Effects of Dynamic Task Environment on the Learning of Standard Cost Variance Significance

Abstract

models to repeated specific instances. As a result of analyzing specific instances the individual identifies relationships in the events and objects (e.g., similarity, dissimilarity, causality, diagnosticity, covariation, interaction). This process, labeled as tacit knowing by Polanyi and as paradigmatic learning by Kuhn, may be more generally termed inferential learning. The concepts of inferential learning may be used to characterize judgments of standard cost variance significance. Through repetitive analyses of specific standard cost variances the operational manager identifies relationships in the underlying production process. In situations where the objectives of technological efficiency and of managerial effectiveness cannot be simultaneously maximized, operational managers will consider the relative importance of the objectives and will make initial decisions on the basis of their most important objective. A situation variable that could affect this ranking of objectives is operational system stress. Under conditions of system stress (e.g., when technological efficiency appears to be declining relative to that of the immediate past) operational managers might consider technological efficiency to be more important than managerial effectiveness. Under conditions in which the system is not stressed (e.g., when technological efficiency appears to be stable or increasing relative to that of the immediate past) operational managers might consider managerial effectiveness to be more important than technological efficiency. Under both conditions the objective with the second priority would have some satisficing threshold beyond which a priority reversal could occur. A major variable in the inferential learning process is the feedback received by the individual (Einhorn [1980], Hogarth [1980], and Einhorn and Hogarth [1981]). This feedback allows the individual to evaluate the relative success of his (her) specialized knowledge and, depending on the individual's satisfaction with this success, to continue the learning process. Two sources of feedback are available with which to evaluate standard cost variance significance judgments: action/outcome information and performance evaluation by supervisors. The action/outcome alternatives that result from using judgment of standard cost variance significance to make production investigation decisions (adapted from Einhorn and Hogarth [1978]) are presented in figure 1. Available in a reasonably contemporaneous frame are the outcomes of decisions to investigate the production process (positive hits and false positives). Outcomes of decisions not to investigate the production process are not directly observable by the manager (false negatives and negative hits). These outcomes, however, may become known in the future when either a significant variance persists over time or a potentially significant variance disappears over time. The second source of feedback is the supervisor's evaluation of the manager's variance investigation decision performance. This evaluation can give the operational manager knowledge of the managerial effectiveness of his (her) variance investigation decisions. However, if the operThis content downloaded from 157.55.39.195 on Tue, 26 Apr 2016 05:08:43 UTC All use subject to http://about.jstor.org/terms