Today I came across an article called Lean Dilemma:Choose System Principles or Management Accounting Controls, Not Both by H. Thomas Johnson.
It is, or it should be a thought-provoking read, especially for a CEO or other senior manager.
The author also wrote “Profit Beyond Measure” which I have not read, but based on this article, I will.
My personal challenge question is: What is the ROI on an environment where people work so well together that no detail is overlooked? It is, of course, impossible to calculate. Nevertheless, no one would argue that such a company would be a formidable competitor in any market.
Perhaps what you measure is what you get.
More likely, what you measure is all you get. What you don’t (or can’t) measure is lost.
Today the mantra of “Sarbanes-Oxley” is being used as justification to plant, fertilize and cultivate a garden of chokeweed that will embrace and strangle any attempt to streamline processes. I have run into the same “regulations won’t allow it” excuse in the aerospace industry (“the FAA won’t allow that”), in health care products (“the FDA requires this”), and, believe it or not, in ISO-9000 registrations. (“That violates ISO”) Of course, in every case, it was a smoke screen.
Once the assumptions are challenged, and the actual requirements are studied and understood, there is always a way to comply with the letter and spirit of the requirements with minimal (or no) waste. The problem comes in when people confuse the requirements themselves with the policies of the company to implement them. Those policies can be changed with the stroke of a pen, sometimes followed by convincing an auditor that the new way is better.
But I digress. Toyota operates in the USA and is subject to exactly the same regulations and financial securities laws as everyone else – yet, somehow, they manage to operate without these things as justifications for the status quo.
Read the article – tell me what you think.
Edit – 9 August – Someone pointed out to me that there are people who are turned off by Johnson’s environmental stewardship message toward the end of the article. My view is that intelligent people should be able to read the article and agree or disagree with that message, while still “getting” the core message: Traditional management accounting controls damage shareholder value.