Fiscal Check-up
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17 August 2013 - 22:38, by , in Uncategorized, No comments

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.

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Tom Pryor
TomPryor@ICMS.net
(817) 475-2945

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