Academic journal article International Journal of Management

The Changing Role of Accounting in Supporting the Quality and Customer Goals of Organizations: An Open System Perspective

Academic journal article International Journal of Management

The Changing Role of Accounting in Supporting the Quality and Customer Goals of Organizations: An Open System Perspective

Article excerpt

Traditionally, the accounting department (subsystem) has played a significant role in monitoring and improving the efficiency of a business organization. In recent years, however, most business organizations found it necessary to broaden their emphasis from an efficiency-only based orientation to an orientation which integrates efficiency and quality to achieve organizational effectiveness. This paper examines the changing role of the accounting subsystem in the context of the open system business model which characterizes the modern business organization. In the process, the emerging role in comparison to the traditional role of the accounting subsystem in supporting the quality efforts and customer focus of a business organization are analyzed. Practical recommendations are provided to facilitate the strategic alignment of the accounting subsystem in order to be more consistent with the quality efforts and goals of today's business organizations. Cross training accountants to help them become advocates of an information sharing-quality culture will result in a proactive approach to identifying and resolving quality problems. In addition, encouraging an information cost orientation rather than an allocation of cost approach will result in improved value propositions throughout the supply chain. Finally, resources should be reallocated to improve information systems and fully integrate customers, suppliers and the business organization.

Introduction

Competitive pressures facing business organizations in today's information intensive global business environment led to reliance on quality-oriented business practices and strategies. With the recent experience of Enron and WorldCom some may question whether these same quality practices were abandoned under extreme competitive pressures. Perhaps a return to quality practices can help restore investor confidence. History has shown that business organizations all over the globe have made quality orientation in the form of Total Quality Management (TQM), Continuous Improvement (CI), and other related quality improvement efforts a strategic choice of doing business. In this context, the focus of most quality improvement initiatives is on enhancing the quality of products and services delivered to customers in an attempt to improve customer satisfaction. However, the results of these quality improvement efforts have been less than desirable in some instances (Miller, 1992; Hoover, 1995; Lackritz, 1997).

The objective of this research is to shed some light on the changing role of the accounting subsystem of the organization, in relation to the management of quality efforts and investments. In the process, the role of the accounting subsystem in supporting the closed system view of quality is contrasted with its role under the open system view of quality. For this purpose, an open system conceptual framework which integrates tools and concepts related to useful methodologies such as a root cause analysis (RCA), Benchmarking (BM) and Process Reengineering (PR) is formulated and presented.

The role of the accounting subsystem of the business organization has been and will continue to be critical, since the accounting subsystem is the entity most qualified to identify and track the cost of quality (COQ). Limitation on accounting measurement has restricted allowances in quality cost measurement, but the role of the accounting subsystem in relation to quality management has evolved through the years. Traditional accounting systems create errors in the calculations of quality costs due to their closed system orientation. A closed system (see Figure 1) has little interaction with external elements such as suppliers and customers as well as internal subsystems and processes. The accounting subsystem of the closed organizational system serves as a transactional processing information system. It tracks and stores information related to production costs. However, there is a limited sharing of this information with other entities in the organization. …

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