Performance measurement and reward systems in JIT and non-JIT firms

Many people have directly addressed the inadequacy and ineffectiveness of traditional management accounting performance measurements in today's environment. Although evidence exists that some organizations are making greater use of nontraditional information and incentive systems, the majority...

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Bibliographic Details
Published in:Cost management 2003-11, Vol.17 (6), p.40
Main Author: Fullerton, Rosemary R
Format: Magazinearticle
Language:English
Subjects:
Accounting systems
Decision making
Employees
Just in time
Lean manufacturing
Management accounting
Measurement techniques
Performance evaluation
Polls & surveys
Quality management
Total quality
Online Access:Get full text
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Summary:Many people have directly addressed the inadequacy and ineffectiveness of traditional management accounting performance measurements in today's environment. Although evidence exists that some organizations are making greater use of nontraditional information and incentive systems, the majority of manufacturing firms continue to emphasize traditional accounting criteria in performance evaluation. To better understand the measurement systems at advanced manufacturing firms, survey data were collected from 253 US manufacturing executives. The responses indicate that JIT firms measure and report the effects of product quality, vendor quality, on-time delivery, setup times, rework, and equipment downtime more than non-JIT firms. JIT firms use nontraditional measures of quality, team performance, and throughput time to reward their employees more than do non-JIT firms, whereas non-JIT firms are more inclined to use traditional accounting measures of profitability and budget conformance to reward their employees. JIT firms use significantly more of the total-quality management (TQM) measurement tools, such as SPC charts, Pareto analysis, and cause-and-effect diagrams, to evaluate their performance than do non-JIT firms. JIT firms also more fully utilize their lower-level employees in decision making and strategic planning.