Using Accounting to Enhance Organisational Productivity
| DOI | https://doi.org/10.1108/02635578910132837 |
| Published date | 01 May 1989 |
| Pages | 3-6 |
| Date | 01 May 1989 |
| Author | Steve Mills,Brian H. Kleiner |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
USING ACCOUNTING TO ENHANCE
ORGANISATIONAL PRODUCTIVITY
by
Steve
Mills and
Brian
H. Kleiner
California State
University,
USA
The problem of productivity in the United States is of primary concern to most corporations.
In the years following World War II we were the strongest economy, far outdistancing all foreign
competitors in measures of productivity. In the last 10-15 years, we have seen European and
Asian industrialised countries surpass the United States in growth of overall productivity.
The effect of this has been a renewed commitment among many corporations in America
to find and implement methods to improve productivity. The accounting profession is playing
a major role in the quest for methods to improve productivity as well as establishing systems
which should serve to promote or enhance productivity in organisations.
The ways that accounting enhances productivity are:
(1) through its feedback or reporting role;
(2) through its control role;
(3) through its advisory role, and
(4) through its role in establishing systems.
Reporting Role
The reporting or feedback role is that most familiar
to the majority of people. Accountants prepare
financial statements which report the results of
operations for the business. These reports take the
form of income statements, balance sheets and
statements of changes in financial position. Many
other summarised reports are also prepared by
accountants which provide information to various
segments inside and outside the business. Those
responsible for production need to know how they
are doing in order to maintain or improve
productivity. Some may refer to this role as
"scorekeeper". According to management
consultant Daniel R. Murray:
Scorekeeping is underrated. Scorekeeping is
important, and it is not simply a matter of tallying
points and publishing results. Good scorekeeping
entails skills at selecting the right information and
presenting it in a manner that results in effective
action by those who have line management
authority[1].
The reporting of results does not have to be dull
and mundane. For instance, at Dayton Power and
Light Company, the accounting department
presented a television news programme on
videotape. The show had employees acting as
anchorpersons, reporters, writers, directors, and
producers. The stories involved a meter reader on
his rounds, an employee discovering power theft,
safety and health reports on problems that could
lead to absenteeism. The anchor team then
reported the month-to-date and year-to-date
statistics on corporate goals, as if they were game
scores[2].
Cost accounting is another area of accounting
which can be used to enhance productivity. By
reporting variances from pre-established
standards, cost accounting provides useful
measures to production personnel. Certain
innovations are taking place in cost accounting
which should make it more effective as a tool to
enhance productivity. An organisation called
Computer Aided Manufacturing International,
comprising members from some 30 manufacturers
such as Rockwell, Eastman Kodak, and General
Electric, is developing a conceptual framework to
update cost management systems. This involves
allocating overheads to products in a manner more
reflective of the true costs which go into a
product[3]. Accurate cost information can give a
company a competitive advantage. At IBM, new
production layouts have enabled cost accountants
to identify most overhead charges to particular
products. They have managed to reduce the
percentage of overheads which has to be allocated
from 75 per cent to 25 per cent[3]. This allows
for better pricing decisions as well as better
resource allocation.
IMDS
Number 5
1989
3
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