Relevance Regained: Total Quality Management and the Role of Management Accounting

Abstract

I want to reflect on how my thinking about issues raised in Relevance Lost (Johnson & Kaplan, 1987) has changed since Bob Kaplan and I wrote the book. The academic and business communities in countries around the world have received the book with far more enthusiasm than we ever could have anticipated. The primary theme of Relevance Lost is management accounting's contribution to declining competitiveness in American business after the 1950s. The book opens with the observation that "today's management accounting information, driven by the procedures and cycle of the organization's financial reporting system, is too late, too aggregated, and too distorted to be relevant for managers' planning and control decisions". The book attempts to show management accounting's deficiencies impaired long-term performance of American businesses in the post-war global economy. A key part of book's massage is that management accounting had not always served as poorly as it did in the last 40 years. Several historical chapters in Relevance Lost show that managerial accounting information had not impeded competitiveness for a century or more before World War II. Why the change after the 1950s? In this paper I want to reflect on the reasons for the change. I suggest that relevance was due to an inappropriate emphasis on the use of accounting information to manage. The paper then examines the need to focus on the management of processes and the contribution of total quality management. I conclude with some comments on the changes required in management education.