Aligning Accounting and Operations on the Lean Journey
A fundamental pillar of Lean is Respect for People. Does your accounting function truly respect all of the employees at your company? Do people outside of accounting really understand the financial statements, understand that standard costs are incorrect, know what a variance is, how it was derived, and what the source data was? Can they read a financial statement, understand the message, and determine what corrective action is needed? I bet not, and unfortunately, if the entire company does not understand the language of business, and especially those people in the value creating positions in operations, then the Lean journey will suffer. Fortunately, there are alternatives to the current standard cost accounting financial statements. We call these alternative statements, plain English financials, which are also GAAP compliant. It is incumbent upon financial leadership to learn about these alternatives if a successful enterprise wide journey is to become a reality.
Accounting must become a major contributor and participant in the Lean journey. Accountants typically do not understand Lean, have not been taught how to support Lean, and do not know how to measure Lean improvements as current metrics typically are anti-Lean.
On the other hand, operations’ professionals typically achieve great gains on the production floor but are surprised that their efforts are met with a yawn in accounting with little to no evidence of improved operating results appearing in the financial statements. A significant disconnect develops between accounting and operations.
As long as operational improvements remain invisible on financial reports, accounting will be stymied in supporting operational improvements and manufacturing will be frustrated in knowing their efforts are not appreciated.
Manufacturing and accounting must work together to develop new metrics and “plain English” financial reporting. This session will illustrate the disconnect between accounting and operations, what should be done to eliminate it, thereby creating a much more respectful environment for all to flourish!
- Why shop floor improvements will likely be invisible to accounting
- Why current metrics will not illustrate Lean improvements
- What manufacturing practitioners can do to create an alliance with accounting
- What a plain English P & L is
- What respectful accounting is all about
About the Facilitator:
Jerry Solomon has over 35 years of experience working in a variety of industries where he has held the CFO & Vice President of Operations positions. He led Lean transformations achieving dramatic improvements in inventory turns, lead-times, customer service, income and cash flow. He has authored 3 Lean books, two of which won the prestigious Shingo Award: Who’s Counting? and Accounting for World Class Operations as well as Leading Lean. He was the Maryland Lean Leader of the Year in 2013. He is a founding thought leader and subject matter expert in Lean Accounting and has been teaching and practicing Lean Accounting for the last three decades. Jerry is a long time board member of the Maryland World Class Consortia and a frequent speaker at industry conferences.