Productivity Measurement and Management Accounting

Productivity improvement has become a key objective for U.S. industry.' Productivity measurement, however, has gone largely unnoticed by accounting professionals, particularly those teaching and doing research in accounting departments and business schools. Accounting textbooks virtually ignore issues of productivity measurement, and accounting journals contain few articles on the subject. Most articles on productivity measurement are written by economists—usually interested in productivity measurement at the national economy level—or by industrial engineers and production professionals.^ The implicit, and occasionally explicit, rationalization for the accounting profession's lack of interest in productivity measurement apparently arises from the belief that variances computed by the firm's standard cost system, particularly usage variances, are sufficient to measure the efficiency of the enterprise. Presumably, a desire for increased productivity could be signaled by across-the-board tightening of standards by the desired percentage. If a firm were inefficient or failed to meet its productivity improvement target, then the accounting system would report many unfavorable usage variances. We do not believe that even well-designed and well-operated standard cost systems provide adequate information for productivity measurement and improvement programs. Primarily this is an empirical statement. We observe numerous companies, with extensive standard cost accounting sys-