Using profit information for production management: evidence from Japanese factories

Purpose - – This study aims to investigate the relative weight of financial and non-financial performance measures used to evaluate production managers (such as shop floor managers or foremen) in a modern manufacturing setting. Design/methodology/approach - – Using survey data from Japanese factories, the paper examines the association between the choice of profit, cost, and non-financial performance measures with two characteristics of manufacturing systems: interdependence and multi-tasking. Findings - – The results indicate that interdependence has a significant and positive association with the importance of profit information, while multi-tasking is associated negatively with the importance of profit information, and positively with non-financial information for performance evaluation. Originality/value - – In recent years, a significant shift has been observed in Japanese production management with many companies now focusing on profit information instead of cost information. For example, the past studies show that large Japanese manufacturing companies are now using micro-profit centres and include profit information when evaluating factories. However, little empirical evidence is available on performance measurement at the shop floor foreman level, and even less is known about the importance of profit information in the evaluation of these lower level managers.