An article by MUM Ph.D. candidate Manjunath Rao and Associate Professor, Andrew Bargerstock was published in the Fall 2011 issue of Management Accounting Quarterly, the refereed online journal of the Institute for Management Accountants (IMA). The article titled “Exploring the Role of Standard Costing in Lean Manufacturing Enterprises: A Structuration Theory Approach,” presents the theory and research plan for Manjunath Rao’s dissertation. The system of Lean Management focuses on adding value to customers while streamlining operations and eliminating waste. It grew out of the success principles used by the remarkably successful Toyota Motor Corporation.
Mr. Rao also recently received a $4,000 research grant from the IMA to examine the nature of an apparent contradiction between accounting theory and practice in mature Lean manufacturing plants. According to lean accounting theory as published in numerous books and articles, mature lean manufacturing companies are expected to eliminate the use of standard costing and variance analysis (SCVA). However, field reports suggest that many companies continue to retain SCVA even after they have successfully implemented an effective system of work cell metrics.
SCVA is taught worldwide as the traditional method for controlling costs in manufacturing operations by averaging input costs and quantities over the entire production process. It involves setting quantitative average cost and quantity targets for key categories of inputs: material, labor and overhead. Reports are typically generated each month that summarize and compare actual costs to standard costs. Differences (variances) are investigated to determine root causes of unexpected results.
By contrast, in a lean manufacturing company, work cell teams (typically 6-10 people who perform a few sequential tasks) develop the relevant data they need to control quality and costs in real time (as compared to monthly reports with SCVA). From the perspective of Lean Management, work cell metrics are clearly superior to SCVA reports and therefore SCVA reports are expected to be eliminated in mature lean companies.
Surprisingly, there has been no significant research study that has tested the lean accounting theory that mature manufacturers will eliminate SCVA. Rao’s research will gather such information via survey and he will also collect data to understand why companies are retaining SCVA.
Rao utilized Gidden’s Structuration Theory, a general social theory model, to test the relevancy and completeness of questions on his survey. In his dissertation, Rao will show how Giddens’ theory mirrors Maharishi’s consciousness-based Samhita concept that explains the relationships among the knower, the known, and process of knowing.
According to Dr. Bargerstock, Rao’s dissertation adviser, “Manjunath’s research has garnered significant attention by experts in the field of lean accounting. In June 2011, Manjunath gave a poster presentation of his research plan at the annual conference for the IMA. In September, 2011, he was named as one of two Ph.D. students nationally who were recognized as Lean Accounting Students of the Year at the Lean Accounting Summit in Orlando, FL. In December, Manjunath received a research grant award of $4,000 from the IMA. And now, he is recognized again by the IMA with the publication of this article. We are very pleased with the progress of Manjunath’s dissertation.”