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Constraint‐based accounting and its impact on organizational performance: a simulation of four common business strategies

Constraint‐based accounting and its impact on organizational performance: a simulation of four... Since its inception, cost accounting has provided data to managers for the development of internal organizational performance measures. In the mid 1980s, Dr Eli Goldratt introduced a new management philosophy called the theory of constraints (TOC). This philosophy contained a new set of performance measures which linked together the strategic objectives and operational capabilities of the organization. This linkage allows for the maximization of profits. Since its introduction, there has been a growing amount of evidence documenting TOC's ability to more tightly link local decisions to organizational performance than those of traditional cost accounting. This research used a simple Gedunken experiment to evaluate the difference between strategy driven product-mix decisions based on TOC accounting and traditional cost accounting. In all cases, the constraint-based approach to costing outperformed the traditional approach based on cost accounting. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Integrated Manufacturing Systems Emerald Publishing

Constraint‐based accounting and its impact on organizational performance: a simulation of four common business strategies

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References (32)

Publisher
Emerald Publishing
Copyright
Copyright © 2002 MCB UP Ltd. All rights reserved.
ISSN
0957-6061
DOI
10.1108/09576060210426895
Publisher site
See Article on Publisher Site

Abstract

Since its inception, cost accounting has provided data to managers for the development of internal organizational performance measures. In the mid 1980s, Dr Eli Goldratt introduced a new management philosophy called the theory of constraints (TOC). This philosophy contained a new set of performance measures which linked together the strategic objectives and operational capabilities of the organization. This linkage allows for the maximization of profits. Since its introduction, there has been a growing amount of evidence documenting TOC's ability to more tightly link local decisions to organizational performance than those of traditional cost accounting. This research used a simple Gedunken experiment to evaluate the difference between strategy driven product-mix decisions based on TOC accounting and traditional cost accounting. In all cases, the constraint-based approach to costing outperformed the traditional approach based on cost accounting.

Journal

Integrated Manufacturing Systems – Emerald Publishing

Published: Jun 1, 2002

Keywords: Performance measurement; Strategic planning

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