If You Can't Measure It You Cant Manage It
Introduction
There are many things one can measure in a business; from production costs; employee absenteeism; budget variances; waste; customer satisfaction; business unit performance, the list could go on and on, however how are these measurements relevant and how do they add to business performance, does simply measuring something mean you can influence it? “If you can’t measure it you can’t manage it” has been stated by more than one influential business or academic expert; Deming, Drucker, Kaplan, this is another list that could go on, however, this is a statement that has not been made without critism. This report will have a brief overview of the popularity of accounting measures, and then we will apply the “If you can’t measure it you can’t manage it” ideas to some specific contexts in order to demonstrate different views on the topic. Finally, we will conclude with our opinion.
Discussion
Cost and management control information became of great importance during the 19th century as large production, transport and distribution businesses came to the fore (Kaplan, 1984). Production businesses needed to monitor the efficiency of their multiple processes in completing and end product and transportation businesses were dealing with larger numbers of cash transactions than any one before. As businesses grew larger more hierarchical and often separated geographically, ways to monitor the performance of divisions and manage aspects of the business were needed and the measurement of processes and costs became widely used. In the early 20th century this trend continued as companies created many of the management practices, based on the measurement of production characteristics and costs, which still formed the bases of almost all management accounting processes up until the late 1980’s and many of them onto today (Johnson & Kaplan, 1987). The late 1980’s saw a great amount of focus on management accounting measures as the dysfunctional effects of focusing on
There are many things one can measure in a business; from production costs; employee absenteeism; budget variances; waste; customer satisfaction; business unit performance, the list could go on and on, however how are these measurements relevant and how do they add to business performance, does simply measuring something mean you can influence it? “If you can’t measure it you can’t manage it” has been stated by more than one influential business or academic expert; Deming, Drucker, Kaplan, this is another list that could go on, however, this is a statement that has not been made without critism. This report will have a brief overview of the popularity of accounting measures, and then we will apply the “If you can’t measure it you can’t manage it” ideas to some specific contexts in order to demonstrate different views on the topic. Finally, we will conclude with our opinion.
Discussion
Cost and management control information became of great importance during the 19th century as large production, transport and distribution businesses came to the fore (Kaplan, 1984). Production businesses needed to monitor the efficiency of their multiple processes in completing and end product and transportation businesses were dealing with larger numbers of cash transactions than any one before. As businesses grew larger more hierarchical and often separated geographically, ways to monitor the performance of divisions and manage aspects of the business were needed and the measurement of processes and costs became widely used. In the early 20th century this trend continued as companies created many of the management practices, based on the measurement of production characteristics and costs, which still formed the bases of almost all management accounting processes up until the late 1980’s and many of them onto today (Johnson & Kaplan, 1987). The late 1980’s saw a great amount of focus on management accounting measures as the dysfunctional effects of focusing on