and incentive systems in relation to the degree of

TheroleofperformancemeasuresandincentivesystemsinrelationtothedegreeofJITimplementationRosemaryR.Fullertona,CherylS.McWattersb,*aUtahStateUniversity,SchoolofAccountancy,Logan,UT84322-3540,USAbFacultyofManagement,McGillUniversity,SamuelBronfmanBuilding,1001SherbrookeStreetWest,Montreal,CanadaH3A1G5AbstractTheshifttoworld-classmanufacturingstrategieshasnecessitatedcomplementarychangesinmanagementaccount-ingsystems(MAS).Usingsurveydataobtainedfromtopmanufacturingexecutivesat253USfirms,thisstudyempiricallyexaminestherelationshipbetweenthelevelofjust-in-time(JIT)practicesimplementedbyUSmanu-facturingfirmsandtheperformancemeasuresandincentivesystemsthatareincorporatedintheirMAS.Thestatisticaltestsprovideempiricalevidencethattheuseofnon-traditionalperformancemeasuressuchasbottom-upmeasures,productquality,andvendorquality,aswellasincentivesystemsofemployeeempowermentandcompensationrewardsforqualityproductionarerelatedtothedegreeofJITpracticesimplemented.#2002ElsevierScienceLtd.Allrightsreserved.1.IntroductionAnappropriateorganizationalstructure,incor-poratingthemanagementaccountingsystem(MAS),isconsideredanecessityforthesuccessfulimplementationoforganizationalstrategy(Brick-ley,Smith,&Zimmerman,2001;Oldham&Tomkins,1999).Asorganizationsadapttotech-nologicalchange,globalization,andcustomerdemand,theymustensurethattheMASisdesignedcongruentwithdecision-makingandcontrolrequirements.Recentstudieshaveempha-sizedthat‘‘[s]trategicprioritiesshouldbesup-portedbyappropriateandeffectivelyimplementedmanufacturingprocessesandinformationsystems,includingthoseprovidingmanagementaccountinginformation’’(Chenhall&Langfield-Smith,1998b,p.243).BouwensandAbernethy(2000)addressthisissueinthecontextofcustomizationstrate-gies.Todate,relativelylittleresearchhasexam-inedwhatdesignoftheMAS,organizationalstructures,andcontextsisconsistentwiththeadoptionofleanmanufacturingsystems,suchasJIT(Selto,Renne,&Young,1995).Theshifttoworld-class,integratedmanufactur-ingstrategies,includingaJITmanagementphilo-sophy,requiresaccompanyingchangesinthemanagementaccountingsystems(MAS)thatsup-porttheirimplementation(Milgrom&Roberts,1995;Safayeni,Purdy,VanEngelen,&Pal,1991;Young&Selto,1993).JIT’sfocusonexcellencethroughcontinuousimprovementrequiresadeci-sion-makingsystemthatevaluatesthechangesinquality,setuptimes,defects,rework,andthroughputtime.TheMASalsomustprovidetherequisitecontrolsystemstomotivateorganiza-tionalmembersintermsofJITstrategies.Young0361-3682/02/$-seefrontmatter#2002ElsevierScienceLtd.Allrightsreserved.PII:S0361-3682(02)00012-0Accounting,OrganizationsandSociety27(2002)711–735*Correspondingauthor.andSelto(1993)suggestthatbothmanagementandresearchersmustbetterunderstandthetypesandusagesofmanagementcontrolsthatarecrucialtomeasuringthesuccessofmanufacturingstrate-gies.InaJITenvironment,thecontrolsystemshouldbelinkedtocriticalsuccessfactorsatallorganizationallevels,butasLangfield-Smith(1997)andMia(2000)discuss,theneedforperformancemeasurementsascontrolsisparticu-larlyimportantattheoperationalleveloftheorganization.Thepurposeofthisstudyistoevaluateempiri-callytherelationshipbetweentheJITpracticesimplementedbyUSmanufacturingfirmsandtheirrespectivesystemsfordecisionmakingandcon-trol,specificallytheperformancemeasuresandincentivesystemsthatthesefirmsuse.Thestudycontributestothemanagementaccountinglitera-tureinanumberofways.First,itrespondstothecallforfurthersurveyresearchthatfocusesonthecombinationofstrategy,managementtechniques,andmanagementaccounting(Chenhall&Lang-field-Smith,1998b).Throughhierarchicalmultiplelinearregression(MLR),thecurrentstudyfindsasignificantstatisticalrelationshipbetweentheimplementationofaJITstrategyandtheadoptionofnon-traditionalperformancemeasurementandincentivesystemswithintheMAS.Second,ratherthanarbitrarilyclassifyingfirmsintoJITornon-JITcategories,acontributionofthisstudyisitsprovisionofacomprehensiveassessmentofJITimplementationbycapturingthedegreetowhichmanufacturingfirmshaveimplemented10basicpracticessupportingtheJITphilosophy.ResearchhasfoundthatthemoreextensivetheadoptionofJITinbothbreadthanddepth,thegreaterareitsbenefits(Fullerton&McWatters,2001;White&Prybutok,2001).Third,theresearchextendsChenhallandLangfield-Smith(1998a),whichexaminedtheinfluenceofmanagementaccountingondiscretemanagementtechniquesusedtoimplementmanufacturingchangeprograms.WhiletheJITphilosophyisbothbroadandambiguousinnature,thisstudyoperationalizesJITintermsofthe10JITpracticesclassifiedandutilizedinpreviousresearch(Fullerton&McWatters,2001;White,Pearson,&Wilson1999;White&Prybutok,2001;White&Ruch,1990).Specifically,theresearchexaminesthemanage-mentaccountingcontrolsystemthatsupportsJITimplementation.ThenextsectionexaminesthepriorliteraturerelatedtoJITandtheMAS,andoutlinestheresearchhypotheses.Section3describestheresearchmethod.Sections4and5presentanddiscusstheempiricalresults.Thefinalsectionsummarizesthestudy,andidentifieslim-itationsandfutureresearchdirections.2.Researchhypotheses2.1.TheJITmanufacturingenvironmentJITisaJapanese-developedmanufac