Sherpa Alliance

How much time, energy, attention, paperwork, systems, software and, above all else, discipline, do we invest in the financial accounting of our businesses?  A lot.  And by comparison, how much do we invest in the “strategic accounting” (translating strategy and execution into traction) of our business?

I always find it interesting as I work with CEOs and their teams - for some reason there is some kind of expectation that the "strategic accounting" of a business shouldn’t take much investment of time, energy, attention, paperwork, systems, software and, above all else, discipline.  It shouldn’t be something which is at all complicated, it should be simple.  It should be something which doesn’t take any real time, energy or attention.  Paperwork should me minimal.  Any systems and software should not be at all complicated.  The discipline should not require much rigor or level of commitment.  How would it be if we took the same approach to the financial accounting of your business?  It would be a disaster!  Stupid simple (Simplicity & Complexity).

We take for granted that the financial accounting of your business is complicated with all kinds of detail complexity (dotting the "i"s and crossing the "t"s) and dynamic complexity (dealing with inflows and outflows on an hourly, daily, weekly, monthly, quarterly and annual basis) which we need to master (The Traffic of Dynamic Complexity). Do you remember the first time you took Financial Accounting 101?  You were introduced to the concepts of double-entry book keeping, accrual-accounting and inventory management;  the artifacts of a balance-sheet, profit-and-loss-account and a cash-flow/sources-and-uses-of-funds-statement; the processes of forecasting, budgeting and expense/disbursement-control; the day-to-day discipline of book-keeping to handle the myriad of individual transactions which in the continuous flow of the financial accounting of a business, and much, much, much more.  To some degree, we all probably had a similar reaction - oh my goodness, this is extremely complicated, will I ever be able to master this?  Thankfully, some of you decided to stay on that learning curve, dedicating yourself to moving through that complexity and achieving the elegant simplicity of mastery on the other side (Dabbler, Obsessive, Hacker or Master?), becoming the specialists who now oversee the financial accounting of our business, in which we all participate.  We accept that financial accounting has to be in the DNA of our business and psyche as Executives.  We are all somewhere on that learning curve of financial acumen or we wouldn’t have been promoted to be managers, executives or CEOs.  None of us are dabblers or hackers when it comes to the financial accounting of our business (well maybe a little around the edges, when it comes to such things as submitting expense claims on time or getting our budgets in on time and other things like that!).

So why do we think its OK to be dabblers or hackers when it comes to the "strategic accounting" of our business?  It is no less complicated, at least, not in orders-of-magnitude terms.  Translating strategy and execution into traction, for a business of any size, is complicated, involving multiple products and services, markets and clients, facilities and people, processes and operations, business environments and competitors and much, much, much more.  Equally intensive and complicated is the hour-to-hour, day-to-day continuous flow of transactions - different kinds of transactions but transactions nevertheless - the myriad of things-to-think-about, questions-to-ponder, decisions-to-make aand actions-to-take (The Fighter Pilot’s OODA Loop;  Observe, Orient, Decide, Act), individually and collectively as teams, departments and as a business as a whole.  The financial consequences of  not mastering these complexities can be as equally disastrous in the medium to long run.

Yet, often times, when we engage a team in the concepts, artifacts, processes and day-to-day discipline of "strategic accounting" we hear some cry, "its too complicated, can’t we just focus on … (you can fill in the blank)".  The word "just" can be a tell tale that what is coming next is likely to be leaning towards stupid simplicity ignoring complexity, rather than elegant simplicity embedding complexity.  In financial accounting terms that would be like saying, can’t we just focus on the P&L Statement and not worry about the Balance Sheet and Cash-Flow Statements; or why do we need to do an annual budget, can’t we just manage our expenses from month-to-month;  or why do we need to look at profitabilities by product or market or client, can’t we just look at it for the business overall? 

"Strategic accounting" hasn’t yet made it into the DNA of our business and psyche as Executives (Strategy Tragedy) but it must, especially as business becomes more and more like a dynamic journey on a shifting landscape (Change has Changed).   When we are mastering the detail complexity and dynamic complexity of the "strategic accounting" of our business, achieving the elegant simplicity of the core concepts, artifacts, processes and discipline, then we are choosing our future.  When we default to the stupid simplicty of "its too complicated, can’t we just …(fill in the blank)", our future is choosing us.  It may not be pretty (read the Eastern Airlines story in Divergence & Convergence).  Are you choosing your future or is your future choosing you?  How serious are you?