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Management, accounting and philosophy
Author: Takeda, Hiroshi; Boyns, Trevor
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Abstract: Purpose - The purpose of this paper is to provide an understanding of the "Kyocera approach" to business, i.e. the relationship between the Kyocera philosophy, the amoeba management system (AMS) and the associated management accounting system. Design/methodology/approach - Utilising a variety of
secondary sources, including semi-autobiographical works written by Inamori, the architect of AMS, the authors examine in detail the links between the underlying Kyocera philosophy and the management and accounting principles derived therefrom. These sources are used to examine the historical origins of these principles, their influence on both the AMS and the management accounting system, and how these have developed over time. Findings - Both the AMS and the associated management accounting system can be shown to contain a mixture of influences, including traditional Asian/Japanese factors, but also Inamori/Kyocera-specific factors linked to Inamori's underlying philosophical approach to life and specific life experiences encountered by him. This suggests that while the Kyocera approach may be applicable more widely in Japan or Asia, outside of this context, the conflicts between Western and Asian cultures, although not necessarily insurmountable, may provide barriers leading to incomplete applications of the Kyocera approach Originality/value - This study adds to the understanding of the interrelationship between management philosophy and management accounting practices, and the ability of individuals to determine culture within organisations. It illustrates the importance of historical research in obtaining a detailed understanding of the philosophical, cultural and religious
underpinnings of current management and accounting practices. Full text: 1. Introduction
In early 2011 it was announced that, as from 1 April, Japan Airlines (JAL) would be adopting the amoeba management system (AMS) in an attempt to turn round its ailing fortunes. Perhaps such an announcement should not have come as too much of a surprise since the founder of AMS, Kazuo Inamori, had been appointed chairman and chief executive officer (CEO) of the ailing JAL in February 2010[1] . In a speech made to
reporters at the Foreign Correspondents' Club of Japan in October 2010, Inamori stressed that it was "important to have a system to allow you to grasp details of real-time figures and results so that all employees can pitch ideas to improve business operations" ([50] The Japan Times online , 2010). In the view of Inamori, the government bail-outs of the past had served to de-motivate employees and management, and what was required was a system which "increases a sense of management among employees and rejuvenates their interest in profitability" ([8] Asahi Shimbun , 3 February 2011). Reflecting on Inamori's threeyear tenure at JAL -he retired from t-he board on 31 March 2013 - Yoree Koh, correspondent of T-he Wall Street Journal , noted that, through the adoption of AMS, Inamori had been able to introduce a "cost-conscious culture at the once
profligate national airline" ([82] The Wall Street Journal , 2013). The introduction of AMS, initiated by Inamori at what is now the Kyocera Corporation, enabled JAL to recover rapidly from bankruptcy in 2010, posting in May 2012 an annual net profit of 186.6 billion yen for the previous financial year ([51] The Japan Times online , 2012a). As a result, on 19 September 2012, JAL re-listed its shares on the main section of the Tokyo Stock Exchange, the first company ever to do so after going through Japan's version of Chapter 11 bankruptcy ([82] The Wall Street Journal , 2013). The market value of the shares, at nearly 700 billion yen, made it the world's second biggest initial public offering in 2012 after that of Facebook Inc. ([52], [53] The Japan Times online , 2012b,c).
historical and philosophical underpinnings of the system and, in particular, the management accounting system which forms part of the AMS. In particular we are concerned with the interrelationship between the management accounting approach adopted and the underlying management philosophy. While the relationship between philosophy and accounting has been raised by some authors from time to time, the issue is not a widely discussed one. Nevertheless some have considered it to be important, and recently [64] Mattessich (2008, p. 83) has argued that "academic accounting is bound to remain an intellectual fragment" unless there is a "profound inquiry into the reality that our discipline tries to represent". The lack of discussion of philosophical aspects of accounting, however, contrasts with that within management research, where the link between philosophy and management has been discussed for several decades.
Within the management literature the emphasis has been not so much on the philosophy of management, although two journals have been developed since 2000 to publish work in this area[2] , but on management (or business) philosophy, that is, the ideas and principles which lie behind the actions of the person in charge of managing a business. But what relationship is there, if any, between the management philosophy pursued and the nature of the management accounting system adopted? Do different management philosophies result in the adoption of different management accounting systems? Does the existence of different management
philosophies in Western businesses compared to that in non-Western businesses, result in the use of different management accounting systems or, indeed, different approaches to management accounting? To what extent do religion and culture influence such relationships and what problems are faced when a business developed in one geographical context goes global, either through internal expansion or taking over existing businesses operating in other countries?
Although not entirely ignored by accounting researchers, the issues of religion and culture have tended to be examined in limited ways. Studies of accounting and religion have largely focused either on specific religious institutions, such as [48] Jacobs and Walker (2004) and [71] Quattrone (2004), although [13] Carmona and Ezzamel (2006) have noted that research in this field is still at an embryonic stage, or the implications of religion, especially Islam, for the international harmonisation of financial reporting ([25] Hamid et al. , 1993; [54] Karim, 2001). Of a more fundamental nature, [1] Abo (2005) has examined the moral and religious foundations of double-entry bookkeeping. In the sphere of managerial control, however, [31] Hofstede (1987, p. 8) remarked that accounting control systems were likely to vary along cultural lines, a suggestion that in the past couple of decades has given rise to cross-cultural comparative analyses of management control practices. However, as [11] Bhimani (2007, pp. 348-49) points out, much of this research has been of the nomothetic variety, and while cultural differences have been identified as explaining different practices ([63] MacArthur, 2006), or a lessened impact of specific practices on management performance in some countries compared to others ([23] Eternadi et al. , 2009), such studies largely ignore the impact of cultural roots and historical influences and, it may be added, the impact of specific individuals on particular companies.
Historical and religious factors can undoubtedly influence both national and corporate cultures and individual management or business philosophies. In this study we utilise a historical lens to examine the links between the management philosophy and the managerial and management accounting practices (as influenced by Kazuo Inamori) adopted by the Kyocera Corporation, a Japanese multi-national business which expanded initially within Japan and then through overseas expansion. That individuals can potentially have a profound impact on accounting and society is suggested by the work of [33], [34], [35] Hoskin and Macve (1986, 1988, 1993), who examined the significance of the new disciplinary culture of writing, examining and grading introduced at the West Point Military Academy in the USA by Sylvanus Thayer, who was appointed superintendent of the
example, [6] Antonelli et al. , 2008). Such historical studies, however, invariably ignore the importance of culture and religion.
While it is not our intention to suggest that the impact of Inamori has been (or indeed will be) of a similar nature to that ascribed to Thayer by Hoskin and Macve, it is our view that a historical study of the Kyocera Corporation can throw light on the importance of an individual's management/business philosophy in shaping not only the nature of the accounting approach adopted but also the general corporate culture. The paper therefore relates, as one of the referees succinctly put it:
[...] how the world view of a particular individual [Kazuo Inamori] shaped the growth of an industrial empire, its organisational structure, management and accounting practices, how he came to possess such a world view, how the employees in Japan were willing to buy into it, and what happened when that world view came into contact with other organisational norms as the empire expanded.
The aim of this paper is therefore to stimulate discussion of the relationship between management and
accounting practice on the one hand, and the extent to which these are influenced by philosophical aspects. In the context of scholarly debates, we examine the interrelationship between philosophy, management and accounting inherent within the managerial approach adopted at Kyocera (the "Kyocera approach"). This is done through a careful study of the writings of scholars and Kazuo Inamori and an analysis of the link between these writings and the management and management accounting practices at Kyocera. In order to better understand the motivation and philosophical underpinnings of the Kyocera approach (that is, the AMS, the management accounting system and the underlying Kyocera philosophy), we examine historical aspects of the life of Inamori and that of Kyocera. This use of historical analysis enables us to obtain a fuller understanding of the
philosophical underpinnings of the Kyocera approach and the rationale behind it. In turn, this helps us to throw some light on the factors which have contributed to the success of AMS at Kyocera, thereby potentially enabling us to consider whether it can be "exported" successfully to other companies, such as JAL.
The study is structured as follows. In section 2 we set out our definitions of management accounting and management philosophy and explore the nature of the relationship between them in general terms. This is followed in section 3 by a brief history of the development of Kyocera. Section 4 focuses on the Kyocera approach, examining the Kyocera Philosophy and the management and accounting principles, especially the latter, that derive therefrom. Section 5 of the paper briefly sets out the main elements of AMS and the associated management accounting system. Section 6 examines the success or otherwise of attempts to implement the Kyocera approach more widely, while in the concluding section we summarise the fundamental differences in Kyocera's management accounting system and briefly comment on the potential for the Kyocera approach to be effectively utilised by JAL and Western firms.
2. Management accounting and management philosophy
There is no generally accepted definition of "management accounting". Nevertheless, most definitions
emphasise the importance of the provision of information, whether they focus on management accounting as a process[3] or as a profession[4] . Some definitions emphasise management accounting as a body of knowledge ([7] Armstrong, 1995) or a set of techniques or practices "loosely coupled to one another and varying across both time and space" ([16] Chapman et al. , 2007, p. ix), with some academic researchers suggesting that the focus of management accounting research today should be on understanding practices within organisations (see, for example, [75] Scapens, 2006; [68] Otley, 2008). This paper reflects this viewpoint and adopts a broad definition of management accounting, namely, the use of accounting information for managerial purposes. Furthermore, it is our belief that management philosophy has an important influence on the choice of approach to management accounting, and hence the particular system adopted.
The importance of management philosophies has long been recognised in management, but the link to management accounting has rarely been discussed. De Bono and Heller
managers think of themselves as "doers" rather than as "thinkers" have suggested, based on their own experiences and those of others, that managers have to develop their own personal management philosophy. Moreover, management philosophies must reflect "practical requirements", while using "the thinking process to learn from results", such learning being fed back "into a deeper understanding" of the management practices being adopted (de Bono and Heller, www.thinkingmanagers.com/business-management/management-philosophy). Management accounting, as a practice which provides information for management purposes, forms an integral part of management and, as such, with any underlying management philosophy.
As with "management accounting", however, there is no generally accepted definition of the term "management philosophy" ([83] Wang, 2009). In their review of the literature between the 1920s and 1960s, [62] Litzinger and Schaefer (1966, p. 337) noted that the term "management philosophy" had "been used variously to refer to a theory, a goal, a technique, a way of life with certain implied values, or a public relations gambit". Furthermore, [62] Litzinger and Schaefer (1966, p. 342) could point to a "confusion among writers on management
philosophy" stemming "from a basic confusion about the term 'philosophy' itself". Over the last half a century the focus has largely shifted away from the meaning of the term "management philosophy" to how management philosophies are reflected in management practice. For example, management techniques/approaches developed in the twentieth century, such as just-in-time (JIT) and the theory of constraints, have been considered as different management philosophies ([72] Sale and Inman, 2003), while [2] Adams et al. (2007) have suggested that traditional management (TM), total quality management (TQM), and the theory of constraints are management philosophies which exhibit strong perceptual differences from each other.
[79] Taka (2009) has suggested that the issue of management philosophy can be approached in seven different ways (see Appendix 1). First, from the perspective of a concern with fundamental issues of management (approach 1); second, through a focus on defining the field of study (approaches 2, 3 and 4); and third, with an emphasis on management thought and practice (approaches 5, 6 and 7). The approach adopted in this paper follows the third of these approaches encompassing:
[...] management philosophy as the thoughts of a manager (as influenced by his/her personal experiences), his/her beliefs, the systematization of those thoughts and beliefs through the establishment of a corporate culture, as exemplified by the establishment of a corporate motto, management rationale, and expressed through the official documents of the corporation (e.g. corporate social responsibility report), and the implementation of such thoughts and beliefs in practice.
This approach embraces the idea that the term "management philosophy" describes a "theory or attitude that acts as a guiding principle for behaviour" (one definition of "philosophy" provided by OED online), and opens up a number of fields for potential research, such as the origins of such philosophies, how they differ from one another, and their implications for management accounting. Hence, one focus of research could be an
examination of the difference between the management philosophies of individual businessmen, but of possibly greater interest given recent business and economic history would be to consider a broader focus, such as the difference between Western and non-Western management philosophies and their impact on management accounting. The latter, however, can be approached through studies of the former type since one way of better understanding such differences, consistent with the growing emphasis in modern research in both management and management accounting with practices and how they have developed and changed, is through historical case studies of individual businesses, such as Kyocera. Since the company grew up in a Japanese context, but later expanded into the West, a study of Kyocera can throw important light on the relationship between
management philosophy and management accounting. Before examining the details of the Kyocera case and, in particular, the Kyocera Philosophy, and to help place it in a broader perspective, we briefly turn our attention to the different philosophical contexts that exist in Japan and the West.
2.1 Japanese and Western philosophical approaches
reflecting a holistic philosophical approach, whereas that of Western business is based on a more analytical approach which focuses on targets and measurable objectives ([58] Kustin, 1993, p. 4). Work by [84], [85] Yoshida (1989, 1991) has emphasised that the different approaches of Japanese and Western businesses are strongly linked to their different business cultures. In the West, and especially in the USA, business developed in a context where there was a vast quantity "of available land, large markets, an educated labour force and, in the nineteenth century, a laissez-faire government" ([58] Kustin, 1993, p. 4). This contrasted with Japanese business, which developed in an environment comprising "limited available land, a strong feudal system, and a religious following of Buddhism and Confucianism which supports the unit (i.e. family unit) rather than the individual" ([58] Kustin, 1993, p. 4).
The essence of holistic philosophy is that the whole is greater than the sum of the parts ([84] Yoshida, 1989)[5] . In contrast to Western analytic thinking, which seeks to understand the whole by dividing it into its component parts, Japanese holistic thinking focuses on the whole rather than on the individual parts. Furthermore, it rejects the idea that the whole will necessarily be perfect just because each individual part is perfect ([84] Yoshida, 1989). Yoshida's discussion of Japanese and Western differences was carried out in the context of an analysis of Deming's management philosophy, i.e. his concept of quality management, which has been seen as a crucial factor in Japanese business success after second world war. For [84] Yoshida (1989), the Japanese "holistic" approach is based around the establishment of a fundamental company philosophy from which everything else follows, including corporate objectives, goals and job specifications. On the other hand, in Yoshida's view, the American "analytic" mind requires at the outset the establishment of clear-cut objectives and detailed job specifications.
2.2 The underpinnings of the Kyocera philosophy
The Kyocera Philosophy, i.e. the management philosophy adopted within Kyocera, is a specific form of Japanese management philosophy. Although attempts have been made to explain it in terms of Western philosophical approaches such as Aristotelian "phronesis"[6] ([73] Sawabe, 2010) or Adam Smith's moral theory ([30] Hiromoto and Hiki, 2010), these approaches fail to consider the Kyocera Philosophy as a holistic concept. It is our contention that the Kyocera Philosophy can only be fully understood in the context of the Japanese holistic approach. Attempts such as those of [73] Sawabe (2010) and [30] Hiromoto and Hiki (2010) to explain amoeba management through the use of Western moral theories fail to acknowledge the importance of classical Chinese texts and Japanese thought in determining Inamori's philosophical approach to running Kyocera ([47] Inamori et al. , 2005; [55] Kawakami, 2010). As we shall see below (section 4), amoeba management is based on Japanese cultural norms, in particular that of toku (Fixed graphic 1 [Figure omitted. See Article Image.]), emphasising the importance of seeing the Kyocera philosophy as a holistic entity, moreover one that encompasses not only management per se but also management accounting as an important element of management.
Indeed, seeing management accounting as a key element of management reflects the holistic approach. The Western view which sees management accounting as a distinct entity in its own right emphasises the difference in approach between Japan and the West. In the latter, management and management accounting are separate entities and can be analysed individually; in the former, although they may be different things, they are
nevertheless inter-locked since they form part of a single system of management. [56] Kazusa (2010) and [57] Kazusa and Sawabe (2006) have argued that the management accounting system played an important role in the successful development of Kyocera. Furthermore, [30] Hiromoto and Hiki (2010) have insisted that within Kyocera the micro-macro loops of production, money and workers are connected more effectively than within Toyota. To better understand the role of management accounting in the development of Kyocera, and its significance as a part of the holistic Kyocera Philosophy, we focus in the remainder of this paper on the links between the Kyocera Philosophy and the company's system of management accounting. We start this
3. A brief history of Kyocera
The Kyocera Corporation is a Japanese multinational[7] which, at 31 March 2013, had a capital of 115.7 billion yen and consolidated net sales of 1.28 trillion yen. Today it operates in a number of fields, including fine ceramics, electronic devices, photocopying equipment, etc., and comprises 229 companies employing 71,645 workers (http://global.kyocera.com/company/summary/company_profile.html). However, before 2000, the company was little known outside of Japan, despite the fact that it had begun to create something of a stir back in its native country more than 20 years earlier[8] . In 1980, for example, Kyoto Ceramics, as the company was originally known, was noted as being "first for its distinctive management method and creativeness" ([49] The Japanese Economic Journal , 1980, p. 4). The distinctive management method was something known as "amoeba management", a system which had been developed by the company's founder, Kazuo Inamori, from the middle of the 1960s.
In 1958, having been working for Shofu Industries for four years, and following a disagreement over the company's technological development policy, Inamori left to set up his own business, assisted by his former manager, Masaji Aoyama, and two of Aoyama's friends. With borrowed funds, Inamori founded the Kyoto Ceramics Co. Ltd. on 1 April 1959 with an initial capital of 3 million yen. The company produced fine ceramics and came to specialise in the production of ceramic packages for electronic chips. Employing 28 members, the company initially faced a number of difficulties but, according to [19] Crampton (2001), the fact that it was profitable from its first year meant that Inamori was able to expand the business by both internal growth and buying up other businesses in Kyoto facing financial difficulties. Thus, the company expanded during the 1960s, opening an office in Tokyo in April 1960 and adding additional production plants at Shiga in 1963 and
Kagoshima in 1969. By 1968 company employment exceeded 500 (see Table I [Figure omitted. See Article Image.]).
Expansion was increasingly based on overseas sales, Inamori making his first visit to the USA in 1962. In 1966 a large order for alumina substrates for integrated circuits was secured from IBM and, two years later, in August 1968, a sales office was opened in California. In July 1969 this became the company's American sales
company, Kyocera International Inc., and production facilities were opened in the USA in March 1971. Back in Japan, the company moved its headquarters to Yamashina, Kyoto, in July 1972, opening the Kagoshima Kokubo plant in October of the same year. The company's expansion led to an increase in capital and its shares becoming quoted on the Tokyo, Kyoto and Osaka stock exchanges, while American Depository Receipts were issued in the USA in February 1976 and again in May 1980, the latter issue coinciding with the company's stock being listed on the New York Stock Exchange (NYSE).
Further developments at the end of the 1970s and the beginning of the 1980s resulted, in October 1982, in the formation of the Kyocera Corporation, a merger of Kyoto Ceramics and four affiliates, including Cybernet Electronics Corporation (a telecommunications equipment manufacturer in which Kyoto Ceramics had invested capital in 1979). In the early 1980s Kyocera controlled about 70 per cent of the world market in ceramic
packages for electronic chips, but this market was beginning to stagnate as plastics began to replace ceramics ([22] The Economist , 9 April 1983, p. 65). Looking for sources of potential future growth, the company engaged in mergers with Japanese companies such as the camera manufacturer, Yashica Co. Ltd., in October 1983, while in June 1984, together with 24 other companies (including Sony and Mitsubishi), Kyocera established Daini-Denden Kikaku Co. Ltd. (DDI - later KDDI) as a competitor for Nippon Telegraph and Telephone (NTT) following the deregulation of the Japanese telecommunications industry[9] . A few months earlier, in April 1984, Kyocera had supported the establishment of the Inamori Foundation and the Tokyo Central Research
Laboratory (later Tokyo Yoga office), while a few months later, in August 1984, it established the Solar Energy Centre (now the Chiba Sakura office) in Sakura, Chiba.
establishment of various subsidiaries across the world, namely, Germany (May 1986), America (January 1987) and Mexico (September 1987), while two American corporations, Elco and AVX joined the Kyocera group in August 1989 and January 1990 respectively. By 1990 employment at Kyocera had reached 12,762 and sales 300.4 billion yen or US$2.4 billion ([77] St James, 1990, pp. 50-52). The early 1990s saw further developments in North America, while subsidiaries were established in China (Dongguan Shilong Kyocera Optics Co. Ltd. in July 1995 and Shanghai Kyocera Electronics Co. Ltd. in December 1995). In 1997, though sales had more than doubled compared with the beginning of the decade, reaching 714.77 billion yen (US$5.76 billion), employment had only grown slightly to 13,270 ([78] St James, 1998, pp. 329-32). It was in 1997, aged 65, that Inamori formally resigned as chairman of both Kyocera and DDI, becoming instead "founder and chairman emeritus" of both companies[10] .
During the late 1990s and early 2000s the company's progress stalled somewhat but, by 2005 revenue was almost twice what it had been in the mid-1990s (see Table II [Figure omitted. See Article Image.]). Kyocera's group sales exceeded 1 trillion yen for the first time in the financial year ending 31 March 2001 but this did not prevent it having to lay off some of its workforce in 2001/2002 as a result of the problems of the Japanese economy. Since 2004, although Kyocera has continued to focus its activities on electronic components and products, it has diversified into the hotel business, medical supplies (Japan Medical Materials Corporation) and in April 2006 the company not only established a subsidiary in Korea but also set up a consultancy arm, KCCS Management Consulting Inc. A Chinese subsidiary of the consulting arm was established in Shanghai in December 2006.
According to [30] Hiromoto and Hiki (2010), [56] Kazusa (2010), [57] Kazusa and Sawabe (2006) and [41] Inamori (2006), the success of the company has been built on the Kyocera approach. In the next section we analyse this approach, focusing on the Kyocera Philosophy and the management and accounting principles which it has spawned.
4. Kyocera philosophy and the management and accounting principles 4.1 Background
When Inamori founded Kyoto Ceramics in 1959 there was no well thought-out philosophy guiding his approach to management. Furthermore, as a university-trained chemist, he lacked any formal, or indeed informal, training in either management or accounting. It was as a result of various events (life experiences), and developments within both the business and his own views on philosophy that a well-established approach to management and accounting matters subsequently emerged. Thus it was that AMS and its associated management accounting system began to take shape during the 1960s and early 1970s.
Fundamental to this developmental process was a strike which occurred at Kyoto Ceramics in April 1961. Having set up the business in 1959, Inamori's initial concerns were focused on three areas: research; satisfying customers' needs; and avoiding bankruptcy. These ends were pursued to the detriment of matters such as personnel management. The desire to avoid bankruptcy led to pressure on sales people, production staff, and development personnel to work around the clock to fulfil product orders before their deadlines ([78] St James, 1998, p. 330). However, this neglect of workers' welfare, as Inamori focused his own energies largely on research, resulted in a three-day strike by some recently engaged high school graduates. The process of resolving this dispute made Inamori re-think his approach to managerial issues. In particular, he recognised that he needed to be more concerned with the well-being of his workforce and it was this that resulted in the
development of a new managerial rationale, reflecting his developing philosophical approach to management. The Kyocera web site today presents this rationale as follows:
To provide opportunities for the material and intellectual growth of all our employees, and through our joint efforts, contribute to the advancement of society and humankind
(http://global.kyocera.com/company/philosophy/index.html).
developmental process ([47] Inamori et al. , 2005). The first stage was his early life (pre-working age) where he learnt, from his family and school teachers, to do "the right thing as a human being". The second stage
comprised the understanding which he gained from studying the management/business philosophies of leading businessmen such as Konosuke Matsushita, founder of Panasonic, and Soichiro Honda, founder of the Honda Motor Company. Finally, the third stage is represented by the deeper understandings Inamori gained from reading philosophical texts and Chinese classics, including texts written by influential writers such as Confucius and Mencius. [44] Inamori (2007b, p. 110), has written that "if merchants have high moral standards and personal integrity [ jin-toku ; Fixed graphic 2 [Figure omitted. See Article Image.]], they can do more than gain trust: They can earn the respect of their customers. I believe that the secret of success is to earn our customers' respect". [44] Inamori (2007b, p. 110) also explains that "being virtuous [toku-sei Fixed graphic 3 [Figure
omitted. See Article Image.]; ] means more than offering superior performance on price, quality, and delivery ... .it's the ability to make others spontaneously respect us. We cannot manage a great business unless we learn to acquire this quality". These attitudes are a reflection of one of the central tenets of Confucius, namely kunshi (Fixed graphic 4 [Figure omitted. See Article Image.]; a man of toku [Fixed graphic 5 [Figure omitted. See Article Image.]]). These philosophies and thoughts can be summarised in the word toku , a commonly used word in Japan and one which is considered to represent one of the highest of all possible moral and ethical values. The meaning of toku is to develop one's character by doing good deeds that result in profit, wealth and fortune. The concept of toku originates in ancient China and its values have been accepted in Japan, China, Korea, Taiwan, Hong Kong, and Singapore for several thousand years ([26] Hasegawa, 2009). Toku therefore provides a basis for Eastern philosophy and management thought. As a Chinese character, Fixed graphic 6 [Figure omitted. See Article Image.] (toku ) consists of Fixed graphic 7 [Figure omitted. See Article Image.] (go), Fixed graphic 8 [Figure omitted. See Article Image.] (open) and Fixed graphic 9 [Figure omitted. See Article Image.] (mind) so that the literal meaning of toku is to go with an open mind. In other words, toku means that if an individual exhibits a fine character (one with an open mind), and realizes good deeds which generate happiness and social advancement, that individual will be rewarded with profit, wealth and fortune. However, it is important to realise that toku is a set of values that considers happiness and social advancement as priorities, profits being of secondary importance and an outcome of achieving other goals, not an end in itself. For example, Mr Nishieda, one of the friends of Aoyama who had lent funds to Inamori to help him establish the company, asked just one thing from Inamori: "Never be a slave to money" ([43] Inamori, 2007a, p. 10). By 1971, when the company was ready to go public and Inamori was eager to repay him for his investment, Mr Nishieda insisted that it was not necessary and explained: " I did not invest in you to become rich. I did it because of your
philosophy " ([43] Inamori, 2007a, p. 10 - italics in original). Similarly, when the company's stock was first listed, Inamori chose a public offering of new stock rather than that held by existing stockholders, including himself. In other words, Inamori decided against personally benefiting financially from the stock-listing, all capital raised being used to develop the company ([44] Inamori, 2007b, p. 58).
Inamori was clearly influenced strongly by the concept of toku , as indicated by the notes and written
memoranda he kept, reflecting on his own early managerial experiences. These notes and memoranda were subsequently fused together in what has since become known as the Kyocera Philosophy. This philosophy, developed during the first half of the 1960s, was initially put together and "published", albeit in a form solely for internal consumption by firm members, in 1967 ([59] Kyocera Corporation, 2000a, pp. 72-73). Numerous versions of this philosophy have been published over the years for use within the company (there had been 37 by 2000), but while these have indicated modifications, the fundamental underpinnings of the philosophy have remained unchanged. Indeed, according to Inamori:
1995).
In 1989, Inamori was persuaded that this philosophy should be made more widely available and it was published for external consumption as Kokoro wo Takameru, Keiei wo Nobasu . The English translation of the title of this work is Elevate Your Mind and Expand Your Business but when the work was eventually published in English, in 1995, it was entitled A Passion for Success . The English version was not simply a direct translation of the Japanese text, but a more structured work which used a different method of presentation of the material and also contained some different "keywords" (see section 4.3 below) to those found in the Japanese version. These differences reflect the influence of Kyocera's merger with the US-based AVX Corporation in 1990. Following the merger, Inamori presented lectures on the Kyocera Philosophy at AVX, and it was in the light of discussions between Inamori and the AVX directors that A Passion for Success emerged. The book
represented a fusing together of the material contained in Kokoro wo Takameru, Keiei wo Nobasu with ideas that emerged from the discussions with the AVX directors, presenting Inamori's philosophy in a manner that would suit an American audience. In 1996, A Passion for Success was translated into Japanese as Seiko eno Jyonetsu .
4.2 The structure of the Kyocera philosophy
There are four key elements to the Kyocera Philosophy, as depicted in Figure 1 [Figure omitted. See Article Image.]. At the core is the corporate motto of Kyocera, Kei-Ten Ai-Jin (Fixed graphic 10 [Figure omitted. See Article Image.]: "Respect the divine and love people")[11] . The phrase Kei-Ten Ai-Jin is attributable not to Inamori but to Takamori Saigo (1827-1877), the founder of the new Japan under the Meiji Restoration in 1868. Being born and brought up in Kagoshima, the same town as Saigo, Inamori was taught by his parents and teachers about Saigo, the town's proudest son, and he learnt this phrase as a child. Just after the founding of Kyoto Ceramics, the first president of the company, Otoya Miyaki, presented Inamori with a scroll on which was depicted the phrase Kei-Ten Ai-Jin, which Inamori had mounted and displayed in the company's reception ([45] Inamori, 2007c).
As Figure 1 [Figure omitted. See Article Image.] shows, immediately surrounding the corporate motto is the management rationale, representing a broader manifestation of the same message. Surrounding the rationale, and giving effect to it and the motto, are principles, which are further elucidated through the philosophy
keywords and reflect the concept of management based on the bonding of human minds. The Kyocera
Philosophy, as it applies to accounting, is expressed in Figure 2 [Figure omitted. See Article Image.]. Here, the key principle, as indicated by [38] Inamori (2000) is that of "seeking essence", which is expressed initially in the 12 management principles and then through the seven accounting principles. There are two aspects to the "principle of seeking essence":
the pursuit of the essence of matters should be based on principles and general rules; and decisions should be made on the basis of what is right as a human being.
As indicated in Figure 2 [Figure omitted. See Article Image.], the accounting principles are to be found nested inside the management principles, reflecting Inamori's holistic view that accounting is but one part of
management. Furthermore, he goes on to note that accounting represents "the core of management":
I realized that being aware of the true condition of the company was essential for the long-term development of the corporation ([http://global.kyocera.com/inamori/management/accounting.html]).
All 12 of the management principles (see Appendix 2 for a full list) can be found to be linked with one or more of the accounting principles. In section 4.3 below we examine in more detail certain aspects of the Kyocera Philosophy and principles depicted in Figures 1 and 2 [Figure omitted. See Article Image.].
4.3 Philosophy keywords and principles
easily understood. While the use of such phrases or dictums is not something particularly new or Japanese, western writers on management, such as [14] Casson (1915), [69] Peters and Waterman (1982) and [21] Deming (1986), having likewise produced similar phrases or dictums[12] , what is distinctive about the Kyocera philosophy is the existence of a more detailed, c.700 word, explanation of each keyword. Such explanations help facilitate the determination of the link between the philosophy keywords and principles and have informed our discussion below.
At the heart of the Kyocera philosophy is the idea that decisions should be taken on the basis of doing "the right thing as a human being". This is put into practice through the philosophy keywords which link to both the 12 management and seven accounting principles utilised within the company. While the main links are reasonably clear, the inter-relationships between them all are extremely complex, do not lend themselves readily to simple diagrammatic representation, and their explanation would take up far more space than is available in a single journal article. Hence, our analysis below is more limited, focusing on the key links, especially those between the philosophy keywords, the accounting principles and the key management principles to which they are related. To better understand the background context to these relationships, we first examine the link between the philosophy keywords and management principles.
To consider such links, we need, first, to establish the philosophy keywords to be studied. This is no simple task since the precise number of philosophy keywords used has varied both over time and between Japanese and English language versions of, ostensibly, the same text. Thus, while Kokoro wo Takameru, Keiei wo Nobasu contained 106 keywords, A Passion for Success contained only 105, while the current Kyocera web site records just 78 (see Appendix 3 for full list). The reason for the smaller number of keywords shown on the web site is not altogether clear: it may reflect simply those used in Kyocera today, or it may reflect the fact that some keywords are closely associated with actual business practice and, since they represent certain elements of Kyocera's core competency, they have been deliberately left off the web site[13] . To keep our analysis manageable, we focus on those philosophy keywords presented on the current Kyocera web site, but it needs to be recognised that several of the current web site keywords do not appear in Inamori's various works, nor do they seem to have any direct precursors or equivalents.
Turning to the issue of the links between keywords and management principles, the first of the various works published by Inamori which dealt specifically with this issue was A Passion for Success (first published in 1995). This work is divided into two main sections, the first dealing with "how to succeed in life" and the second with "how to succeed in business". The key elements in relation to the latter are summarised in the word "Passion". Each letter of this word stands for something different: "P" stands for "profit"; "A" for "ambition"; one "S" for "sincerity" and the other for "strength"; "I" is for "innovation"; "O" for "optimism"; and "N" for "never give up". For the purposes of this research, we have utilised a modern reprint of the Japanese version of this work ([46] Inamori, 2007d) and a modern reprint ([39] Inamori, 2004a) of his earlier Japanese work Kokoro wo Takameru, Keiei wo Nobasu (originally published in 1989). Utilising the explanations provided in these two works, it is possible to illustrate the links between the majority of the 78 keywords currently displayed on Kyocera's web site and the 12 management principles (see Table III [Figure omitted. See Article Image.] and Figure 3 [Figure omitted. See Article Image.]).
Kyocera. Furthermore, the addition of the new accounting-related keywords may reflect a concern within the company to explain more simply to the workforce and managers the practical meaning of the accounting principles. Nevertheless, it can be determined that, like each management principle, each accounting principle can be linked to at least one philosophy keyword, as indicated in Table IV [Figure omitted. See Article Image.], and also to one or more of the 12 management principles.
Since both the management principles, accounting principles and the principle of seeking essence are linked to the keywords, and also interlinked with one another, the Kyocera philosophy is very complex. While in theory it is possible to build up a single diagram depicting this complexity, such a diagram would be impossible to read when reduced to a size that could be accommodated within the confines of the page of an academic journal. Thus Figure 4 [Figure omitted. See Article Image.] depicts only the links between the philosophy keywords, the seven accounting principles and the two management principles, 5 ("maximise revenues and minimise
expenses") and 6 ("pricing is management"), which, according to [38] Inamori (2000, pp. 34-38), are those most closely connected with the accounting principles and the principle of seeking essence. Despite its limitations, since certain keywords are seen to be linked to both an accounting principle and either the principle of seeking essence or management principles 5 and 6, Figure 4 [Figure omitted. See Article Image.] emphasises the holistic nature of the Kyocera Philosophy, as previously indicated in general terms in Figures 1 and 2 [Figure omitted. See Article Image.].
Having established the links between the accounting principles and other aspects of the Kyocera philosophy, we now consider the former in more detail, including the rationale behind them and the historical factors that have influenced them, and draw comparisons with western approaches to accounting.
4.4 The accounting principles
At the time Kyoto Ceramics was founded, Inamori has claimed that he had no knowledge of management or accounting. It was in the process of learning to manage Kyocera during the 1960s that Inamori came to understand that accounting represents "the core of management". To overcome his lack of knowledge of accounting matters, Inamori was forced to read books on the subject
[http://global.kyocera.com/inamori/management/accounting.html]. Further evidence indicates that it was in 1968, the year after Akio Saito had been appointed as head of the company's accounting section, that Inamori visited the library of Stanford University in order to study accounting ([38] Inamori, 2000, p. 69). Fifty years old at the time of his appointment, Saito had gained accounting experience with other companies and was very much wedded to traditional accounting ideas when he joined the firm ([38] Inamori, 2000). Initially, Saito and Inamori often disagreed over the accounting approach to be adopted, and it seems to have been this disagreement which stimulated Inamori to visit Stanford. Over time, Saito began to be swayed by Inamori's vision of the "essence of accounting" and he established a study group to develop Kyoto Ceramic's "terms of accounting" which were issued around 1970 ([27] Hiki, 2007). These terms of accounting, the result of a combination of Inamori's philosophy and Saito's accounting expertise[14] , subsequently became enshrined in the seven accounting principles depicted in Figure 4 [Figure omitted. See Article Image.].
company to the customer well into the night, long after the administrative office had closed ([38] Inamori, 2000, p. 77). As a result such deliveries often failed to be recorded, either at the time or subsequently, making it impossible to recover sums owed to the company ([38] Inamori, 2000, p. 77). To avoid future problems of this nature, in addition to the one-to-one correspondence principle, Inamori introduced the double-check principle as part of the accounting system, effected organisationally through the establishment of a separate materials department, to which all goods manufactured had to be sent and recorded, before being dispatched to the customer, thus providing a double-check, by enabling a match to be made between production and sales ([38] Inamori, 2000).
The principle of double-check, however, plays a much more fundamental role than this within the Kyocera Philosophy. Indeed, it forms a general, over-arching principle which is linked to the fundamental concept that "management must be based on the bonding of human minds" ([38] Inamori, 2000, p. 103). Inamori, however, notes that while human minds can bond together in a manner which leads to "wonderful achievements", they can also bond in ways which lead to the "destruction and unhappiness of large numbers of people" ([38] Inamori, 2000, p. 104). It is the desire to avoid the latter, and encourage the former, which lies behind the principle of double-check. Recognising that people have weak minds and can make mistakes, double-check helps to ensure that individuals do not take the wrong path ([38] Inamori, 2000, p. 104). Thus, within Kyocera, all processes and expenditure, even those for which Inamori was ultimately responsible, are subject to double-check as a means of trying to ensure that only correct decisions are taken. In particular, it is considered that double-check can help to prevent fraudulent or criminal activity on the part of particular individuals ([38] Inamori, 2000).
Making sure that funds were not lost from the business was vital in ensuring that the company remained
solvent. Inamori's concern with avoiding bankruptcy in the early years reflected one of the basic business tenets of his father, namely, that debt should always be avoided ([40] Inamori, 2004b). In starting up Kyoto Ceramics, however, Inamori had been forced to borrow money, and during the early years he was concerned not only that the company should not get further into debt, but that the loans should be paid off as soon as possible. Thus, Inamori racked his "brains day after day over how to run operations so the company would not go bankrupt" (quoted in [36] Hyde, 2008). This concern found its manifestation in the principle of cash-basis management; Kyocera's accounting system, in conformity with keyword 71 ("Buy only what we need when we need it"), is therefore cash-based rather than founded on the accruals principle. Thus, all purchases by an amoeba within an accounting period are charged to that period, irrespective of whether or not the material purchased is utilised within that period[15] . In this way it was considered that the company could avoid debt[16] .
In discussing the cash-basis management principle, Inamori draws a parallel with the Sumo wrestler. For Inamori, the Sumo wrestler should fight hardest when he is in the centre of the ring, rather than wait to do so until he is at the edge, about to be thrown out ([38] Inamori, 2000, pp. 58-59). From a business point-of-view, challenges must be faced immediately they arise, rather than waiting until a deadline is looming ([38] Inamori, 2000). From the accounting perspective, Inamori argues that a company should maintain large reserves of cash, since this gives the directors the freedom to make and act on investment decisions as the opportunities arise without having to make recourse to outside sources of finance, which may slow down the decision-making process and possibly lead to lost opportunities ([38] Inamori, 2000)[17] .
The third principle which does not necessarily seem odd to Western eyes is that of one-to-one correspondence. For Inamori, this principle needs to be followed strictly, not just as an accounting discipline, but also as a way by which to regulate the enterprise and the people who work within it ([38] Inamori, 2000, p. 65). Without this principle the information generated from the accounting system may be incorrect and transparent management would, as a consequence, be impossible and/or misleading ([38] Inamori, 2000, p. 65). One-to-one
The remaining four principles do not so much seem to be principles of accounting per se , but rather to be concerned either with the end to which the accounting system is put or how it is supposed to help achieve those ends. For Inamori, management must be transparent (principle 7), and it is one of the functions of the
accounting system to provide the information which ensures that this is the case ([38] Inamori, 2000).
Transparent management is management free from any unfairness, either internal or external, and this principle arose from Inamori's growing awareness that, in discussions with employees, as CEO, he had more information at his disposal than they did ([38] Inamori, 2000). Aware that, for a small business to survive, it had to be built on trust between management and employees, Inamori determined that information relating to the company's financial position should be shared with them in order to build up such trust ([38] Inamori, 2000).
The sharing of information means that employees are able to monitor the performance of top managers, since the accounting information reveals if they have made the correct decisions or not. Furthermore, knowing that every employee would know if they did something wrong, every manager would have an incentive to ensure that they made the correct decision on all occasions. As well as achieving transparent management, the accounting system, by recording everything that happens and making it available to all, can help to ensure the attainment of perfectionism (principle 4). The existence of this principle probably owes as much to lessons learnt by Inamori prior to forming Kyoto Ceramics than during the company's early years. While conducting research work at Shofu Industries, Inamori learnt that unless absolute care was taken during the conduct of scientific experiments they could result in failure, although the reason for the failure would not be clear, and hence the experiments would have proved nothing ([38] Inamori, 2000). Similarly, in production, care must be taken at all times, otherwise product quality could be affected. Hence, for [38] Inamori (2000, p. 100), anything less than 100 per cent perfection is not acceptable!
Principle 3, that of muscular management, is really concerned with the way in which accounting can help to improve profitability through ensuring that the business has a lean and athletic body with excellent blood circulation[19] . It is the function of management, with the assistance of the accounting system, to ensure that the company remains lean and fit, thereby generating profit. However, as Principle 6 makes clear, the goal is not profit per se , but rather profitability improvement. Profits, and the improvement of profitability are, of course, important to all businesses, but it is important to realise that Inamori's concept of profit is not the conventional one to be found in Western texts since, for him, profit includes wage costs (see section 5.2 below). In this way, all members of the business have an incentive to help improve profitability, since ultimately their welfare will be raised, while the company's corporate activities help contribute to the advancement of society. The mechanism (practice) within Kyocera which helps to achieve profitability improvement is amoeba management and the associated management accounting system. These are examined in the next section of the paper. 5. Putting the principles into practice: AMS and management accounting
As we have already noted, the accounting principles examined in the previous section are closely linked to two of the key management principles. Moreover, accounting principle 6 is closely related to the concept of amoeba management. In this section we first examine the nature of the AMS and then, in the second sub-section, we turn our attention to the management accounting system used in conjunction with AMS.
5.1 The amoeba management system (AMS)
indicated that he considers amoeba leaders to be "business partners"; since everybody within an amoeba takes an active role, both in the workplace and in relation to management, amoeba management represents
"management by all".
Amoeba management took several years to put into effect and has been constantly evolving. A report on Business Wire at 0932GMT on 26 April 2007, for example, reported that a reinforcement of Kyocera's unique AMS had enabled the company to raise its profits during the year ending 31 March 2007 ([12] Business Wire , 2007). Since its introduction in the 1960s, AMS has become integral to Kyocera's way of working. The lack of hierarchy represented by AMS is particularly pronounced when compared to the strict bureaucratic pyramids that govern most traditional Japanese companies, differentiating Kyocera from other Japanese firms. AMS, however, provides Kyocera with great flexibility since, being small, amoebas represent fast-responding, customer-focused, entrepreneurially-oriented business units.
Although separate, and operating as independent companies, the amoebas "share a united purpose, i.e. the parent organization's goals and objectives" ([3] Adler and Hiromoto, n.d., p. 1). Each amoeba is required to act in coordinated independence with every other amoeba. The goal is to empower each amoeba to the point that each resembles an independent company, having its own internal and external customers, suppliers, and markets, and with each seeking to manage its own profitability. As [5] Adler and Hiromoto (2012, p. 84) have put it:
The use of the word "amoeba" is meant to capture the concept of an entity at its smallest, most elemental level, as well as to describe its ability to multiply and change shape in response to the environment[1] . [37] [Inamori, 1999: 57]. In other words, amoeba management is intended to offer a spontaneous, homeostatic response to a business world characterized by rapid, dynamic change.
[41] Inamori (2006) cites an amoeba's ability to adapt quickly to change, particularly as demanded by communications and electronics markets, as one of its advantages.
[4] Adler and Hiromoto (2010, pp. 3-4) point out that:
Amoebas typically consist of 5-50 employees. Each amoeba is accountable for a meaningful organizational activity, an activity that is meant to mirror what currently exists (or could exist) in the outside, competitive environment. The amoeba manager and his/her employees are encouraged to act like the owner of a small, independent company. Accordingly, the manager is accountable for a wide range of activities, including the regular ongoing daily activities of purchasing raw materials and hiring and scheduling labor, as well as the more strategic activities of new product and new market development. Ultimately, the amoeba manager is meant to be accountable for managing his/her unit's profitability, and in the process becomes not just a valued and respected managerial decision maker but part of a set of de facto business partners.
For Inamori, the amoeba philosophy, despite its entrepreneurial directive, does not lead to over-individualism. "I do not believe that any such danger exists in properly managed amoebas. The reason is that an amoeba's performance is not directly linked to salaries paid to the employees" (quoted in [80] Taninecz, 1995). Nevertheless:
Reliance on a myriad of small, loosely coupled amoebas creates a critical management challenge: how to ensure organization-wide harmony and coordination. For without this harmony and coordination, amoebas could undermine other amoebas' or, ultimately, the entire organization's performance ([42] Inamori, 2007: 79). Accordingly, as [28] Hiromoto (2005) points out, amoeba management features interactively cycling micro-macro loops (MMLs) of information flows between the organization as a whole and its individual amoebas. In particular, as [29] Hiromoto (2007: 98-102) notes, the information flows focus on disseminating and receiving information related to two main factors: 1. organizational values and management philosophy; and 2.
organization-wide and amoeba-level performance ([3] Adler and Hiromoto, n.d., p. 2).
5.2 Kyocera's management accounting system According to [41] Inamori (2006, p. 4):
From the time that Kyocera was founded, I felt that the long-term development of the company required an infallible management philosophy shared by all employees, as well as a management accounting system that allowed for accurate and timely awareness of the realities of operations in every area of the organisation (see also http://global.kyocera.com/inamori/management/amoeba).
According to [74] Sawabe and Ushio (2008), the basis of Kyocera's management accounting system is an emphasis on the importance of amoeba units as micro-profit centres (MPCs - see [18] Cooper, 1995). For Cooper, these MPCs are smaller than the profit centres found in more traditional business corporations, and this provides Kyocera with certain benefits, not least greater flexibility to respond to its environment while
simultaneously reducing the growth of organisational bureaucracy ([74] Sawabe and Ushio, 2008, p. 16). By emphasising amoebas as profit centres rather than cost centres, although the aim is to reduce costs, the focus is placed on positive rather than negative strategies. The leader of each amoeba is responsible for the
performance of the unit, which is measured through the concept of "Workers' profit" (WP), or total value added, and "Hourly workers' profit" (HWP) or hourly efficiency (see Appendix 4). In calculating WP and HWP, however, labour expenditure is included not as a cost but as part of profit: WP=profit+workers' wages-capital interest[21] . The inclusion of workers' wages in WP reflects a key element of Inamori's philosophy, namely, that everything is done in the interests of society as a whole. Thus higher expenditure on labour is not seen, per se , as being something bad and which has to be reduced, but as something good and to be maximised since it represents a return to all of those in the amoeba. However, higher wage costs must be offset by higher efficiency and this is monitored through HWP, which is determined simply by dividing WP by the total number of labour hours worked by the members of the amoeba.
HWP represents the value added per hour and is computed and summarised daily, these daily summaries being announced to all employees ([41] Inamori, 2006; [74] Sawabe and Ushio, 2008, p. 36). Each amoeba has a target established within a yearly plan which is then broken down into monthly plans. Progress towards the targets stated in the monthly plan is monitored daily, while those in the yearly plan are monitored monthly. Amoebas are divided as between manufacturing and sales, but since the former are seen as being the source of all profits, the sales amoebas are designed to serve the manufacturing ones, receiving "commission from the manufacturing units in recognition of their support" ([74] Sawabe and Ushio, 2008, p. 36). For a manufacturing amoeba, "the monthly plan evaluation mainly look (sic.) at total production, production per labour hour and value added per labour hour" ([74] Sawabe and Ushio, 2008, p. 13 - citing [17] Cooper, 1994, pp. 7-8). Responsibility for achieving targets is placed squarely on the shoulders of the leader of each amoeba. According to [65] Miya (2003), MPCs are considered to enhance the motivation of the leaders, who are under pressure to reduce costs. Each leader, however, is "treated as a 'feudal lord' and expected to manage his or her unit in his or her own way" ([74] Sawabe and Ushio, 2008, p. 18). Amoebas are meant to be autonomous and are kept small, typically between 3 and 50 members ([24] Hamada and Monden, 1989, p. 199), so that "the leader can supervise to an incredible level of detail. Each leader of a unit [i.e. amoeba] is expected to improve his or her level of management abilities. As a manager , each leader has discretion over pricing their unit's products for both internal and external transactions" ([74] Sawabe and Ushio, 2008, p. 34). Amoebas have the choice of whether they deal with other amoebas within Kyocera, as either suppliers or customers, or with external firms. Internal transfer prices appear to be determined through a process of bargaining which reflects market prices. [24] Hamada and Monden (1989, p. 201) have described the competition between amoebas as being "keen".
each amoeba being able to compete with other amoebas, and the freedom afforded to an amoeba in determining its customers and suppliers. This helps to ensure that the quality of the product produced by an amoeba is maintained at a high level, otherwise other amoebas will stop purchasing from it and its performance, as measured through the management accounting system, will be adversely affected.
6. Applicability of AMS to other companies 6.1 AMS and its use within Kyocera
[27] Hiki (2007) has claimed that, since the Kyocera Group came into being in the early 1980s, all Japanese subsidiaries of the company have adopted AMS or some variant thereof. Given that the system is based on the concept of toku , which has a long tradition in Japan and the Far East, the ability to make use of it within such environments is not particularly surprising. However, it is clear that the different cultures existing within some companies taken over by Kyocera have led to variations on the standard Kyocera AMS. Thus, [24] Hamada and Monden (1989, p. 209) noted that, at Kyocera's Okaya factory, formerly owned by Yashica, the management system was a hybrid of amoeba management and Toyota's JIT system, making it "remarkably different from Kyocera's original amoeba management system". It is not clear whether this was simply a transitional arrangement or a compromise outcome, but local circumstances within Japan do appear to have led to modifications and/or variations on the Kyocera approach.
When Kyocera merged with Cybernet, a Japanese manufacturer of citizens-band radios and audio equipment, aspects of the existing corporate culture resulted in conflict with the labour unions, hampering the smooth transition Inamori sought ([78] St James, 1998, p. 330). In discussing such negative reactions, Inamori has argued that:
The amoeba system is somewhat unorthodox, or runs counter to the orthodox concept of accounting, so in order to introduce it we had to make changes to accounting. People who are used to traditional [accounting methods] did not like the changes. So there was opposition from that aspect. But as far as the basic concept, which is to provide small units within a business to have the authority, or autonomy, for maintaining financial management, that concept itself has not been opposed by people. It was more because of opposition to changes than opposition to concept (quoted in [80] Taninecz, 1995).
Despite the adoption of AMS or a variant thereof throughout its Japanese subsidiaries, [27] Hiki (2007, p. 298) has suggested four reasons for the lack of effective operation of AMS within certain parts of the Kyocera group: The person in control of the accounting within a subsidiary does not agree with the Kyocera method of cost accounting (this is the case in some US subsidiaries where the preference is for standard cost accounting). Lack of support from top management for AMS.
Disagreements over the nature and mechanism of negotiations between manufacturing and sales amoebas. The nature of employment contracts militates against the use of AMS.
Outside of Japan, such issues can be exacerbated not only by existing company cultures but also national cultures, though such negative influences can potentially be overcome. Takeovers of US corporations in the late 1980s and early 1990s met with differing responses from local management and employees. At the Elco
Corporation, acquired by Kyocera for $250 million in 1989, most of its senior management left following disagreements which developed between them and Inamori ([78] St James, 1998, p. 331). When AVX was acquired in 1990, however, things went much more smoothly, AVX's existing executive directors buying into the Kyocera approach much more readily, though no doubt assisted by the lectures they received on the Kyocera philosophy from Inamori ([46] Inamori, 2007d). On switching to the Kyocera approach AVX's performance improved, sales growing three-fold and profits six-fold over the first six years following the merger, enabling the company to be re-listed on the NYSE ([70] PHP Institute, 2007).
badly affect motivation in less good times ([41] Inamori, 2006, pp. 89-91). Thus, Kyocera generally favours indirect over direct incentive schemes, based around a system of meritocracy. Since the emphasis of the Kyocera philosophy is on the overall contribution of the individual, and this is something that can only be measured over the medium to long term, workers achieve promotion, and hence higher individual rewards, on the basis of their medium to long term contribution, not simply their most recent performance. In Brazil, however, the different work culture there necessitated the use of a more direct incentive system to motivate workers to improve performance ([27] Hiki, 2007, p. 262). Thus while AMS and the management accounting system are employed in Kyocera's Brazilian subsidiary, pay there is directly related to amoeba performance. It is not difficult to understand why, potentially, there should be more problems for Kyocera in getting its
approach adopted by overseas subsidiaries. While the tradition of toku is a familiar one throughout the Far East, it is not familiar in the West. Thus, one might expect that modifications to the Kyocera approach would be necessary, although the group's US arm has utilised AMS for 20-30 years. However, at Kyocera Solar and Kyocera Mexico, [27] Hiki (2007) has noted that operationalising AMS proved problematic and the system has been less than fully effective.
6.2 Use of AMS outside of Kyocera
Given that AMS and the associated management accounting system have not been fully implemented
throughout the whole of the Kyocera group in a fully effective manner, a question arises as to whether or not the Kyocera approach can be transferred to other companies outside of the Kyocera group and, in particular, ones that do not share the Kyocera Philosophy.
[65] Miya (2003) provides evidence that the introduction of AMS outside Kyocera has been successful in improving performance (such as at the Systec Corporation from July 1994). However, AMS has not always been implemented in a wholesale fashion nor has its introduction always involved the wholesale adoption of the Kyocera approach. Thus, the Disco Corporation adopted Kyocera's management accounting system but did not adopt other aspects of the Kyocera approach though, in the view of [65] Miya (2003), quality control circles, as used by the company, represent an approach similar to that of AMS. Such examples indicate that the process of adopting the Kyocera approach can be, and often has been, carried out in a piecemeal fashion. The introduction of AMS or Kyocera's management accounting system, therefore, need not form part of a wholesale adoption of the Kyocera approach, but rather simply the adoption of those parts of the system which it was considered could be beneficial. This mirrors the introduction of approaches such as that of scientific management, where history shows that piecemeal adaptations, i.e. the implementation of specific tools and techniques, rather than wholesale adoptions, seem to have been the order of the day (see, for example, [67] Nelson, 1992).
Philosophy, is another matter.
7. Putting Kyocera's management accounting system into context: some concluding thoughts
Like all firms, Kyocera's focus has been on fundamental business issues such as survival, product quality, satisfying customers and making profits, all of which are undoubtedly inter-linked. While Kyocera is no different in these respects, in several ways, as we have seen, it is fundamentally different from other firms, even within the Japanese context. One major difference is the Kyocera approach, in which the Kyocera philosophy is given effect through AMS and the management accounting system. The latter presents a different approach to that adopted in other Japanese companies, most notably through the inclusion of workers' wages within the concept of company profit. This encourages a positive view of increasing labour costs (since it represents a higher return to labour as a whole) rather than negatively as a drain on (conventional Western measures of) profit, reflecting a concern within the Kyocera philosophy that the emphasis should be society as a whole rather than the
individual.
A second difference is the openness and transparency that exists within Kyocera concerning performance data. After the Second World War, Japan was characterised by increased levels of socialism and unionist activity, and the basic response of most CEOs to this phenomenon was, like that of their counterparts in the West, to keep secret, from competitors and workers, as much information about their company as possible ([41] Inamori, 2006, p. 30). The Kyocera approach, however, runs counter to this mentality: Inamori feels that everybody should have the same information as the CEO, making them therefore de facto CEOs. Sharing information, through making generally available to all employees key accounting data, most particularly the monthly accounting reports which reveal each amoeba's net production, value added, and hourly efficiency, enables management by all and facilitates transparent management. In this way, it is similar to open-book management (OBM) developed in the USA by Jack Stack of Springfield ReManufacturing in 1983[22] . As [20] Davis (1997, p. 7) notes:
OBM literally "opens the books" to employees and discloses a company's financial records, expenses, and sources of profit. By sharing detailed operating information and educating employees about how to use it, management provides its workers with the opportunity to contribute to the success of the enterprise. In return, companies practicing OBM give employees a stake in the business, through profit sharing plans or some form of stock ownership.
In one important respect, however, OBM differs from the Kyocera approach, namely that there is no explicit mention of the need, nor is there any attempt made, to educate workers as to the nature and importance of the management philosophy underlying the approach (see [61] Kyocera Corporation, 2011).
A third difference identified by [24] Hamada and Monden (1989, pp. 202-03) is that whereas other Japanese firms focused on performance as measured by profit, output, cost or ROI, at Kyocera performance was monitored through the concept of value added. Furthermore, as Hamada and Monden pointed out, Kyocera's system helps to stimulate competition between amoebas, indicates when existing ones should be divided or disbanded and new ones created, and also helps to determine if the amoeba system is functioning effectively. Two further differences are the emphasis within the costing system on accounting on a cash rather than an accruals basis, and the practice of conducting, subject to strict rules, all cost accounting within the amoebas themselves, reflecting Inamori's view that amoebas should be self-governing.
It is clear, therefore, that the Kyocera approach generates certain fundamental differences in the firm's management accounting system from those found in other Japanese firms, despite the fact that the underpinning Kyocera Philosophy is based on the concept of toku , and hence clearly located within widely accepted Far Eastern thought. While this might suggest that the Kyocera approach is likely to achieve most success in the Far East, not only in Japan but especially in Taiwan and China, where there is a shared,
