Real Numbers: Management Accounting in a Lean Organization will not be the first Lean book in your library, but it is a book you need to fit into your reading rotation. The book is based on the experiences and observations of two finance executives who were actively part of their respective companies’ Lean transformation. In addition to reporting successful metrics at their firms Cunningham and Fiume write about how financial reporting needs to change to support a Lean enterprise.
A key point is that financial groups need to change their focus from Cost Accounting to Cost Management so that managers and front line workers have access to financial measures that are actionable. They recommend specific changes to accounting practices designed to prevent dysfunctional behavior (pumping up the numbers to make the company or a division look better in the short term) without violating Generally Accepted Accounting Principles. Their concern is with creating reporting systems that discourage sub-optimization in favor of aligning actions so they support the entire enterprise.
Another important point is that finance can play a crucial role in promoting productivity increases. In their view productivity is a misunderstood concept, and a key factor in achieving economic improvement, not only for the enterprise, but also for the nation. Based on their experience they assert that productivity gains of eight to fifteen percent per year are achievable. Such gains provide the basis for increased real wages and profitability. As for increasing individual wealth, the authors make the case for profit sharing being the best approach.
With so many enterprises focused on results, attempting to manage objectives, it’s also refreshing to see finance executives making the case for managing the process, with results as an expected product of Lean processes.
The book is written clearly, and it is an important book for non-finance Lean practitioners to read.