Lean Management and Lean Accounting: History
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Anna Stronczek

The concept of "lean," as a production management concept, was popularized under the term "lean manufacturing", in works aimed at introducing the ideas of Japanese vehicle manufacturers, particularly the Toyota Production System (TPS). The concept of lean orientation extended beyond the realm of production and started being implemented in various other spheres of operation (such as trade and administration), resulting in the emergence of lean management principles.

  • lean management
  • lean accounting
  • production

1. Introduction

Effective management of an organization depends on appropriate information. Therefore, the role of IT systems, including the accounting system, in creating this information is extremely important. At the same time, management accounting systems are strongly determined by the conditions in which companies operate and the strategic values that determine the directions they follow. Managers’ demand for actual information about desired features often forces the implementation of diametrical changes in the accounting information system, especially in its subsystem—management accounting.
Bakar and Majid [1] see the possibility of creating organizational value in the proper use of information, creating a logical sequence: selected information will allow managers to improve decisions, which, in turn, lead to increased value for the customer and ultimately to greater value created for shareholders. This logic is coherent with the conceptual elements of lean management. Accepting the legitimacy of the above reasoning is tantamount to recognizing that the conceptualization of lean accounting requires setting a framework with a specific structure, assumptions, and goals aimed at providing the stakeholders of the organization with reliable information about the company’s achievements for value creation. At the same time, accounting practices cannot be viewed or shaped in separation from changes in the way production is approached. The development of the concept of lean accounting is the result of adapting accounting information systems to the principles of lean management.
The term “lean manufacturing” was used for the first time by J. Womack and D. Jones [2], but the origin of the lean strategy is commonly associated with the Toyota Production System (TPS). With time this term has begun to be referred to wider context of company management conception—lean management (LM). The basis of LM is the creation of improved high-quality system that realizes production in response to customer demand, reducing the amount of waste [3]. According to lean management, companies should determine their strategies based on the value delivered to the customer by systematically eliminating waste inside the enterprise, as well as along the supply chain.
During implementation of LM many companies noticed that traditional systems of management accounting are unable to support this kind of projects. Changes of philosophy in company management towards lean became the basis of management accounting aims and tasks change. Its techniques, tools, and concepts have undergone both transformations on a theoretical and practical level [4][5][6][7][8].
The conventional accounting system needs radical changes to make it reflective of the changes in the manufacturing strategies emanating from the lean philosophy [7][9][10]. The nature and value of lean accounting (LA) have been thoroughly discussed in the literature. An LA system is commonly considered an important ingredient of a lean management system. However, it is a complex process, the success of which can depend on many factors. Little of the research done studies have addressed why LA systems fail [5][11][12], although efforts to implement or maintain a successful lean accounting system have failed many times. Also, definitely, not much is known about the mutual relations of barriers to implementing LA in manufacturing companies.
The field of lean accounting has seen widespread exploration in numerous countries [11][12][13][14][15], with a predominant focus on separated methodologies. While individual lean accounting methods have gained substantial attention in the literature, the broader context of barriers that influence the real extent and triumph of implementation has often remained unexplored.

2. Lean Management

The scope of lean orientation has expanded beyond just production and started being utilized in other areas of activity, such as trade and administration. This evolution led to the term “lean management” (LM). LM is a performance improvement philosophy with the primary objective of eliminating waste throughout a system. The lean approach is focused on constant process improvement and employs various tools and methods to implement these improvements. The core principle is the elimination of waste and unnecessary activities while ensuring seamless value creation at each step.
According to LM methodology, the quality of a product is solely determined by what the customer actually needs and is willing to pay for [16]. In this concept, lean advocates for a rule where every process can be further rationalized, leading to the elimination of often unnoticed waste.
Authors present a lean approach to the production process in the form of five rules, which can be applied both to the entire enterprise and to individual processes or the actions of specific employees [17]. These principles are: (1) specify value, (2) identify the value stream, (3) avoid interruptions in the value flow, (4) let customers pull value, and (5) constantly pursue perfection.
In a lean company, the traditional vertical organizational structure is abandoned in favor of an organization centered around value streams, representing the paths of product streams throughout the enterprise. The concept of lean management is oriented towards internal process improvement, the aspiration to eliminate waste, and the fostering of respect for people and other stakeholders within the organization [18] (p. 35). The wide use of this concept is attributed to its ability to contribute to the elimination of repetitive problems.

3. Lean Accounting

For the results obtained to meet expectations, organizations that have adopted the lean manufacturing system must apply the lean thinking model at all levels, including the accounting activity.
According to the literature, the success of lean transformation depends on its application throughout the organization. Therefore, accounting, as the main source of decision-making, plays a crucial role in the success of the lean transformation process [19], hence the need for lean accounting.
Implementing the lean philosophy demands the introduction of new performance assessment measures that allow for control and lead to continuous process improvement [20].
Effective management concepts within enterprises cannot function without proper performance measurement techniques. To make the right operational or strategic decisions, it is necessary to precisely understand costs in all possible dimensions and conditions, as well as their dependence on specific factors, both internal and external. This level of cost knowledge can only be achieved through an efficiently organized accounting system, particularly the management accounting system. Lean management implementers recognize the potential of this concept in identifying and eliminating waste. However, the effects of these activities are not directly reflected in the information provided by traditional accounting systems. Past research on lean management has repeatedly emphasized the need to modify accounting methods and tools in companies implementing lean principles, to ensure consistency between the applied cost management systems and accounting principles, and the implemented strategy [4][7][9][21]. E. Zarzycka also notes that “positive and long-term effects are a consequence of covering the implementation of all elements of the enterprise management system, not only the production part” [22] (p. 48). Therefore, changes in the philosophy of business management towards lean management have become the basis for redefining the goals and tasks of management accounting. Its techniques, tools, and concepts have changed, both in theoretical and practical terms [8]. This adaptation involves either modifying existing solutions or creating new solutions and practices not used so far. These dependencies can be summarized by quoting the opinion of A. Kamela-Sowińska: “Original, modern solutions and ideas are currently one of the most important, highest-valued components of an economic entity’s resources, and therefore there is no doubt that accounting solutions should be a derivative of changes taking place in the real world” [23].
Lean accounting is defined as an alternative system of measurement based on cost accounting of the value stream, connected with an analysis of resource use levels. Its task is to support decision-making, which is oriented towards the implementation of lean management. The tools applied within its scope enable the evaluation of the profit resulting from future state maps projects, as well as the assessment of the implementation outcomes of specific lean management methods and techniques [24] (p. 103).
The Institute of Management Accountants (IMA) has presented key assumptions of the Lean concept in accounting in the form of five fundamental principles of lean accounting, which simultaneously provide realization of traditional accounting functions [10] (pp. 8–9):
  • lean accounting uses lean methods in accounting processes to reduce losses embedded in transaction processes, reports, and accounting methods,
  • accounting processes focus on measuring and understanding the value created for clients through a focus on the entire value stream, rather than on particular products or services,
  • information is provided clearly and punctually, as evidenced by accounting reports that are not locked into a monthly reporting cycle, and their frequency is adapted to the needs caused by the implementation of the lean concept,
  • planning from a lean perspective involves individuals responsible for achieving results and actively engaged in setting goals,
  • reinforce internal accounting control by eliminating transactions through careful planning.
Despite the benefits of lean management [25], researchers have found a very low success rate of lean management [26]. This happens for many reasons [26]. One of them is that lean management has not been adequately supported by lean accounting [27]. Authors [5][6][28][29] have highlighted that overlooking lean accounting barriers or not fully understanding them significantly contributes to implementation failures. Considering that successful lean implementation demands continuous and consistent efforts [25][30], comprehending these barriers and their importance throughout the implementation process becomes crucial to ensure a seamless transition [14].

This entry is adapted from the peer-reviewed paper 10.3390/su151512008

References

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