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SYSTEMS, PERFORMANCE MEASUREMENT, BEHAVIOR & VARIABILITY A system has been defined as "a group of interacting, interrelated, or interdependent elements forming or regarded as forming a collective entity".A performance measurement system is part of an overall system, (i.e., it is a subsystem) because it not only measures performance within the system, but simultaneously affects performance within the system. Performance measurements are interacting, interrelated or interdependent elements within the system. THE DUAL PURPOSE OF ACCOUNTING MEASUREMENTS The realization that accounting is part of the system helps one understand why accounting measurements must have a dual purpose that includes influencing behavior 14 , or performance, as well as measuring performance. Management accounting is a powerful method of influencing behavior because, in many organizations, much of the information that is used to evaluate performance is generated by the management accounting systems briefly described in the preceding sections. The manner in which segments of a company (departments, plants, divisions, product lines, managers, and workers) are evaluated has a very strong influence on behavior. Thus, it is important for those who develop and use performance measurement systems (or subsystems) to understand the overall system and the interactive nature of the company’s performance measurements. It is also important that developers and users of performance measurement systems understand the concept of variability and the tools of measuring variation within a system. THE CONCEPT OF VARIABILITY Walter A. Shewhart, and more recently W. Edwards Deming, explain that there are two types of variation within a system. These include variation that results from common causes and variation that results from special causes. Variation that results from common causes is attributed to the faults or randomness of the system, while variation caused by special causes might be attributed to a particular worker, group of workers, a specific machine, or some local condition. Deming estimated that ninety-
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This note was uploaded on 04/03/2012 for the course ACCT 325 taught by Professor Warren during the Spring '08 term at Rutgers.

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