The diffusion and maintenance of a lean accounting
and control network
Master Thesis
Rudolf Breddels
S 2732688
23 January 2017
University of Groningen
MSc. Business Administration:
Organizational and Management Control
Supervisor: dr. M.P. van der Steen
Co-supervisor: dr. R.C. Trapp
Abstract
The field is increasingly paying attention to lean manufacturing. Prior literature argued that traditional control may develop tensions in a lean setting. Several papers propose to use lean accounting and control (LAC). LAC is based on lean principles and is propagated as a method to deal with the
tensions mentioned above. A limited number of papers studied these techniques in practice. This paper answers the call for more research on the diffusion of lean accounting and control in practice.
Therefore, the research question of this paper is: ‘How is lean accounting and control diffused and maintained in a lean environment?’ To answer this question, three case studies are used to explore the highs and lows of the implementation process. This paper contributes to our understanding of control systems in advanced manufacturing plants. The findings show that current literature is incomplete about the contribution of LAC. Besides dealing with tensions, LAC is capable of improving the communication structure, reducing the costs of indirect processes and increase the transparency of MA processes. Key in diffusion of LAC are the managerial actors, who are naturally capable of attracting other actors like power, resource and human-actors to their network. The stability of a network is not guaranteed once the network becomes an obligatory passage point. Active maintenance in the form of dedicated actors are required to keep the network stable.
Keywords
Actor-network theory, management control systems, lean accounting, lean control.
Acknowledgements
The author gratefully acknowledges the help of his supervisor, dr. M.P. van der Steen, who generously shared his knowledge and provided inspiration. The author would also like to thank his second
1. Introduction
In recent years, lean manufacturing has become one of the most influential production systems
(Fullerton, Kennedy, & Widener, 2013; Huxley, Robertson, & Rinehart, 1998; Kristensen & Israelsen, 2014). Lean manufacturing is a business system innovation with the intention to increase productivity and product quality (Bhasin & Burcher, 2006; Holweg, 2007). The quality of products is improved by examining the production process from the perspective of the customer. The processes are
continuously redesigned according to this perspective, and in such a way that every process
contributes to the value of the product (Woehrle & Abou-Shady, 2010; Womack & Jones, 2003). Lean strives to be a pull-strategy instead of traditional mass production (Elliott, 2001; Lu, Yang, & Wang, 2011; Womack & Jones, 2003).
Authors recognize that firms encounter issues with traditional management control systems (MCS) while implementing lean production systems (Åhlström & Karlsson, 1996; Chiarini, 2012; Fullerton et al., 2013). Control systems are processes that managers use to ensure that organizational members with varying interests work together in an effective and efficient way to reach the
organizational goals (Anthony, 1965; Langfield-Smith, 1997). Traditional control systems are based on traditional manufacturing concepts, which differ from lean thinking (Brimson, 1987; Brimson & Berliner, 1987; Haskin, 2010; Johnson, 2006; Maskell, Baggaley, & Grasso, 2012; Woehrle & Abou-Shady, 2010). Lean thinking is based on operational, non-financial information and employee
empowerment, in contrast to traditional financial control and hierarchical power (Forza, 2009; Malmi & Brown, 2008; Tillema & van der Steen, 2015; Woehrle & Abou-Shady, 2010).
Alternate accounting and control practices have been suggested by the literature. Lean accounting and control (LAC) are methods that are developed around lean thinking (Kennedy & Widener, 2008; Maskell & Baggaley, 2004, 2006). Lean control is better equipped to capture lean results, which may go unnoticed by traditional controls systems (Brosnahan, 2008; Sale & Inman, 2003). Lean control systems focus less on financial information. Furthermore, they aim to provide more accurate, frequent and understandable information (Maskell & Kennedy, 2007). In lean
accounting there is a reduction of steps in transaction processes, standard costs are replaced by actual costs and cost allocation is eliminated or strongly reduced (Kennedy & Widener, 2008).
production managers use lean control while higher hierarchical levels use traditional control methods. This leads to an organization where multiple concepts of control exist, which may cause tensions (Tillema & van der Steen, 2015).
Despite the LAC concepts that are suggested by literature (Kennedy & Widener, 2008; Maskell & Baggaley, 2004, 2006; Maskell & Kennedy, 2007), the number of papers studying LAC in a practical environment are limited. Lean control practices have been researched by Kennedy and Widener (2008) and Fullerton et al. (2013) who contributed one of the earlier empirical evidence of LAC. These papers suggest that lean control practices affect each other and should be studied as a package. Tillema and van der Steen (2015) take a more critical approach and suggest that a fundamental resolution to the tensions is not required, instead organizations can also deal with the tensions by learning how to cope with localized tensions.
An area of LAC that has not yet been studied is the implementation process of LAC. This remains an important subject to study as the implementation process of MA innovations is a delicate process. The success of a MA innovation is based on its ability to serve the temporary interests of various actors, rather than the adoption of its technical characteristics (Baxter & Chua, 2003; Berry, Coad, Harris, Otley, & Stringer, 2009; Chua, 1995). In this view, generating insufficient support amongst organizational members is a reason for MA implementation failure (Briers & Chua, 2001; Sarker, Sarker, & Sidorova, 2006; Siverbo, 2014). Conversely, by generating enough support for the innovation, short-term weaknesses of the innovation can be overcome (Briers & Chua, 2001). Furthermore, it has been argued that MA is coupled with routines and knowledge of organizational members (Burns & Scapens, 2000). This provides stability, but also leads to resistance to change. Resistance and organizational inertia is especially high when the knowledge and routines collapse with unfamiliar logic of new accounting rules (van der Steen, 2009). It is unknown whether LAC faces the same issues during the diffusion process despite it is being used to solve tensions in organizations. To fill this research gap, this paper will explore how LAC innovations are diffused and maintained in organizations.
This research contributes to the literature in three ways. First, the thesis answers to the call of Kennedy and Widener (2008) to research the implementation process of LAC. Research on the implementation process of LAC has not yet been conducted. Therefore, case studies on this diffusion process will add to our understanding of control systems in a lean setting. Second, with every MA innovation promoted by consulting literature, the question rises whether the new method is
fundamentally different than traditional accounting (Ittner & Larcker, 2001). This thesis contributes by studying the innovation critically, counterbalancing LAC promotions by consultants. Third, the thesis contributes by providing a detailed analysis of actor-networks instead of generating theory on
implementing MA change. It also provides an interpretive case study rather than positivist research. The third contribution may be found beneficial by practitioners (March, Olsen, & Axelsson, 1977; Merchant & Stede, 2006).
2. Literature review
2.1 Lean thinking
Lean manufacturing became widely known when European car manufacturers explored why Toyota was doing so well (Holweg, 2007). It became evident that the Japanese car manufacturer developed an effective way to produce automobiles. Ever since, the manufacturing approach that became known as lean, became a popular production system (Fullerton et al., 2013; Pedersen & Huniche, 2011). In lean, organizations examine value from the perspective of the customer (Womack & Jones, 1994, 2003). Processes are redesigned to deliver products according to this value (Woehrle & Abou-Shady, 2010). Processes that do not contribute value to the product will be eliminated. Contrary to traditional production methods which are based on mass production, lean is ideally based on pull-strategy, where production is demand-driven (Elliott, 2001; Lu et al., 2011; Womack & Jones, 2003).
Lean manufacturing encompasses four advanced manufacturing technique bundles, namely: just-in-time, total quality management, total preventative maintenance (Kennedy & Widener, 2008), and human resource management (Cua, McKone, & Schroeder, 2001; Kennedy & Widener, 2008; Shah & Ward, 2003). Just-in-time is an inventory system where required materials are delivered at the moment when the production process requires them. The advantage of just-in-time is that inventory costs are eliminated, as these costs are not perceived as value to the customers (Haskin, 2010; Huson & Nanda, 1995). Total quality management is a systematically and continuous problem-solving technique that focusses on improving the quality of processes and products (Ittner & Larcker, 1996). Important aspects of total quality management are the customer perspective, employee training and participation, and a strong focus on production process management and product design quality. Total preventative maintenance encompasses practices to plan predictive and preventive maintenance of equipment by using maintenance optimization techniques (Cua et al., 2001; Shah & Ward, 2003). Human resource management includes practices to change employees mind-set towards lean thinking. Practices like flexible, cross-functional work force and self-directing work teams are included (Shah & Ward, 2003).
2.2 Lean accounting and control
In this paper I define traditional MCS as the control systems of traditional manufacturing systems like Fordism. Fordism is a production system based on mass production, standardization and low-cost products (Forza, 2009; Smeds, 1994). Traditional MCS are based on hierarchical power and financial information (Forza, 2009; Malmi & Brown, 2008; Tillema & van der Steen, 2015; Woehrle & Abou-Shady, 2010). Traditional MCS are not equipped to recognize the operational benefits of lean manufacturing (Åhlström & Karlsson, 1996; Fullerton et al., 2013). Additionally, traditional MCS notice financial improvements with a latency, which may lead to rejection of lean innovations before the result is recognized (Chiarini, 2012). Therefore, traditional control systems are not fit to control lean manufacturing (Maskell & Baggaley, 2006; Maskell & Kennedy, 2007; Tillema & van der Steen, 2015; Woehrle & Abou-Shady, 2010). Literature proposed changes to traditional MCS which are defined as lean accounting and control (LAC) (Brimson, 1987; Brimson & Berliner, 1987). LAC reflects the fundamentals of lean thinking. Lean control systems differ in various areas from traditional MCS. The foremost differences are how the workforce and production flow is controlled by financial and non-financial measures (de Treville & Antonakis, 2006; Shah & Ward, 2003; Woehrle & Abou-Shady, 2010).
In this research control mechanisms will be researched as a package (Malmi & Brown, 2008). I draw on Kennedy and Widener (2008) for three control mechanisms in lean organizations:
behavioural control, output control and social control. First of all, behavioural controls are standard operating procedures. Standard operating procedures should not be seen as strict working instructions, but rather as a description of how products flow through the system (Kristensen & Israelsen, 2014). The goal of standard operating procedures is to align all organizations members’ work practice to the current best practice. It ensures a steady flow of products (Kennedy & Widener, 2008) and contributes to the quality of products (Rondeau, Vonderembse, & Ragu-Nathan, 2000). In lean, standard operating procedures are open for continuous improvements by empowered employees (Ahrens & Chapman, 2004).
The second control mechanism is output control. Measures for output control in lean
The third and last control system is social control. Social control encompasses four social mechanisms. These mechanisms are training, empowerment, peer pressure and visualization
(Kennedy & Widener, 2008; Kristensen & Israelsen, 2014). Training is used to increase the skillset of the workforce, which is required for lean (Dean & Snell, 1991). Empowerment means that the
organization motivates the employees to troubleshoot problems, improve quality and redesign the product flow. Peer pressure is based on motivation and horizontal incentive schemes, which are supported by sanctions, enforceable side-contracting and team identity (Fullerton & McWatters, 2002; Ittner & Larcker, 1996; Towry & Fallis, 2003). Lastly, visualization encompasses mechanisms to increase transparency throughout the organization. This includes physical measurements like removing walls, making inventory visible, and showing work flow by paintings on the shop floor (Adler & Borys, 1996). Besides this, visualization also includes accounting measurements like showing accounting information on the work floor (Kristensen & Israelsen, 2014).
The process of creating informational reports by gathering and aggregating data in a meaningful manner is called accounting (Kennedy & Widener, 2008). The techniques of lean accounting are not different from traditional accounting, however the underlying principles change. According to Maskell & Kennedy (2007) these changes are necessary to meet the following demands: Firstly, the measures of lean accounting have to be based on non-financial operation measures, in contrast to financial-based measures for traditional accounting. Secondly, traditional cost systems like standard costing or ABC have to be replaced by lean accounting systems like VSM. Thirdly, decision making, like make-or-buy decisions, have to be based on lean principles (Haskin, 2010). Fourthly, lean accounting information has to be understandable for everyone in the organization, not only to a few specialized employees. Fifthly, accounting systems like actual versus standard costs have to be replaced by lean control systems as their complexity is no longer relevant. Lastly, the focus of the accounting system has to change from cost-oriented to customer value-oriented. Costs and earnings remain important on lean, however the attention is mainly focused towards the customer value.
Besides this, wasteful and unnecessary transactions in lean accounting are also eliminated while maintaining financial control over the organization and comply to the local GAAP (Laura, 2009; Maskell & Kennedy, 2007).
2.3 Management accounting change
Research on LAC focuses mostly towards its technical characteristics (Kennedy & Widener, 2008; Maskell & Baggaley, 2004, 2006). Although these papers describe what lean control is and why it is required in lean organizations, they provide little insight in how lean control innovations should be implemented in organizations. MA innovations have been shown to induce social and political challenges besides technical implications (Briers & Chua, 2001). The social and political impact of MA change is caused by the institutionalization potential of MA (Burns & Scapens, 2000).
Tillmann & Goddard, 2008). Sense-making refers to the attempt to understand reality through the use of accounting numbers. Therefore, MA numbers are perceived by the organization as reality, and are used to base decisions on (Tillmann & Goddard, 2008). Aside from the sense-making function, the MCS is also used as a carrier of organizational know how (Burns & Scapens, 2000). This brings stability to the organization. However, stability of existing accounting practices are paired with organizational inertia towards new accounting practices (Burns & Scapens, 2000). This organizational inertia is especially explicit when the knowledge and MA routines collapse with unfamiliar logic of new accounting rules (van der Steen, 2009).
Alternative research studies make comparable conclusions about the challenges of MA change. Studies in this literature field show that there are two critical moments in the change process. Firstly, organizations need to identify relevant stakeholders and their interests (Sarker et al., 2006). Neglecting to identify relevant stakeholders can form difficulties, which may surface later during the implementation process (e.g. Pipan & Czarniawska, 2010; Sarker et al., 2006). Secondly, generating support amongst these relevant actors for the change is critical to create sufficient commitment and sponsorship for the innovation (e.g. Briers & Chua, 2001; Sarker et al., 2006). Unsupportive actors may resist to cooperate with the innovation (e.g. Siverbo, 2014). Both commitment and sponsorship are required to overcome temporal barriers that pair the implementation phase and make the
innovation succeed (Briers & Chua, 2001). Although the authors mentioned above did not explicitly mention that their theories relate to LAC innovations, I will adopt the underlying principles in my research on LAC.
As literature on LAC remains scarce, I will explore how LAC is diffused and maintained in a lean environment by using alternative research concepts. Actor-network theory (ANT) will be used to research this complexity of social and political relations.
2.4 Actor-network theory
Latour (1987) suggests that innovations, such as LAC, do not spread from organization to organization once they are proven as ‘best practice’. Instead, the process is much more fragile and under the
influence of many factors (Ahrens & Chapman, 2007). ANT may be described more as a collection of social terms or a methodological approach than a theory (Ahrens & Chapman, 2007; Scapens & Bromwich, 2010). ANT is frequently used in both lean (e.g. Langstrand, 2012; Papadopoulos & Merali, 2008; Papadopoulos, Radnor, & Merali, 2011) and management accounting research (e.g. Ahrens & Chapman, 2007; Alcouffe et al., 2008; Briers & Chua, 2001; Mouritsen et al., 2001; Pipan & Czarniawska, 2010). This thesis does not contribute to ANT. Instead, ANT is used as a theoretical framework.
process of translation, actors adjust themselves to the network, but the network is also affected by this process (Steiner, 1998). Therefore, the process of translation reacts to the local context and acts differently in every situation (Law, 1992)
Translation theory is built around three concepts, which are heterogeneity, relationality and performativity (Latour, 1987; Law, 1999; Mouritsen et al., 2001). Heterogeneity assumes that a network of relations is set up by different types of actors. These can be human or non-human, like employees, consultants or IT software. External or internal, as a network may cross borders between organizations (Briers & Chua, 2001). And finally, actors can be strategic and operational, like high level executives or production employees. Furthermore, relationality implies that the diffusion of an innovation is the effect of relations amongst actors, rather than a planned result (Callon, 1984; Mouritsen et al., 2001). In the theoretical scope of ANT, every actor has a unique agenda and the actors use the network tool-wise to accomplish their own goals. Moreover, performativity implies that the relations between actors fluctuate continuously. Therefore, every actor is actively contributing to the stability and dynamics of the network. This leads to a continuous change process that is never finished, it will only reach a temporary state of being (Callon, 1984; Law, 1992).
2.5 Four stages of translation
Based on the conceptualization of Callon (1984), the process of translation involves four overlapping stages (Alcouffe et al., 2008; Langstrand, 2012; Mouritsen et al., 2001). These are problematization, interessement, enrolment and mobilization, which will be described below.
In the problematization stage, the initiator defines the problem from his own point of view. He searches for other relevant actors which are affected by the issue. After identifying the relevant actors, the initiator develops a strategy to deal with his defined problem. The strategy becomes the obligatory passage point (OPP) (Callon, 1984; Sarker et al., 2006). The initiator places the OPP in such a way that it has the ability to deal with the issues of the identified relevant actors. Although the innovation has been developed in MA literature, its stability depends on the ability of the initiator to enrol it in such a way that other, already established, ideas are not contradicted (Alcouffe et al., 2008).
human-actors may take part in these negotiations by use of representatives. A phenomenon whereby
representatives are not speaking on behalf of their represented is called betrayal (Callon, 1984; Sarker et al., 2006).
Enrolmentisthethirdstageoftranslation.Thisisthestage whereactor-alliances with different goals enrol into actor-networks and in which actors define and accept their role in the network. The roles are aligned with the interests of the network, and not necessarily with actors’ own interests.
The final stage of translation is mobilization. During this part of the translation process, the innovation reaches the state of an unquestioned black box (Briers & Chua, 2001). This encompasses that the innovation is accepted within the organization. An important aspect of the unquestioned black box is the acceptances of the network inscriptions. Inscriptions have no role in building the network, instead they act as an end. According to ANT, accounting numbers are inscriptions that represent particular aspects of the organization. Inscriptions are the final goal of the initiator of LAC
innovations, because inscriptions have the potential power to change the way reality is perceived by the organization. Besides this, the interest of actors in the actor-network are also monitored by the initiators during this stage (Mouritsen et al., 2001).
An additional phenomenon in translation is called trials of strength (Briers & Chua, 2001). Trials of strength are conflicts with competing innovations. The initiator only succeeds when he proves to the actor-alliances of LAC that the competing innovations are less useful to them. (Siverbo, 2014). Trials of strength can take place at any given moment during the translation process.
Figure 1: A visualization of the translation process
3. Research method
In this section, the research design will be elaborated, followed by a clarification of the data collection and analysis.
3.1 Research design
Considering that little is written about lean accounting and control (LAC) implementations in organizations, exploratory research is required (Eisenhardt, 1989). Following a naturalistic approach, this research explored the phenomenon of LAC in its ordinary context (Baxter & Chua, 2006; Morgan & Smircich, 1980). This methodology follows the approach of Latour (1996) which states that by using ANT one should start researching local contingencies and working up to universal laws. The methodology that was used in this thesis can be typified as an interpretive, qualitative multiple-case study (Eisenhardt, 1989; Silverman, 2001). The central research question in this paper is ‘How is lean accounting and control diffused and maintained in a lean environment?’
3.2 Data collection
The empirical domain encompasses three organizations in The Netherlands, which are presented in table 1. Each organization was given a fictional name to remain anonymous. The cases were selected based on convenience sampling. In inductive research, cases should be selected based on theoretical, instead of statistical considerations (Jönsson, 2003). Therefore, convenience sampling does not limit the generalizability of this study.
Table 1: Characteristic of three organizations
Two data sources have been used to research each case site. Case information was collected primarily by conducting in-depth face-to-face interviews. This data was supplemented with
allowed for corrections (Aken, Berendsen, & van der Bij, 2012). Moreover, when using ANT the documents may be used to view the network from another perspective than the perspective of the interviewees. Also, the documents may be the inscriptions of the network.
Multiple actors have been interviewed for each case study. According to ANT, interviewing a single actor results in a single perception of the network (Colville & Pye, 2010). Therefore, to
reconstruct the network, the network should be analysed from the perspectives of multiple actors. However, the amount of information becomes incomprehensibly large without making a selection of the actors (Latour, 2005). Therefore, the number of actors involved in my research have been limited to the most important ones. Ten actors were interviewed in total, which is considered to be sufficient for developing generalizable propositions (Eisenhardt, 1989). An overview of these actors have been provided in table 2. In two of the three organizations, one financial specialist and one financial manager were chosen in combination with one production manager. This combination is valuable as different hierarchical levels may view change from different perspectives. Moreover, production managers were also interviewed in each case study as financial specialists may exaggerate their own role (Byrne & Pierce, 2007). The perspectives of production managers assists in reducing this form of respondent bias (Aken et al., 2012). In Alpha only one higher level financial professional was
available. Therefore, additionally the Sales Manager was interviewed. In all three organizations a tour was given priorto the interviews to develop a generic senseof whatwasgoingonineach organization.
Table 2: Interviewees profile
These interviews took place in the fourth quarter of 2016. All interviews were conducted in Dutch, as both the researcher and all interviewees were Dutch. Using native language may contribute to data accuracy, authenticity of responses and the construction of shared understanding during an interview (Welch & Piekkari, 2006). All interviews were audio-recorded with the permission of the interviewees. These recordings were used to transcribe the data verbalism. They also contribute to the completeness and accuracy of the transcriptions (Barriball & While, 1994). Furthermore, the
ordertouncovernuances.Thisreducesresearcherbias(Aken et al., 2012).Theinterviewtranscriptions were not translated into English, as important nuances might be lost during translation. Exceptions were made for the quotes that are used in this paper.
It is important that the research is reliable, the results should be able to be replicated by other researchers (Swanborn, 1996). I will control for reliability in the following ways. During the interview period I do not allow the interviewees to talk to each other about the research. This will prevent them from changing their minds over the subject by exchanging information during the research period. In this way I will control for respondents reliability (Aken et al., 2012). The extensive research method and fully written transcriptions of the interviews enhance the controllability of this research (Aken et al., 2012). The triangulation of the different actors, documents and organizations contributed to the generalizability of this thesis (Aken et al., 2012).
The formal semi-structured interviews were developed to explore the network together with the interviewer from the ANT perspective (Fontana & Frey, 2000; Silverman, 2001). The uniformity of semi-structured interviews contributes to the reliability of the research (Aken et al., 2012), while interviewees retain the opportunity to share unforeseen issues. The questions were structured around the four stages of translation, as were presented in the theoretical framework of section 2.4. The focus of these questions lay on capturing both emotional responses and facts (e.g. Sarker et al., 2006). Conform the semi-structure of the interviews, the interview guide was only used as guidance. Therefore, the issues that were discussed varied per interviewee, depending on the role of the interviewee, the information I gathered from other interviewees and issues that were raised by the interviewee during the interview. The interview guides are included in appendix A.
By using ANT, I recognized that actors can be both human and non-human. As only humans may be interviewed, human actors also functioned as spokespersons for non-human actors. Therefore, the interviews also included questions about the role of non-human actors in the network
configuration. These questions replaced the notion of non-human actors by terms like objects and business systems. This resulted into questions investigating how LAC affected the role of IT-systems, traditional accounting techniques and existing controlling structures.
3.3 Data analysis
After transcription, the interviews were analysed. ANT served as a tool to retrospectively interpret the data (Gearing, 1970). I do not view the cases as ethnographic entities where reality is objective, as Yin (1994) suggests, but rather take an interpretive point of view. Because of the interpretive nature of this study, I acknowledge that the findings do not resemble reality, but rather my interpretation of reality (Ahrens & Chapman, 2006). Furthermore, prior ANT studies on MA innovations concluded that no prescription of MA innovation diffusions can be made, as the theory shows that the right change approach depends on local specific actors. Therefore, the analyses and description of the cases will not be less valuable than the propositions that are based upon it (Sarker et al., 2006).
4. Case analysis
4.1 The translation process of lean in Alpha
Lean was only recently introduced in Alpha. By including this case study, we can learn what the initial challenges for a lean network are and how accounting and control adapts to lean in an early stage. The management team (MT) of Alpha is composed of four managers, of which the business administration manager (BAM) is responsible for MA.
4.1.1 Problematization and interessement. Lean was initiated by the sales manager and an
intern he hired. The organization operates within a sector that is characterized by low margins. Lean was problematized as a tool to save costs in the operational process and to provide more value for the customers. The interessement stage was started during a regular MT meeting. During this meeting, several concerns were raised by other managers. The biggest concerns were the expected time that the MT had to invest in lean and questionable benefits of lean. After this meeting, the intern went to assess the possible cost savings. During this assessment, the intern visited all departments and made the lean network visible in the organization. The assessment resulted in a report of the potential cost savings, which functioned as the first inscription of lean.
Prior to this report, lean was just another management fashion to most members of the MT, however the inscription showed what lean could mean in practice. The sales managers explained “At the moment people see the benefits of an innovation, it gets accepted and it moves on. […] I think it is important that we left processes mostly unchanged, our proposed changes were only small
improvements simultaneously”. However, not all relevant actors accepted their role in the network yet. The BAM in his finance role questioned the inscription: “I was under the impression that the potential benefits [of lean] were made up from a theoretical perspective, rather than its feasibility in practice. In practice things often go different than in theory.” Despite that the BAM was not yet convinced, lean received a green light.
4.1.2. Enrolment. There were three main areas where lean would initially focus on. First of
all, freight damage was high. Lean would be used to measure the damage more extensively. By using these new measures, the cause for damage would be more easily identified so appropriate actions could be taken. Secondly, picking errors were reduced. The errors were measured more extensively and actions were taken to reduce the picking errors. Finally, the warehouse lay-out was redesigned by using simulation tools.
things are going to change, aversion will rise”. The biggest objections of employees was the extra time that was required to register and monitor. “You have to measure to gain insight. Measuring takes time without immediately generating revenue.” The sales manager stated: “The trust in these figures is great, these are control figures, they are something concrete and real.” However, the
trustworthiness of these new data is disputed in the organization, as the BAM argued differently: “The information is useful, but reliable? Who tests the reliability of these numbers? The warehouse workers register these numbers but I question whether it is being controlled by the manager. […] Registering has to be in line with the competences and interests of the workers. Currently, it is something that is done mostly sideways besides their jobs.” Besides output control, no other control mechanism was changed under influence of the network. Furthermore, the proposed lean accounting techniques of Maskell & Kennedy (2007) were not present at Alpha.
4.1.3. Mobilization. The initial issues that the sales manager and the intern addressed are still
under scrutiny and improvement. In this light, the network has been accepted. However, lean tools are not continuously being applied to uncover new areas of improvement. The network has not created enough alliances in the organization to effectuate this. The mobilization was restrained by another network that is based around the beliefs that the organization is already advanced in its efficiency and improvements. The operation manager stated: “I think we already do a lot of lean activities, not really from the lean perspective but because we want to be efficient. […] When looking at other
organizations I visit I think we work very efficiently. I see we are pretty advanced. We are not the best, we are absolutely not the worst. […] Lean is just working efficiency and it strongly coupled to
delegation. It means doing something right the first time. That is something you should strive for.” From this point of view, the lean network was redundant. This is underlined by the BAM, when he compares lean to another innovation network aiming to increase the quality of processes, ISO. The BAM is responsible for ISO certifications. “We really want to be a good company that exceeds in its services. But the tools we can use for that, lean or ISO, are omitted. The support of the MT is insufficient.” The organizational culture is hard to change according to the BAM. “I have trouble to inspire my own people to adopt their processes to ISO.” This feeling is confirmed by the operation manager: “[...] ISO, that nonsense… I know it has to happen [to obtain customers]. I fill-in the formats, put everything in a folder, however I find it nonsense.” The trial of strength has restrained the lean network to reach the status of an unquestioned black box.
things should be more inter-departmental so we can learn from each other. […] If I want something to be done, I discuss this with the MT. If I directly speak with the employees of other managers, the managers would feel passed over.” A reason why the BAM regained interest in the network may be because of ISO. As the BAM is the ambassador of ISO, he may presume the joined networks could overcome the current network that is formed around the belief that the organization is already
advanced in its efficiency and improvements. A coalition between the actor-networks may be required for the networks to form one alliance, overcome the trial of strength and reach the status of an
unquestioned box together.
4.2 The translation process of lean in Beta
The second organization is Beta. It is a production and R&D facility for the European market and has a sales department for the Dutch market. The experience of Beta with lean is clearly visible in the manufacturing process and the communication structures around it.
4.2.1 Problematization. The network of lean in the office environment was initiated 3 years
ago. The organization named it ‘indirect lean’. The network was initiated by the head office of Beta Thermotechnology. Together with an external consulting office, a team of Beta lean specialists called navigators visited Beta plants worldwide to implement indirect lean. The goal of the innovation wave was to increase the efficiency by 20%. Indirect lean was set as an obligatory passage point (OPP) for managers and team leaders to reach this efficiency. Lean would function as a tool to increase the transparency of indirect processes, identifying the waste in these processes and to develop a culture towards continuous improvements.
4.2.2 Interessement. Interessement and goal alignment of the relevant actors were generated
by a two day training in the head office of Beta Termotechnology. This training was obligatory for all team leaders and managers. In this training, they were instructed about the OPP and taught about whiteboard meetings, sit-ins, and coaching conversations. The finance & control (FC) manager suggested that training is not all: “I think I received enough training in lean, however you have to learn it on the job as well: coaching in conversations and sit-ins.”
4.2.3 Enrolment. During the enrolment, the network struggled to align interests of all relevant
actors. The MMO stated: “Resistance… it is a change. Changes always lead to resistance. You need to carefully explain the changes, which costs a lot of energy.” Some activities that the network
assembled were not in the line with the interests of relevant actors. For example on the 1 on 1 monitoring, the MMO explained: “People had to be explained that we wanted to improve our
organization by letting them show their daily activities.[…]Many people found it difficult to show what they were doing. […] The hardest step was to be vulnerable: this is my process, this is my waste. […] We never intended to suggest that employees did not work hard enough. The intention was to save so much hours that we can use to improve, to innovate, that was what we wanted to achieve. […] Our intention was not to lay off employees, if that would have been the case, the innovation had no chance of succeeding.”
During this stage of the network development, the floor employees also had to meet for the first time in front of a whiteboard and show their activities for the day. These meetings had the purpose to make the activities of the employees transparent and to solve issues in daily processes. First, employees were empowered in indirect lean to solve process in issues. This employee
empowerment is part of the social control system adaptation to lean. Second, transparency is used by managers to get an overview of their team and to make employees learn from each other. “Why is one guy doing something within half an hour while the other needs an hour to do it? […] They previously had to work at their desk, but now they have to show everyday what they are doing. […] That is a large change in the culture”. One of the employees at the quality department resisted to this
transparency by stating that their job existed mainly of ad-hoc activities and they could not plan those in the morning. The management dealt with resistance like this in an individualistic manner. This particular example was solved by asking the employee to list his activities of the previous day. This lasted a week until the employee concluded that only 50% of his activities were ad-hoc. “On one side you can explain lean to people and you can make individual arrangements. But after a while you reach the point when you just implement the changes regardless of the resistance. I think this depends on the local manager.”
Further resistance was dealt with by allowing relevant actors to negotiate with the initiators of the network. Negotiations allowed relevant actors to adjust to the network, so their interests would be better represented in the network. Two forms of negotiations took place. First of all, the managers received room to develop their own plans to reach the 20% efficiency gain. Second of all, the managers negotiated what would be done with the 20% efficiency gained with indirect lean. For example, while the controlling team did not replace 20% of the FTE that voluntarily left the
organizations, the sales department negotiated to reinvest all the gained efficiency in the department. At the sales department, resistance was dealt with by explaining what the goal is, why it is useful for the employees and for the organizations. The complaints were mostly related to
Controller 90% of the objections were taken away with explanations, but after that it is just “suck it up, this is what we do, period”. It may be concluded that the sales department accepted indirect lean relatively well. “It is always the same group who resist to change. Beforehand you can tell who will have objections against the change and that forecast became true, as was confirmed by their reaction.”
The network of lean also collided with the remains of older abandoned networks which resulted in a trial of strength. This old lean implementation failed at the FC department. This
abandoned lean network was represented by a culture of employees that resisted to changes that were named ‘lean’. The FC manager recalled “They [the employees] did not see the added value of lean. They said let us work instead of standing at the whiteboard”. The lean network adapted its tools to the interests of these resisting actors. The manager dealt with this by creating a new actor, an ultimatum: “I made clear that I was not going to motivate them every time we had to do lean. […] Finance people are never enthusiastic, it is a change, people felt rapped. […] Now we found a way that we stand at the white board only for 15 minutes. In practice, 15 minutes is short. But it works for us in this way.” Also the scale of the adoption process may have contributed to the stability of the current LAC network. The difference with this lean implementation and the previous failed implementations is the feeling amongst the co-workers that they contribute something to the organization.
Besides using VSM, this case does not show any of the lean accounting methods that are presented by literature. Both the sales controller and FC manager deny that any accounting systems were replaced because of lean. There is a lack of understanding what lean accounting systems are and how traditional accounting systems cause tensions with lean principles. The FC manager stated: “We still use traditional accounting besides lean. I cannot evade to calculate margins for our products.[…] Traditional accounting is just my job. Lean is providing overview and communication about the activities that I have to do. […] I don’t see how traditional accounting systems cause friction with lean.”
However, two of the three control mechanisms identified by Kennedy and Widener (2008) were replaced at Beta. Output control was changed, as was explained by the sales controller:
“…previously when I sent KPIs to managers, they probably ended up in their mailbox. With indirect lean they can share the KPIs on the whiteboard and share them with the teams. So I think the performance is directed better”. Besides output control, all four mechanisms of social control were adapted by indirect lean. The mechanisms empowerment and training are explained above.
4.2.4 Mobilization. After the 3 month period, the navigators left the organization. To keep
indirect lean stimulated, the navigators could still be consulted by the team leaders. In addition, every month the maturity of lean per department is tested by looking how the teams use the various lean tools. The stability of the network became high. Over time, employees began to see that the interest of the network align with their own interests. Managers noticed that the employees would do the daily whiteboard meetings even when the managers were not present. From this view, the network developed strong ties with its actors. These strong ties are also apparent at higher employees and managers. The sales controller was positively surprised by the cascade possibilities of indirect lean, how problems of the work floor end up eventually at the MT. The FC manager uses indirect lean to shorten the communication lines within his teams. “The whiteboard functions as a communication platform. […] If one has a problem, other can help. This may found in every organization, but the whiteboard is the moment when we do it.”
From this point of the view, the network became stable. As the initiators of the network still want to develop the network further, this stability may form a barrier for their intentions. The initiators want to develop the network more inter-departmental, and to develop the culture of continuously improvements. The MMO confirms this: “When indirect lean is stabilized, indirect lean will be coupled more extensively to lean in the value stream as one system and culture. In this way, the organization can improve chain-wide.” The sales controller agrees: “The improvements projects are here, but the interconnection between the projects themselves and the strategy should be more
visible”. High time consumption and fear for repetitive meetings are the biggest threats to the network. The FC manager adds “The frequency of meetings may be an objection in my team, what is the added value of repeating these meetings every day? It has to remain a living meeting, otherwise it won’t keep fun to do.”
4.3 The translation process of lean in Gamma
Lean was implemented 30 years ago in Gamma. Lean tools are comprehensively applied in the production process. This is underlined by the fact that Gamma is frequently used as a lean showcase for other organizations.
4.3.1 Problematization. The current ‘lean in office’ practices were implemented six years
was called ‘lean in office’. The innovation was problematized as a collection of tools to reduce errors and to increase the transparency in the finance department in various ways. The biggest difference between lean manufacturing and lean in office is the hunt for seconds. “In production we really try to win seconds of the production process. However, here we use the principles of lean [to improve our transparency] rather winning time”. The central lean organization assisted by providing common translations of lean principles for the office environment. Furthermore, they educated the workforce on lean principles.
4.3.2 Interessement. The initiators struggled to align the interests of relevant actors with the
interests of the network. A trial of strength arose against the remains of an old and failed lean
implementation. These remains were expressed as an anti-lean culture. “There we have lean again…”, the HC explained. Gamma worked with lean in the office environment for 10 years, but those were individual scattered practices. The HC continued: “I’ve worked here for 30 years, so I saw many lean projects. They were implemented temporarily at our department, and were removed again. […] Some really crazy ideas were implemented. We drew a yellow line around our cell phone and if the phone was removed, we knew that a phone had to be there. Those principles are very handy in production, because you know where to find your tools. But at finance…” The anti-lean culture also became apparent when the managers started to betray the old network surrounding the scattered lean
implementations. The managers were expected to implement new lean tools, but in reality they were no longer representing the network. The head of controlling (HC) explained: “If you have a manager that says ‘We have to do something again, because in two months I have to present it to the
executives.’ The ‘something’ isn’t worth it to make effort for, from the start on.”
Besides the trial of strength the network also struggled to align interests of other relevant actors. Employees failed to understand how they would benefit from the network. The HC explained: “The largest bottleneck for lean was the time consumption. Employees did not immediately see the benefits of lean. Why would they want to invest time on something they don’t benefit from? Besides that, they were also afraid that [lean] was really going to stay and they would have to track all their activities.”
The central lean organization provided several lean tools to increase the transparency and to reduce errors. Firstly, the behavioural control system, checklists, was replaced by work standards. Work standards are circuit diagrams that describe the activities of a process step-wise, including the required time and the connected processes. The work standards act as inscriptions to make the network visible and contribute to the transparency.
Secondly, the network introduced whiteboards as a social control system. Every department received its own whiteboard where teams meet regularly. Prior to each meeting, everyone updates their status on the whiteboard. According to the HC: “We listen to the workers. Who has trouble with his or hers activities? Then we try if someone can help. This is also useful for others, as they might encounter comparable issues. How often we meet depends on the nature of the activities. We discuss activities with a long lead time less often than activities with a short lead time.”
Thirdly, another social control system was introduced that functioned as an empowering mechanism: corrective action plans (CAPs). The HC explained: “CAPs means we force ourselves to take note of any errors we find during a process. We use post-it notes, similar to manufacturing. […] Before implementing CAPs we thought we had our own good ideas to improve. But try remembering on Monday what went wrong on Friday. In a busy period you’ll forget such things. For example, if an error occurs in the closing and you won’t fix it, you will encounter it again the next month-closing. This is something that you want to avoid, repeating errors. So CAPs is something we keep track off.” CAPs that cannot be solved within a certain team are escalated upwards in the hierarchy.
Besides that control systems were adapted to lean, changes in the accounting technique were less visible. The senior controller explained: “This is because accounting is fairly universal. Lean has more to do with production and assembly. […] My previous employer was a traditional organization. We did not use different accounting techniques there. […] In our facility, people were scared to walk at our department. That is something you need to avoid. As a controller, you have to talk to the supervisors and go to the shop floor. This will make the distance [between finance and production] smaller, and I think that is most important for a controller”. The HC agreed: “I don’t think accounting necessarily has to be different”. However, it was noticed that the role of budgets deviated from the traditional role of budgets. The senior controller explained: “For traditional organizations I learned that you got a budget and that’s all the money you can spend. But I’ve also learned that you try to stretch the budgets as far as possible. This blurs many facets of the organizations. In our lean
4.3.3 Enrolment. After lean practices were implemented, the network gained power over
time. The HC explained: “At a given moment in time I saw people’s mind changing. They noticed that the current lean implementation was going to stay and they would have to immerse themselves in lean”. They noticed that one of the benefits of lean was that new employees were more easily incorporated. “New employees find the work standards something helpful that assists them in getting to know the processes. This enthusiasm leaps to the others. They understood that the standards they had to write were not for themselves, but for others if they had to take over their work. It took some time till this realisation came.” Employees also perceived the innovation to be more convincing when they realised that this implementation was diffused in a much larger scale than the previous scattered lean applications. This meant that the remains of the older lean networks were finally beaten in the trials of strength. Also the coordination of central lean organization assisted. The short term time constrains were solved by the dedication of the trainee.
4.3.4. Mobilization. The stability of the network is high. Lean is actively used to address new
areas of improvement. Furthermore, lean in office is used to provide transparency and contributes to the communication and information sharing. A senior controller explained that the support for lean is currently high. The senior controller argued that lean is most useful in two aspects. Firstly, lean provides control systems that help managers to control their department. By using the whiteboard meetings, managers know what is going on. For the controllers themselves, the whiteboard meeting are less contributing. “We sit very close to each other, so without the whiteboard meetings we would know what is going on for us. So for the department lean is important, however not for me
personally”. However, the CAPs meetings are useful for the employees. CAPs help in defining the essence of issues. “Every month you return to the CAPs meeting and you learn what reactive actions have been taken. You make others joint-owner of issues and [the problem owner] is confronted with [the current state of the issue].”
4.4 Common findings
To provide an overview of the three cases, this section shows the most important common findings. The findings are presented in table 3 and will be elaborated below.
Table 3: Overview of analysis
First, at one case site LAC was problematized as a tool to support lean in manufacturing. In the two other case studies LAC was initiated independently of lean in manufacturing. In these cases, the network surrounding LAC was problematized as a tool to optimize MA processes and to increase the transparency of MA processes. Moreover, after the network surrounding LAC in Beta and Gamma was stabilized, the contribution of the networks were an improved communication structure, improved transparency and cost reduction of indirect processes.
The second common finding is that the network surrounding LAC may adopt a variety of accounting tools and control concepts. In all case studies lean control concepts were adopted to a larger extend than lean accounting techniques. Two lean accounting tools were identified. At Beta VSM was adopted as lean accounting practice. At Gamma, the use of budgets was consciously limited. Control concepts on the other hand, were used more extensively and were adapted in differed
Third, in all case studies a trial of strength took place. The trial of strengths were either related to networks surrounding traditional manufacturing beliefs or networks surrounding beliefs about the counterproductive effects of LAC. Beta and Gamma beat most of the challenges of the trial of strengths. Alpha experienced more trouble overcoming the trial of strength, which eventually contributed to the increasing instability of the network. A difference was found in how these
organizations dealt with the trial of strength. In both Beta and Gamma, powerful actors were actively aligning interests amongst actor-alliances and the network. These efforts eventually led to the collapse of the cultural networks formed against the network surrounding LAC. In Alpha, the managerial actors showed less interest in the lean network. Signs were visible that these actors were still part of the network formed around traditional beliefs.
5. Discussion
In the last couple of years, lean accounting and control (LAC) has received increased attention in the literature. Most of this research can be classified as consulting research (Ittner & Larcker, 2001; Lukka & Granlund, 2002). Consulting research has the tendency to adopt a propagating attitude to aid in the construction of an innovation, rather than critically analysing it (Maskell & Baggaley, 2004, 2006; Maskell & Kennedy, 2007). This thesis belongs to a smaller second group of papers, which take a more critical approach by studying LAC in its natural environment (e.g. Kennedy & Widener, 2008; Tillema & van der Steen, 2015).
Prior literature position LAC as a MA innovation that is able to deal with tensions between lean manufacturing and traditional controlling (Fullerton & McWatters, 2002; Kennedy & Widener, 2008; Maskell & Baggaley, 2004). The findings of this paper show that organizations do not necessarily have to experience tensions between lean manufacturing and traditional accounting. Furthermore, this thesis found LAC practices in organizations that did not recognize tensions between lean manufacturing and traditional accounting. Therefore, this thesis proposes that LAC may also contribute in different ways. Our findings show that networks surrounding LAC can grow and gain stability by providing an improved communication structure, by reducing costs of indirect processes and by increasing internal transparency. This supplements, rather than contradicts, the view of prior research (Brosnahan, 2008; Maskell & Kennedy, 2007; Sale & Inman, 2003) that the contribution of LAC is to enhance the understanding of lean manufacturing.
The control systems that were identified were similar to the quantitative findings of Kennedy and Widener (2008). A difference with recent literature (Fullerton et al., 2013; Kennedy & Widener, 2008) was the scope of the control processes. The literature describes lean control mostly as
controlling manufacturing with lean principles. This type of control was only found in one of the cases. The other cases adopted LAC to control indirect processes, like management accounting and control. The dominant type of control concepts in our case studies relate to the suggestions of Chen & Cox (2012). Chen & Cox (2012) presented a systematic procedure to transform lean principles from lean manufacturing into the office environment.
may have been a lack of knowledge of lean accounting tools at the case sites. However, this seems unlikely as both Beta and Gamma had at least a decade of experience in lean. Secondly, Beta and Gamma were international subsidiaries and had to comply to both international accounting rules and the accounting guidelines of their parent organizations. Therefore, there may have been no room to adopt lean accounting techniques. This view corresponds with Tillema and van der Steen (2015), as was elaborated above. Thirdly, lean manufacturing may be self-providing in its information needs. In this view, lean production managers do not rely on financial figures and therefore do not require MA to adapt their techniques.
The differences in the extent of the adaptation of lean accounting and lean control in practice calls for a small change of terminology in accounting literature. This thesis and other papers (Fullerton et al., 2013; Kennedy & Widener, 2008) show that extensive use of lean accounting may seem
impossible or undesirable in contemporary practice. In this view, discussing lean accounting as an equal to lean control seems incongruous. Relating to the three concepts of lean control of Kennedy and Widener (2008) that were used in this thesis, it is suggested by this thesis to discuss lean accounting as a component of output control.
In all case studies, networks surrounding lean control collided with traditional beliefs and culture. In these trial of strengths, actors openly opposed the lean control network. The LAC network in one case study did not overcome the trial of strength, which underlines the power of local context in opposite to the technical capabilities of a MA innovation (Sarker et al., 2006; Siverbo, 2014). The strength of cultural effects were discussed earlier in MA literature (Briers & Chua, 2001), however never in the context of lean accounting and control (Fullerton et al., 2013).
A critical alliance in overcoming a trial of strength were the managerial actors. In contrast to other actors, managerial actors have resources at their disposal to persuade other actors to join the network of the managerial actor. In the case studies where the management joined the LAC network before the trial of strength took place, the conflict with traditional manufacturing beliefs was
overcome. Therefore, the influence of managerial actors in MA change, as was discussed by Wyman (2013), is also valid for change towards lean control.
6. Conclusion
By exploring lean accounting and control (LAC) as a network, the highs and lows of the
implementation were highlighted. The research question that was central in thesis was: How is lean accounting and control diffused and maintained in a lean environment? Networks surrounding LAC may be problematized in two ways. First, to accommodate lean manufacturing by providing
accounting and control tools that are based on lean principles. Second, LAC contributes by improving the communication structure, cost reduction of indirect processes and increasing internal transparency of MA processes. During the diffusion process, networks surrounding LAC are likely to collide with existing cultural beliefs. The key in the trial of strengths with cultural networks is to identify powerful relevant actors before trials of strength take place. By doing so, the chance is eliminated that the powerful actors support other networks. The stability of a network is not guaranteed once the network becomes an unquestioned black box. Active maintenance in the form of dedicated actors and resources are required to keep the network stable.
6.1 Theoretical and managerial implications
The literature around LAC is limited, therefore this paper opens the discussion around LAC rather than closing it. Research on the implementation process was never done before. By doing so, this thesis answers directly to the call of Kennedy and Widener (2008) to study the implementation process of LAC.
The second theoretical implication of this thesis is not directly related to the research question. During the research it was found that the current literature may not be accurate enough in its
vocabulary around LAC. Lean accounting and lean control are often presented as equivalences. This thesis contributes to the literature by stating that lean accounting should be discussed as a component of lean control. This suggestion is based on lean control in its natural environment.
Besides the theoretical contribution, this thesis also has managerial implications. This study encompasses a detailed analysis of a MA innovation in practice, which practitioners find to be beneficial (March et al., 1977; Merchant & Stede, 2006). Practitioners may learn about the benefits of lean control and about the challenges that accompany the diffusion of the MA innovation.
6.2 Research limitations
risk of social desirability and retrospective sense-making could have taken place. And lastly, all data was collected in plants located in The Netherlands. The location of the plants may have had cultural effects, and legislation may have had influences in the adopting accounting practices.
6.3 Directions for future research
Three directions for future research have been identified. Firstly, as the research field around LAC is expanding, the vocabulary may be losing its connection with the findings in contemporary practice. This thesis proposes that lean accounting should be discussed as a component of lean output control mechanism. Further research should investigate this suggestion. Secondly, this thesis shows how lean control is implemented in practice and shows what elements support and resist the network. However, since the sample size was too limited to generalize any of these elements, future research may
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