Knowledge at Wharton’s picture

By: Knowledge at Wharton

Accounting techniques such as budgeting, sales projections, and financial reporting are supposed to help prevent business failures by giving managers realistic plans to guide their actions and feedback on their progress. In other words, they’re supposed to leaven entrepreneurial optimism with green-eye-shaded realism.

At least that’s the theory. But when Gavin Cassar, a Wharton accounting professor, tested this idea, he found something troubling: Some accounting tools not only fail to help businesspeople, but may actually lead them astray. In one of his recent studies, forthcoming in Contemporary Accounting Research, Cassar showed that budgeting didn’t help a group of Australian firms accurately forecast their revenues. In a second paper, he found that the preparation of financial projections added to aspiring entrepreneurs’ optimism, leading them to overestimate their subsequent levels of sales and employment.

“It’s been shown in many studies that people are overly optimistic,” Cassar says. “What’s interesting here is that, when you use the accounting tools, the optimism is even more extreme. This suggests that using the tools, which a lot of academics and government agencies say is good practice, can lead to even bigger mistakes.”

Thomas R. Cutler’s picture

By: Thomas R. Cutler

In the first quarter of 2007, my company conducted a complex-manufacturing research survey of 1,473 senior management level executives (CEO, COO, CFO, vice-president of operations). Complex manufacturers were defined as those employing “other than exclusively repetitive manufacturing processes” including engineer-to-order, made-to-order, and assemble-to-order. The data include a wide range of industry cross-sections, geography, public and private companies, numbers of employees, and annual revenues, and revealed a clear change from a similar survey done in 2000. The statistically significant difference from the identical 2000 survey to the current 2007 survey is that the complex manufacturers face increasing business and global requirements. There’s also an increasing international diversity of customers, suppliers, and partners.

Complex Manufacturers

 

2000

2007

Thomas R. Cutler’s picture

By: Thomas R. Cutler

In the first quarter of 2007, my company conducted a complex-manufacturing research survey of 1,473 senior management level executives (CEO, COO, CFO, vice-president of operations). Complex manufacturers were defined as those employing “other than exclusively repetitive manufacturing processes” including engineer-to-order, made-to-order, and assemble-to-order. The data include a wide range of industry cross-sections, geography, public and private companies, numbers of employees, and annual revenues, and revealed a clear change from a similar survey done in 2000.

The statistically significant difference from the identical 2000 survey to the current 2007 survey is that the complex manufacturers face increasing business and global requirements. There’s also an increasing international diversity of customers, suppliers, and partners.

Complex Manufacturers

 

2000

2007

Mike Thelen’s picture

By: Mike Thelen

As is the case with any lean implementation in a traditional environment, culture change is the most difficult obstacle to success. A company can hire consultants, develop work teams, and begin lean initiatives, but if it only talks the talk, the initiative soon becomes just talk.

The transformation to a lean enterprise isn’t easy. Senior management, while being driven by the labor force, must lead the process. More importantly, employees between these two levels must focus on using the tools and training provided on a consistent, daily basis to enforce the concept of culture change. They’re truly the change agents.

This is a weakness in many implementations. Department supervisors and managers receive useful training, yet fail to transfer the knowledge to real-work events. The causes for this may be numerous and valid, but they can’t be accepted. Why does this happen? Can it be prevented?

Mike Thelen’s picture

By: Mike Thelen

As is the case with any lean implementation in a traditional environment, culture change is the most difficult obstacle to success. A company can hire consultants, develop work teams, and begin lean initiatives, but if it only talks the talk, the initiative soon becomes just talk.

The transformation to a lean enterprise isn’t easy. Senior management, while being driven by the labor force, must lead the process. More importantly, employees between these two levels must focus on using the tools and training provided on a consistent, daily basis to enforce the concept of culture change. They’re truly the change agents.

This is a weakness in many implementations. Department supervisors and managers receive useful training, yet fail to transfer the knowledge to real-work events. The causes for this may be numerous and valid, but they can’t be accepted. Why does this happen? Can it be prevented?

Thomas R. Cutler’s picture

By: Thomas R. Cutler

Industrial-marketing programs must encompass the full range of activities needed to grow a business profitably, and often these programs neglect to cover the retention and expansion of a business with existing profitable customers.

In a global competitive environment, a lean industrial-marketing process must help to identify target markets, target customers, and target channels of sales and distribution. The program must focus on profitable growth and financial performance that matches the best-in-class global competitors. The assessment of an industrial-marketing program must include the determination and justification of new global markets with products that offer a superior performance advantage, including an attack strategy for countering foreign competition.

Thomas R. Cutler’s picture

By: Thomas R. Cutler

Industrial-marketing programs must encompass the full range of activities needed to grow a business profitably, and often these programs neglect to cover the retention and expansion of a business with existing profitable customers.

In a global competitive environment, a lean industrial-marketing process must help to identify target markets, target customers, and target channels of sales and distribution. The program must focus on profitable growth and financial performance that matches the best-in-class global competitors. The assessment of an industrial-marketing program must include the determination and justification of new global markets with products that offer a superior performance advantage, including an attack strategy for countering foreign competition.

Knowledge at Wharton’s picture

By: Knowledge at Wharton

Former Chrysler chairman Lee Iacocca once noted, “You can have brilliant ideas; but if you can’t get them across, your ideas won’t get you anywhere.” In their new book, The Art of Woo: Using Strategic Persuasion to Sell Your Ideas,Wharton legal studies and business ethics professor G. Richard Shell and management consultant Mario Moussa provide a systematic approach to idea selling that addresses the problem Iacocca identified. As an example of effective persuasion, they tell the story of rock star Bono’s visit to then-U.S. Senator Jesse Helms’ Capitol Hill office to enlist his help in the global war against AIDS.

Quality Digest’s picture

By: Quality Digest

If you work in a project-based environment, you may feel like one of those juggling clowns at the circus, trying to keep your ball, your baton, and your flaming torch in the air at the same time, all while maneuvering your unicycle around the ring. Focus too much on one object and you risk dropping one of the others, or even taking a tumble. Project management is a lot like this. Neglect to give one project the attention or funding it needs and the consequences of doing so can be much more serious than a dropped ball, especially when your higher-ups find out money has been wasted on an unimportant or failed project.

Organizations don’t have to manage their projects in such a circus-like manner. In fact, project prioritization and selection can help you save time and money and achieve consistent success for your company.

A dearth of facts and unbiased analysis lead executives to make poor decisions when selecting new projects or assigning resources to existing ones. The result? Unmet business goals and lost opportunities. Bad project management decisions not only cause the misuse of valuable funds, they create an environment where strategic projects take a backseat while pet projects are given higher priority.

Richard Lepsinger’s picture

By: Richard Lepsinger

Companies frequently develop vision and mission statements about being No. 1 in their industry, the great service they provide to customers, and their rewarding work environment. More often than not, these statements are so far from reality that they become joke fodder for customers and employees alike. Your company really can keep the promises you make, but first you must create a culture of execution.

Creating a culture of execution begins with the knowledge that developing plans and strategic initiatives is just the starting point. It also requires adopting the mindset that a highly skilled and engaged work force, while important, won’t ensure effective execution.

Many leaders have a blind spot in this area. They either believe that their job is setting the direction, and execution is the responsibility of lower-level managers, or they assume that if they clearly communicate an exciting vision of the future to an engaged work force, everything else will fall into place.

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