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Sunday, 15 November 2009

The evolution is coming...long live the evolution

Watch out, the evolution is coming!

I am going to change tack slightly today with this posting.  Yes, you might spot a slightly more serious tone to this posting.  There are two reasons for this.  Firstly I am trying to moderate my comments with the view of getting it published via a very reputable professional body and secondly I am going to veer off my usual pure economic track towards a more accounting / finance focussed discourse. 

Partly the reason for this is that I am preparing for an “Effective Budget Forecasting” workshop in early December 2009 in Kuala Lumpur and the other reason is to draw your attention to the coming (we have been waiting for this for quite a while now) evolution in the disintermediation of financial and management accounting information production.

Information technology has now for quite a long time threatened to live up to its panacea of providing better decision support or framework for senior management.  And yet here we are, almost a full decade into the 21st Century, with still unfulfilled expectations and untapped potential.

Innovation and technology as one of the critical factors of production necessary to drive growth and advancement, through one of its elements, namely information technology, is beginning to deliver on one of its unfulfilled promises.  With IT now moving into a more mature development stage with more practitioners, better dispersed tools, general skill levels of those practitioners improving and more holistic applications and understanding of work-stream processes, I believe we are standing at the brink of the coming evolution.

Traditional budgeting and management information (MI) systems are ingrained into an organisational culture, much like all other processes and behaviours in general.

In order to change a budgeting and MI system and more critically, for this change to be successful, accountants have to stop thinking, behaving and acting like stereotypical accountants and realise that the evolution has now got some serious momentum behind it.  We won’t be able to hide behind pure accounting GAAP and IFRS statements and more importantly, our beloved spreadsheets and models, but will have to help change our systems and ways of working, via a cultural and behavioural approach to organisational change management.  Moving from annual budgeting to rolling forecasting systems should not just be about how the finance people approach the challenges, but also about how the rest of the organisation changes and adopts and adapts to systems like Value Based Management, Zero Based Budgeting and Economic Value Added® approaches.  These might seem like utopian systems for running and managing organisations, however, it is a lot more effective than purely focussing on EBITDA (Earnings before Interest, Taxation, Depreciation and Amortization) numbers for motivating and galvanising the troops to deliver.

An evolution cannot be achieved in isolation, all parts of the organisational system have to work together or be aligned towards this common purpose.

I the meantime, you and I still have our day jobs, fire-fighting exercises to concentrate on, so good luck with the evolution.

theMarketSoul ©1999 - 2009

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