The Controller as Lean Leader: A Novel on Changing Behavior with a Lean Cost Management System

159 Pages·2012·1.69 MB·English

by  Sue Elizabeth Sondergelt

The Controller
as Lean Leader
A Novel on Changing Behavior with
a Lean Cost Management System
Sue Elizabeth Sondergelt
CRC Press
Taylor & Francis Group
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© 2012 by Taylor & Francis Group, LLC
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Contents
Preface .....................................................................................................v
Author ...................................................................................................vii
Chapter 1 Unbridled, Unproductive Chaos! ......................................1
Chapter 2 Systems of Merit ...............................................................19
Chapter 3 Steering Team Offsite Meeting ........................................31
Chapter 4 The CEO’s Office after Hours .........................................41
Chapter 5 Henry Ford, the Father of Lean .......................................47
Reference .....................................................................................58
Chapter 6 Let’s Get Started! Surfing atop the Breakers of
Change .............................................................................59
Chapter 7 Accounting’s Glass Slipper Does Not Fit .......................65
Chapter 8 Mother Comes to Visit .....................................................71
Reference .....................................................................................77
Chapter 9 The CFO and CEO Push Back on Lean Cost
Management .....................................................................79
Chapter 10 How Will the Lean P&L Work? .......................................87
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iv  •  Contents
Chapter 11 Which Comes First: The Chicken or the Egg? ...............95
Chapter 12 Mary, Our Intern, Speaks Up ........................................103
References .................................................................................110
Chapter 13 Lack of Metrics Is a Recipe for Failure ..........................111
Chapter 14 A Behavioral Revolt! Bring in the Sales Guys! .............123
Chapter 15 Target Costing for Profit Management .........................127
Chapter 16 Town Hall Meeting—One Year Later ...........................139
Chapter 17 The Role of Controller as Lean Leader .........................147
Index ....................................................................................................149
Preface
This book is a compilation of, and reflection upon, all of my Lean and
Lean accounting experiences in businesses attempting Lean, with clients
from my Lean Beans LLC consulting business, with universities where I
have taught as an adjunct, as well as with friends whom I have helped and
who have helped me. The story includes the good, the bad, the ugly … and
the humorous! The story involves a fictional manufacturing entity that is
embarking on a Lean change management journey—for the second time,
having failed at its first attempt at Lean implementation just a few years
earlier. What will the company do differently this time? And what will it
do to ensure that it does not slip backward again as the transformation
unfolds?
The characters, situations, locations, and organizations described in
this novel are entirely fictional, as is any production process or HR model
described herein. Any similarity between the characters in this book and
actual people, situations, locations, and organizations is purely coinciden-
tal. The significance and value that one should take from the reading of
this novel, however, are not fictional. Based on two decades of experiences
in successful (as well as not so successful) attempts at Lean transformation
and Lean accounting implementation, this book tells the story of what
can be if you focus on the behavior, and changing the behavior, of people
rather than on the numbers. The heart of this book is truly the people and
a Lean Cost Management System to change behavior, which in turn will
change the culture of any Lean enterprise.
The process of implementing Lean accounting, as described in this book,
is not a recipe to be copied but, rather, the result of a series of experiments,
trials, and research. It is people’s initiative and problem solving that are to
be admired. The end result is a learning organization with its people still
engaged in learning to understand what works best for their business. The
most important lessons to be learned here are threefold: have a vision and
purpose with shared values, and live those values; take the initiative and
do the research to find what works best for your organization; and, most
of all, be humble and believe in yourself.
v
vi  •  Preface
I wish to thank all of you, both management and my associates, in two
businesses where I have worked, namely, The Wiremold Company and
United Technologies–Pratt & Whitney, who contributed to my Lean learn-
ing over the years, as well as those of you who assisted me and supported
me in the writing of this book. I especially want to thank a very dear friend
outside of business who, together with her dogs Sarah and Charley, taught
me so much more about behavior and motivation. I also wish to thank
Michael Sinocchi, Senior Acquisitions Editor with Productivity Press,
Taylor & Francis Group, for giving me the opportunity to tell my Lean
story from the viewpoint of a financial person working in operations.
My purpose in writing this book is to bring to light some of the many
misconceptions of Lean accounting as well as the various misconceptions
about the implementation of the Lean cost management system; the impor-
tance of a cost management system as opposed to a cost accounting system,
the controller’s extended nonfinancial leadership role in this entire change
management endeavor, and what should be the role of academia in busi-
ness today. The main theme of the book is that culture, simply stated, is
merely the sum of all behaviors in an entity, and thus to change the cul-
ture one must first change behavior, and the best way to change behavior
is to get rid of the traditional cost accounting system that is creating all
the wrong behavior and replace it with a Lean cost management system. A
secondary theme of the book deals with the timing of the implementation
of the various pieces of the Lean cost management system to ensure success
in our Lean transformation. I do not profess to be an “expert” as I believe
it was Henry Ford himself who told us that the minute a person becomes
an “expert” is the time for that person to get out of business. I am simply
telling my story, in an effort to help others. In writing this book, I was
motivated and challenged to dig deeper to better understand the overall
philosophy of business that Henry Ford probably called “common sense”
and that Toyota today calls “TPS.” The descriptions of activities and pro-
cesses in this book are in no way meant to accurately portray either Ford’s
or Toyota’s Lean models.
Author
Having begun her professional career as a high school mathematics
teacher, Sue Elizabeth Sondergelt gained insight into something other
than numbers, namely, soft skills and people skills—skills that she
learned, upon entering business, many other financial professionals did
not possess. After going back to school to earn an MS in accountancy
and her CMA (Certified Management Accountant), she went to work
for The Wiremold Company, a world-class organization and textbook
case in Lean and Lean accounting. Then, after 15 years of service in
operations and finance in two manufacturing conglomerates, Sue semi-
retired, and returned to education as an adjunct at two universities, one
online and one brick-and-mortar. It was here that she realized that the
behavior we see in business today is “learned” behavior, and that it has
been learned, both by engineers and by accountants, at our universities.
Sue believes Lean accounting will never become a valid, well-utilized,
and respected cost management system until we begin to teach it in our
accounting texts and curricula, including our MBA programs, at all
universities.
Since 2007, Sue has been the creator of the innovative new Lean Beans
program on Lean accounting, and owner of Lean Beans LLC, an edu-
cation and consulting group in Lean accounting. She has delivered her
highly respected seminar, “Lean Thinking for Accountants: Sustaining
Corporate Growth,” for over three years and in 30 major U.S. cities, to
assist CPAs in fulfilling their continuing education requirements in cost
management. Today she spends most of her time assisting small manufac-
turers in their Lean cost management journey.
This new book, The Controller as Lean Leader: A Novel on Changing
Behavior with a Lean Cost Management System, brings together the good
and the bad from all of her experiences. She presents information in a way
that will change the way you think. She creates surprising and compel-
ling visuals to change the way you feel about finance in business today.
She guides readers through the first three principles of Lean, which are
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viii  •  Author
so crucial to the successful implementation of the Lean cost management
system. Then she leads the reader to understand how only a Lean direct
cost management system will drive the correct “behavior” to sustain a
Lean change management initiative and change the culture in any orga-
nization today.
1
Unbridled, Unproductive Chaos!
It is six in the morning, and I am rolling into the parking lot. I have always
believed in getting an early start on the day, but perhaps not quite this
early. Although I am new to my job at this plant (but not this corporation),
I perceive that coming in at six in the morning will become a necessity.
There seems to be so much to do here!
I was brought into this particular plant to help “raise the bar.” By profes-
sion, I am a managerial accountant and controller. I like to qualify that
and say that I am a Lean controller. I believe that the finance “function”
plays an integral role in the Lean management revolution. I believe that
effectiveness is more important than efficiency and that finance people
can become more effective by getting to know the business “cold.” And I
believe that the most important role for the finance person is that of cata-
lyst in a cultural change initiative. I also believe that a business should not
focus so much on numbers but rather on behavior.
The chaos that is happening at this plant is not just the result of a
lack of “financial systems” as the corporate internal audit group had
told me, and it is not just about a “war” between operations (OPS) and
accounting. Rather it is about the “learned behavior” of both operations
and accounting associates. OPS people have been taught how to “play
the game” in their MBA programs at the university. And “the game” is
this: you make more product than you know you can sell, and then the
rules of a bsorption accounting allow you to place the full-up cost of all
of those products that you cannot sell on the balance sheet as an asset.
Thus, you have fewer costs in your P&L (profit and loss) this month,
and your operating income looks really good. Wonderful! There will be
bonuses this month for everyone! But is the business really any better
than it was last month?
1