An important reason why Western enterprises so frequently fail at lean transformations lies in the unwillingness of top management to redefine their roles from financially biased commanders-in-chief to operationally informed facilitators and resource providers. Psychological aspects are involved (high-level managers have little or no incentive to relinquish the status they enjoy as controllers – especially management accountants) and cognitive ones too (difficulties and confusion arise when lean concepts are tried to be implemented while the traditional accounting measures still remain active – for example: standard costs, overhead absorption, labor hour variances).
Companies that starts to implement a lean strategy, often complain that they do good things in operations (such as increase productivity and reduce inventory), but it shows up as a negative in the company’s financial statements. This confusion derives from the application of the mechanics of the standard cost- absorption accounting model. This drives managers and entrepreneurs to increase output because more product “absorbs” overhead, creating the illusion of reduced costs. Toyota does not view low cost as a consequence of producing more, but as a consequence of consuming just enough to meet customers’ expectations, and no more. This is the core concept. Unfortunately, many managers, supported by uneducated accountant, have not yet got it, and keep on making mistakes. Cost reduction derives from waste elimination and producing only what is needed, and not from resources (machine and people) fully loaded.


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