lnkco manufactures printing inks. The company employs 150 people, of whom 120 are productt0
The ink market is extremely competitive and, with a 20 per cent market share, lnkco has the third largest share of the Australian market. The two market leaders manufacture high-volume black ink, while lnkco follows a niche market strategy: it produces high-quality coloured inks used in glossy magazines.
Four years ago the company made some changes in the manufacturing plant. Traditional product processing practices were reorganized and work teams were introduced. Each team consists of si production workers. They are self-managed work teams and, over the past few years, have been given increasing responsibilities. The team members have undergone training in quality concepts, as well as in communication and presentation skills. They are also multi-skilled-each member can operate all the machinery within the plant, inspect the quality of their product during processing, and has the skills to adjust the settings on machines when they detect any problems that need correction.
Fabio Smith is a bright young management accountant who has been following these developments with interest. Recently, the general manager has asked him to act as an accounting advisor to some of the teams. Management considers that the teams are now mature enough to take on greater responsibilities. These responsibilities will include managing their own cost budgets and designing specific measures that they will use to monitor their own performance.
However, not all of the accountants are as interested in these developments as Pablo Smith. Jackson Chambers, the budget officer, is critical of the new developments and of Smith's involvement. Chambers corners Fabio in the company canteen:
Fabio, how can you encourage this sort of caper? It is a waste of your time, and it distracts the production workers. They should be focusing on getting the product out, not doing our job. We are the experts in cost management and performance. We have used standard costs to control manufacturing performance for years, and I haven't heard any complaints. Our cost systems are well developed, and that is all we should be measuring. So the solution is clear. Why should these manufacturing teams develop their own measures? And how can management even think of letting them manage their own budgets!
Required:
1. List the reasons that may explain why a company like lnkco would introduce self-managed work teams.
2. Respond to each of the issues raised by Chambers.
3. What qualities could Fabio Smith bring to the teams in his role as their accounting advisor?