Sunday, April 18, 2010

Management Systems ... Responsibility Accounting

Dear Colleagues

I have been involved with design and building management systems since very early on in the computerization of the corporate enterprise. While the computer made it possible to do electronic data processing (EDP) ... the availability of data did not ensure that there would be any decisions made based on these data. Some creativity was needed to get people to pay attention!

It was in this context that we starting doing "responsibility accounting" which in very simple terms was just department or cost center accounting, but with the name of the supervisor responsible for the department written onto the reports. This had the effect of personalizing the reports ... but more important, made the individual supervisors pay attention and then challenge the accountants about the accuracy of the numbers.

The first month these "named" reports were circulated, the accountants were heavily criticized ... and all sorts of errors were identified. The second month, some of the errors had been corrected, but not all. It took several cycles for all the accounting errors to be fixed ... and then the dialog was able to shift to corporate performance. Why were the costs what they were? How could performance be improved? If we did this, would it improve the results? Now the dialog was about cause and effect in the cost center ... and between the cost centers.

As soon as responsibility accounting became part of the management system, decision making was based on data ... and the quality of decisions was determined by the outcomes. People knew who was responsible ... and the company started to function like a well trained team. Each supervisor was not in the management team, not under the management team.

Variants of this have always been part of my management tool-kit wherever I have worked ... and I would always want something like this to be used. I have tried to get people at the UN and the World Bank to take an interest in this sort of accounting, and this sort of responsibility and accountability ... but it has not worked. I recall after a presentation at the Administrator's office of UNDP, one of the staff commenting that words like management, accountability and responsibility had the idea doomed from the start! But I did try ... and I will do so again!

Community Analytics (CA) is for society what management accounting is to the corporate entity ... and in CA the idea of responsibility is also very important. CA moves the focus of analysis from the enterprise to the community ... but CA also needs to address the question not only of the place, but also who is responsible within the place. Most of the time it will not be useful to know who ... but from time to time knowing who is critical (see some examples from Haiti analytics to be posted later).

Peter Burgess

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