Page 802 - Accounting Principles (A Business Perspective)

This book is licensed under a Creative Commons Attribution 3.0 License

see something wrong. It should come as no surprise that such an action brings a lot of attention to the problem
from many people in the plant. Stopping production causes a loss of output while people wait for the machinery to
start up again. Machine downtime also can cause customer dissatisfaction and loss of sales. You may have

experienced this dissatisfaction at a bank when you could not be served because the computer was down, or when
your airline flight was canceled because of an airplane's maintenance problems.
People like to take pride in their work. Surveys indicate that workers prefer to do high-quality work rather than
low-quality work. Companies generally find that workers respond favorably to performance measures and
incentives measuring and rewarding high-quality work.
Many companies use high quality as their strategic advantage. For example, FedEx entered the air courier
business with a promise that it would guarantee delivery the next day by mid-morning. By continually delivering on

this promise, the company built up trust in its customers. Canon and Honda are other well-known companies that
have used product quality to compete effectively.
Benchmarking is the continuous process of measuring how well one is doing against performance levels either
inside or outside of the organization. For instance, students often benchmark by comparing their performance
against the professor's standards or other students' performance. Students often are interested in how well
graduates of their school compare to graduates of other schools on CPA exams, bar exams, or other standardized
exams.
Companies are benchmarking in a similar way. American Airlines looks at its own on-time arrival performance
by computing the percentage of its flights that land within 15 minutes of their scheduled arrival time. The company

compares the results with its own past experience and with its competitors' performance. American Airlines also
compares its own per cent of lost luggage to its own past experience and the performance of major competitors such
as United Airlines and Delta Air Lines.
Benchmarking transforms the theory of quality products or service into practice. Benchmarking focuses
attention on the objective. When American Airlines benchmarks on-time arrivals, it focuses the attention of its
pilots, ground crews, mechanics, and everyone else on ways to improve on-time arrival performance.

An accounting perspective:

Managers executed for poor quality

Business insight

Eighteen managers were executed for poor product quality in a refrigerator plant on the outskirts
of Beijing, China. The managers—12 men and 6 women-were taken to a rice paddy outside of the
factory and shot while plant workers watched.
A government official stated the action was required for committing unpardonable sins against the
people of China. Apparently, workers complained the managers were forcing the production of
poor quality products. When workers complained that components did not meet specifications and
the refrigerators did not function as required, the managers told them to ship the products.

Accounting Principles: A Business Perspective 803 A Global Text