs and out-sourcing criteria are challenged.

Keywords: Management Accounting, Continuous improvement, cultural change

JEL Classification: L23, L6, M11, M14, M4, M54, 03, 031, 032