Topic: Variance Reporting
Characters: Arnie Armstrong, Director of Manufacturing Computer Services Willy McClean, Manager, Manufacturing Department 207 Kathy Cleary, Supervisor, Manufacturing Department 201
Arnie Armstrong has been with Pierce Auto Parts Manufacturing Company for 23 years. Recently, he was appointed Director of Manufacturing Computer Services. In just six weeks in this new position, [he] has moved to reduce the amount of information provided to manufacturing department managers by 60 percent. He argues that excess data is distracting, unused, and expensive to provide.
Willy McClean has been department manager for 12 years. During a coffee break with some of his department production supervisors, Willy is quite vocal about the change. “Who’s this guy Armstrong to tell us what data we need? He needs to be out here for a few weeks to find out what it’s like. Keep it quiet, but I’ve got a contact in Computer Services who’ll get me all the data analyses I want for just a $20 bill each month. It’s a good deal, and Armstrong will never know. How does he expect us to make good decisions about those variances without enough data? This guy in CS can get any of you data if you need it.”
Kathy Cleary, overhearing Willy, is shocked. “Is that ethical, Willy? Do you really need that extra data? Can’t you get the information without going around Armstrong? I sure don’t want to pay for anything Mr. Armstrong doesn’t want me to have.”
“Kathy, you’ve only been a supervisor six months,” Willy replies. “It’s just how the firm operates. Try it, and you’ll see it’s worth the $20. You can’t make good decisions with the stuff Armstrong gives us now.” Kathy doesn’t respond, and the coffee break ends with people returning to their jobs.
Later that evening Kathy begins to think about what Willy said. She knows that he is a good manager, but she does not want to have to buy information to do her job correctly. Tomorrow she is scheduled for a staff meeting with Mr. Armstrong. She is uncertain about what to do or say, if anything.
Author: Leo A. Ruggle, Professor, Department of Accounting, Mankato State University
What Are the Relevant Facts?
- Amie Armstrong has reduced the amount of data on reports sent to department managers.
- Willy McClean secretly buys data from someone on the Computer Services staff to supplement the variance reports he receives.
- Kathy Cleary knows of Willy’s practice of buying data, thinks it is unethical, but does not know what to do about it.
What Are the Ethical Issues?
- Should Willy buy data for his use in managing his department?
- Should Kathy tell Mr. Armstrong (or anyone else) what Willy is doing?
- Should Kathy use the data source in Computer Services?
Who Are the Primary Stakeholders?
- [Arnie] Armstrong
- Willy McClean
- Kathy Cleary
- The data seller in Computer Services
- Other department managers and supervisors
- Stockholders of the company
What Are the Possible Alternatives?
- Tell Mr. Armstrong of the situation when she meets with him tomorrow.
- Ask Willy to stop his data purchases.
- Turn Willy in to Mr. Armstrong anonymously.
- Buy information for herself if and when she needs it.
- Do nothing.
What Are the Ethics of the Alternatives?
- Ask questions based on a “utilitarian” perspective (costs and benefits). For example:
- Which alternative would provide the greatest benefit to the greatest number?
- How would costs be measured? How would value be determined for (a) using the data vs. (b) not using the data?
- Does this situation have costs and benefits beyond the company itself?
- Ask questions based on a “rights” perspective. For example:
- What does each stakeholder have the right to expect?
- Which alternative would each stakeholder find least desirable?
- Are there any obvious conflicting stakeholder rights?
- Does Mr. Armstrong have a right to expect his employees to follow his order?
- Ask questions based on a “justice” perspective (benefits and burdens). For example:
- Is it fair for Willy to have access to data not given to other department managers and supervisors?
- Should Kathy be deprived of data that would allow her to make better decisions, i.e., do her job effectively?
- Should anyone in Computer Services enrich himself or herself because of the company’s failure to provide adequate resources (data)?
What Are the Practical Constraints?
- Can the practice of buying information be curtailed or stopped?
- Can the company afford to provide the data Mr. Armstrong has decided will not be sent to manufacturing managers and supervisors?
- Does the lack of information impede the function of managers under Mr. Armstrong?
What Actions Should Be Taken?
- What actions should Kathy take?
- Which alternative should Kathy choose? Why should she choose it?
- Which ethical theories (utilitarian, rights, justice) make the most sense in this situation?