Management Accounting in an Amoeba Management Profit Center Setting

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John Martin August 2, 2011 Accounting 521 Term Project Management Accounting in an Amoeba Management Profit Center Setting Introduction A profit center is a when a responsibility center’s performance is measured in terms of a profit. Both departmental revenue and costs are accounted for. The resulting profit (or loss) directly affects the bottom line of a company’s overall financial performance. Any department, division, business unit, etc. within an organization’s structure can be designated, structured and accounted for as a profit center. Peter Drucker originally created the term profit center in the 1940’s. The idea was that the manager would treat the department much like his own business with an entrepreneurial spirit akin to the company philosophy while hopefully taking into account the long term viability of the department when making decisions. Some companies have gone so far to create micro-profit centers. In the spirit of promoting empowerment to lower level employees as well as to develop future managers, companies create large numbers of small work groups or “amoebas”. These 10 person groups may be in charge of a step in the manufacturing process and are required to sell their product internally to another department. These inexperienced employees are acting as managers of their own entrepreneur spirited company. An example is technology company Kyocera Corporation in Japan. Its divisions frequently divide into amoebas expected to trade both internally and externally. Separate amoeba counts have been as high as 800 across all divisions. In this paper I will address the following: a. How much autonomy should a corporation grant its amoebas?


b. What kind of data should be measured and shared within the amoeba work group and for what purposes? c. How transparent should management accounting data from one amoeba be for other amoebas within the same company and for what purposes? d. How do management accounting practices influence company culture? e. What is the management accounting role in enabling these otherwise inexperienced managers to succeed? f. Can the amoeba management system be transferred to other companies and other industries outside Japan? About Kyocera Kyocera Corporation is a Japanese multinational company based in Kyoto, Japan. Founded in 1959 as a company specializing in the production of fine ceramic components, Kyocera Corporation has grown into one of the world's preeminent manufacturers of electronics. Although over the years Kyocera has been known more for its individualistic spirit than as a typical Japanese company with a communal spirit, the company's corporate culture reflects a standard Japanese dedication to the manufacture of superior products. Kyocera is one of the most profitable companies in Japan. As of 2007, it was divided as 184 companies based on products and geography. Its divisional structure would be considered a diversified related firm. The Amoeba Management System The founder of Kyocera Corporation, Dr. Kazou Inamori, developed the amoeba management system. It is based on the biological characteristics of an amoeba, an organism of micro size with an ability to change itself constantly as a matter of survival. As applied to an organization, the company itself is looked at as a set of living organisms working together.


In response to a growing bureaucratic system that its divisional structure ultimately created, Kyocera wanted to develop an organizational structure that generated a sense of partnership and profit generation at all levels. Dr. Inamori desired to pass on his entrepreneur spirit to his employees, atypical of most Japanese companies. He wanted to permit employees to both have an influence in how their work is performed and to enjoy it. Amoeba units are profit centers and act as small separate companies. Most amoebas are in manufacturing (to produce the product) and sales (to sell the product). Amoebas trade both outside and inside the...
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