The Lowdown on Lean Accounting: Should Management Accountants Get on the Bandwagon-Or Not?
Van Der Merwe, Anton, Thomson, Jeffery, Strategic Finance
The Lean Revolution is off and running! But before we get too far in transforming businesses, especially the management accounting support for Lean (aka Lean Accounting or LA), it's important to slow down just a bit and address some critical questions in the spirit of advancing the thinking for the benefit of practitioners. In this regard we want to answer two questions: (1) Is Lean Accounting a viable replacement for, complement to, and/or supplement for current and evolving management accounting approaches? (2) Does Lean Accounting have the capability to advance two of the more forward-looking roles undertaken by the management accountant: decision support and enterprise optimization?
Lean thinking, the foundation for Lean Accounting, has a history of demonstrable benefit and is likely to have a significant impact on the U.S. business landscape. Lean refers to the management system of applying Lean principles to operations, and Lean Accounting refers to attempts to derive monetary management information based on Lean principles. This unique bond between an operations flow design approach (Lean) and a management accounting approach means the process of coming to terms with LA has a number of distinctive traits. The management accountant is required to gain an understanding of Lean thinking, principles, and practices, and a manufacturing shop floor emphasis requires that those from service industries dig a little deeper before they will be comfortable. A careful scrutiny of LA literature (books, articles, the Lean Accounting Summit in September 2006, etc.) reveals a number of assertions (and/or strong implications) related to management accounting that require technical analysis and broader, more open debate for the benefit of practitioners. The process of evaluating LA requires addressing four aspects of the case for it as presented: (1) LA's assertions as stated in the literature, (2) understanding the implications of these assertions, (3) questioning the operations-centric view of LA, and (4) evaluating LA's decision support capabilities.
It's important to point out up front that the primary purpose of this article is to provide a fair assessment of Lean Accounting as viable today or its potential to provide benefit in the transformation of the profession. In the "Lean land rush," many assertions have been made that can easily be construed as declarative statements of fact: Accounting is the problem, other approaches have no place in the world of Lean, and more. These statements have been made in numerous Lean articles and books, at the Lean Accounting Summit, and in other forums. When they previewed this article, thought leaders in the Lean Accounting community questioned whether the three assertions included for elaboration would result in a distorted view of or misinformation with regard to Lean Accounting. We subsequently provided references that point to the pervasiveness of these assertions in the LA discourse. As we already said, we believe that "Lean thinking" has real transformational potential but that broader perspectives, fewer declarative statements lacking empirical evidence, and open debate including technical analysis are required if management accounting practitioners are to benefit in the end. (You can view and download presentations from the Lean Accounting Summit at www.leanaccountingsummit.com/2006presentations. These materials provide background, cases, and more and, in some cases, the "assertions" that we keep referencing.)
Our concern isn't with Lean "extremism" in terms of its potential to help transform the profession--it's with those who suggest that Lean Accounting is THE ONLY answer. We strongly believe that exploration, understanding potentially complementary management accounting approaches, and fact-based discussion will help achieve the ultimate objective: providing transformation approaches to help practitioners in an increasingly complex and competitive business environment. …