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Fiscal
Check-up
by
Tom Pryor
My
exercise program this year has been limited to "pushing the envelope",
"skipping out on housework" and "leaping to conclusions".
Then mid-year, my father had triple bypass open-heart surgery. His operation served
as a stark reminder that I only get one body, so I had better take care of it. To
begin my process of improvement, I had a comprehensive physical at the Cooper
Clinic in Dallas, Texas. Dr. Kenneth Cooper M.D. is best known for his groundbreaking
research and books on aerobic training. By the end of my exam, I realized that
the five steps used by the clinic to evaluate my health condition also apply to
the fiscal (financial) condition of most organizations. Five
Steps to Fiscal Health Step
1: "What caused you to come in for a physical?" Physical
application:
That was the doctor's first question. I explained that my
appointment was prompted by three factors … concern that I might have inherited
my father's heart condition, the success my pastor had achieved following his
Cooper Clinic visit earlier in the year, and a growing dissatisfaction with my
own energy level. The doctor was determining the root cause of my visit, e.g.
was it a priority or simply play time. Fiscal
application:
"What's causing you to consider the purchase of ABM
software or consulting?" That is the first question I'll ask you when
you inquire about our Activity Based Management (ABM) products and services. I'm
listening for both facts and feelings. If the reasons are not well grounded, I've
learned that you'll likely fizzle out before the "fiscal exam" is completed.
Step
2: "What is your goal?"
Physical
application:
Both the doctor and nutritionist asked me to define my weight
goal. Surprisingly, both said that I was proposing a goal lower than I needed.
Defining and discussing my goal played a very important role in my physical. Stating
the goal to them indicated that I had given it some thought. And agreeing to a
six-month goal based on their many years of experience gave me optimism that I
could achieve it. Fiscal
application:
What is your fiscal goal? Is it to improve profit by 5% or
$500,000? Or is it to figure out which product lines or customers are unprofitable?
The only wrong answer is, "My goal is to implement ABM." This
answer causes me concern. It indicates that the person is more enamored with the
subject of ABM than the substance.
Step 3: "What are your current exercise and
eating habits?"
Physical
application:
I had to keep a food and exercise diary for the three days
preceding my physical. This provided the doctor, nutritionist and aerobics instructor
the "as is" data they needed to assess my current habits and practices.
They augmented the diary with a stem-to-stern physical exam, CT Scan, plus blood
chemistry analysis. The findings were gathered in preparation for Step 4. Fiscal
application:
What are your current cost management "habits"?
Do you experience financial biorhythms from your monthly closing cycle? While
answers to these questions and others provide cost management experts valuable
information, the best insight to your "as is" fiscal condition comes
from a robust activity accounting analysis of one or more cost centers. Activity
accounting exposes waste. Activity accounting is much like a CT Scan … it
exposes things that are not normally outwardly visible with traditional fiscal
reports. My CT Scan fortunately showed all my coronary arteries to be clear of
plaque buildup. Activity accounting will "scan" your business processes
looking for unnecessary, costly, non-value added activities and bottlenecks.
Step 4 : "Do you realize that your current
condition falls short of your goal?"
Physical
application:
My last consultation of the day was with a medical doctor.
He explained the results of my tests. He also compared the findings to benchmarks
(i.e. what's normal for my age) and to my goals. Test results that fell short
of or exceeded normal guidelines were pointed out, as were findings that would
prevent me from achieving my goals. Fiscal
application:
Every organization can improve. The question to ask is, "How
much?" Activity Analysis and Activity Accounting provide managers with
benchmarks and baselines to match against fiscal goals. But remember … analysis
is easy. The hard part is converting analysis into action!
Step 5: "Are you willing to change your lifestyle?"
Physical
application:
The problem I find with most improvement books is that they
are long on "what to do" and short on "how to do it". That's
why I was so encouraged by the final step of my Cooper Clinic physical. It focused
on my lifestyle and "how to" make the changes I need to make. The aerobics
instructor prepared a handwritten list of activities that I would need to do to
meet my goals. The nutritionist listed how to make more intelligent choices when
eating at restaurants. And the doctor listed specific vitamins and activities
to alter my metabolism. While the list will not throw my daily life into turmoil,
I will need to make incremental changes to my diet and activities. Fiscal
application:
The authors of "CFO
… Architect of the Corporation's Future" state that resistance
to change is the number one obstacle to implementing ABM and ABC. Technical and
system issues come in a distant second and third. ABM is a work-style change:
- Manage the work, not the
workers
- Manage
capacity, not fixed and variable costs
- Manage
processes, not cost centers
- Manage
value, not budget variance
- Manage
bills of activity, not overhead rates
Conclusion
My
physical and your fiscal changes will not come easily. It is human nature to resist
change, even if it's for our own good. Remember the Israelites? On more than one
occasion they tried to convince their leader, Moses, to eliminate change. He was
leading them to an unknown promised land. Yet they repeatedly expressed a desire
to return to the unsavory, yet known slavery of Egypt. For
many, ABM/ABC is a fiscal promised land of improved profitability. Yet habits
cause most managers to remain rooted in the old, well-known cost accounting practices
of decades past. The journey to improved performance begins with a fiscal checkup.
Use your Activity Accounting findings, as I have from my physical findings, to
reshape your organization and lifestyle. Dr.
Kenneth Cooper, M.D. recommends in his latest book "Regaining
the Power of Youth" three activities to regain and retain the
power of youth: (1) Exercise regularly; (2) Stay optimistic; and, (3) Stay involved
in meaningful work. Not bad advice for me, you and our organizations!
Do you or your organization
need a physical or fiscal check-up?
If yes, I highly recommend
the Cooper Clinic for yourself and ICMS for your company. For more information
on the clinic, visit www.CooperAerobics.com.
For more information on an ABM fiscal check-up, check out the products
and services at www.ICMS.net.
Or send your questions to tompryor@icms.net.
This
free e-mail is a service of ICMS, Inc.
For more information on ICMS products
and services, call 817-475-2945.
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