Traditional Management Accounting in Process-oriented Manufacturing: Frictions In a World of Bearings -A case study of SKF

Abstract

Background and problem: In recent years many firms are adopting new process-­‐oriented systems and concepts to become more competitive. The emergence of these concepts, such as lean production, has put the traditional Management Accounting System (MAS) in a challenging situation where it is argued to give birth to potential conflicts and harm the application of new operational concepts. Decades of criticism have led to the development and discussion of lean accounting and control, suggesting a more appropriate use of MAS. Research reveals, however, that traditional MAS remain popular in practice. Although the general critique towards traditional MAS is overwhelming, our literature review displays very few articles describing the concrete implications, such as how and where in the organization they appear. As a result of this we will attempt to contribute to existing research by investigate where conflicts appear, how they are handled, and if different design and use of the MAS at different hierarchic levels may help to manage these potential problems. Aim of study: The purpose of this thesis is to increase the understanding of potential conflicts between the use of traditional management accounting and a process-­‐orientation. The second purpose is to initiate a discussion on how the organizational dimension can contribute to this subject. Methodology: We have chosen to conduct a qualitative case study in order to answer questions such as “why” and “how”. The data was collected through semi-­‐structured interviews, and the theoretical framework is built on well-­‐ established theories connected to our research question. Six interviews and two observations were performed at different hierarchical levels at the case company. Analysis and Conclusion: The design of the harmful MAS was in broad terms concurring to theory. Although, direct conflicts were, to a great extent, prevented through the use of lean controls and other control instruments. Moreover, we discovered that the organizational design and different use of MAS at different levels could further help to prevent direct conflicts. In addition, this case study resulted in three interesting findings: (1) traditional MAS with a coercive approach to control served to ’individualize’ accountability, (2) the process-­‐ orientation was, in direct contrast to lean literature, ensured by centralization of decision-­‐making, and (3) communication was important to balance between the two perspectives of accountability and process-­‐orientation.