I was reading Jason Jennning’s new book Less Is More: How Great Companies Use Productivity last night and thought it was neat reading:
Chapter 8 —The Real Financial Drivers
Q: Why did the accountants cross the road?
Answer: Because the client told them to.” Accounting is the enemy of productivity!”
So proclaims highly respected management consultant Dr. Eliyahu Goldratt, who has been described by Fortune magazine as a “guru to industry” and by Business Week as a “genius.” His book The Goal, a business cult classic, has sold more than two million copies.
Some of Goldratt’s arguments were compelling, so we followed his lead. With my researchers in tow, I poked my nose around the accounting departments of the companies we were studying, trying to learn how they handle accounting and financial reporting differently than their less productive rivals. I was sure that my search for accounting theories shared by the chosen companies would turn up something new and off the radar screens–and it did.
What we discovered is that highly productive companies use the accounting department as it was originally intended; for the preparation and presentation of accurate and truthful financial statements testifying to the past performance of the company and as a resource capable of answering the financial “what-if” questions put forth by management in scenario planning. And . . . nothing more.
We concluded our research by delving into the role of the accounting and financial reporting functions of the companies we studied. We found the following four conclusions to be significant.
- Financial statements–the end results of accounting are the real enemy of productivity.
- Financial statements don’t portray the realities required to increase productivity.
- Financial statements mask an embarrassing secret that prevents companies from becoming more productive.
- Truly productive companies use “Drivers” without wiggle room to increase real productivity.
Yeah, I like that.
