Management And Accounting Web

Castellano, J. F., S. Young and H. A. Roehm. 2002. Teaching business as a system. Management Accounting Quarterly (Summer): 1-5.

Summary by Charles Nowlin
Master of Accountancy Program
University of South Florida, Fall 2004

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Castellano, Young and Roehm begin by discussing the changing roles of accountants, e.g., from historian to consultant as discussed in various IMA publications. The purpose of this article is to describe the authors' response to these changes, or more specifically an MBA course they co-teach at the University of Dayton, and their attempts to incorporate the suggestions of the IMA into this course.

The Catalyst for Change

In 1995 the IMA saw the changes to the accounting profession as a big enough issue to release a research project called Practice Analysis of Management Accounting. This document discussed the changes necessary for educational institutions to prepare their students for employment in corporate America. In 1997 after seeing the rate of change in the profession increase exponentially the IMA chose to do further research to inform Universities of the changing educational requirements for management accountants. This research culminated in the release of Counting More, Counting Less in 1999.1

Understanding Business as a System

One of the University of Dayton’s responses to the changes was a revision to the course “Operational Systems.” The authors of this article chose to implement the suggestions made by the IMA by focusing on the nontraditional activities of management accountants: “Strategic planning, internal consulting, process improvement, and performance evaluation.” The main focus of this course was chosen as “understanding business as a system,” because accountants are being asked to apply their knowledge to make the business a better unit rather than simply report on the standing of the company. The first six weeks of the course are designed to change the students perception of a company so that they will view it as an "integrated, interdependent system".

How to Teach the Concept

The authors chose to use a business-game approach. Through competitive exercises designed to simulate a realistic market place the students gain an understanding of the interdependence that occurs in a business. The first game is an exercise developed in the 60’s by MIT, called “The Beer Game”. The purpose is to show students that the structure of the system causes the behavior of the individual units. In this exercise the groups are not allowed to communicate outside of the game which should emphasize to the students the necessity of interorganizational communication.

The next exercise is the bead game based on W. Edwards Deming’s “Red Bead Experiment.” This exercise is meant to help students realize that holding workers accountable for their performance inside a system that they have no control over fails to recognize the weaknesses that are inherent within the system.

The authors refer to the third game as "The Dice Game" from Eliyahu M. Goldratt’s The Goal (See Summary and note on the Match-Bowl-Dice-Game Experiment). The Dice Game is used to show the effects on the system from attempts to balance the plant when there are dependent events, and statistical fluctuations. (See the links above for more explanation). After the foundation has been laid in the students' minds as to the importance of the system as it relates to output, the remainder of the course is focused on teaching the students how to change the system so that the goals of the organization are achieved.

System Measurement and Control

Beyond the foundation games mentioned above, the course includes a discussion of Baker's Scoring a Whole in One: People in Enterprise Playing in Concert (See Contents), Wheeler's Understanding Variation: The Key to Managing Chaos, and other topics such as: ABM, target costing, and strategy. The final focus of the class is on Kaplan & Norton's Balanced Scorecard approach to performance measurement. Emphasizing financial performance in today’s marketplace is no longer sufficient.

 Companies must focus on the entire system including customers, suppliers, and employees to achieve and maintain a high level of success. The intent, at this point in the class, is for students to be able to understand the secondary effects of their actions and make better decisions by considering all the consequences.

Future accountants need to understand how system interdependencies and variation affect the performance of a system so that they can design performance evaluation and control systems that effectively support the organization's strategies and goals.


1 Institute of Management Accountants. 1999. Counting More, Counting Less, Transformations in the Management Accounting Profession, The 1999 Practice Analysis. Institute of Management Accountants.

Russell, K. A., G. H. Siegel and C. S. Kulesza. 1999. Counting more, counting less: Transformations in the management accounting profession. Management Accounting Quarterly (Fall): 28-34.

Russell, K. A., G. Siegel and C. S. Kulesza. 1999. Counting more, counting less. Strategic Finance (September): 38-44. (Survey results).

Related summaries:

Deming, W. E. 1993. The New Economics For Industry, Government & Education. Cambridge: Massachusetts Institute of Technology Center for Advanced Engineering Study. (Summary).

Goldratt, E. M. 1990. What is this thing called Theory of Constraints. New York: North River Press. (Summary).

Goldratt, E. M. and J. Cox. 1986. The Goal: A Process of Ongoing Improvement. North River Press. (Summary).

Johnson, H. T. and A. Broms. 2000. Profit Beyond Measure: Extraordinary Results through Attention to Work and People. New York: The Free Press. (Summary).

Kaplan, R. S. and D. P. Norton. 1996. The Balanced Scorecard: Translating Strategy into Action Boston: Harvard Business School Press. (Summary).

Kaplan, R. S. and D. P. Norton. 2001. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Harvard Business School Press. (Summary).

Martin, J. R. Not dated. The Beer Game. Management And Accounting Web.

Porter, M. E. 1996. What is a strategy? Harvard Business Review (November-December): 61-78. (Summary).

Roehm, H. A., L. Weinstein, and J. F. Castellano. 2000. Management control systems: How SPC enhances budgeting and standard costing. Management Accounting Quarterly (Fall): 34-40. (Summary).

Russell Ackoff Systems Based Improvement Video - Part 1. (Note and Link)

Senge, P. M. 1990. The Fifth Discipline: The Art and Practice of the Learning Organization. Doubleday Currency. (Note).