FSR Forum 15-04 Lean Accounting

15th Volume June 2013 Issue #4

Lean Accounting Interview R. Verwei

Column V. Maas

Founder Ra’Quel

Why management accounting innovations fail

p26

p30

Column Joost Groeneveld PhD

‘In harmonie uit elkaar’?

p34

Ondernemers helpen groeien met jouw cijfermatig inzicht?

Financieel talent Sta jij aan het begin van een carrière als accountant of fiscalist? Dan is het goed om jezelf af te vragen waar jouw financieel inzicht het best tot zijn recht komt. Bij Baker Tilly Berk controleer je niet alleen het verleden, maar adviseer je ook over de toekomst van een bedrijf. Baker Tilly Berk combineert een landelijke aanwezigheid en een internationaal netwerk met kleinschalige kantoren dichtbij onze klanten. Die jij al snel persoonlijk kunt adviseren. Je werkt bijvoorbeeld mee aan de uitbreiding van een transportonderneming, de fusie van twee bedrijven of een audit in de publieke sector.

Om ondernemers te helpen groeien zoeken we medewerkers die zelf ook ondernemend zijn en zich continu willen ontwikkelen. Denk jij dat de rol van adviseur bij jou past? Dan hebben we voor jou ook een goed advies: werkenbijbakertillyberk.nl.

www.werkenbijbakertillyberk.nl

ACCOUNTANTS EN BELASTINGADVISEURS

At NIBC, entrepreneurial bankers start at the deep end As a trainee banker at NIBC, you also have a daily job. Your assignments and responsibilities start from day one. And you’ll have the chance to specialise, in for example mergers and acquisitions. You and your fellow analysts will follow our incompany training programme at the Amsterdam Institute of Finance, led by professors from international business schools.

A flying start at the bank that thinks and acts like entrepreneurs. For more information, visit www.careeratnibc.com.

fsrforum • volume 15 • issue #4

Lean Accounting

Preface

Dear reader, In front of you lies already the fourth edition of the 15th volume of the FSR Forum. This edition’s theme is lean accounting. Lean accounting is derived from Lean Six Sigma designed to eliminate waste out of the production process. Lean is a hands-on approach to teach employees to work more efficiently. Lean Six Sigma is the statistical foundation, which reveals where the inefficiencies lie. Lean accounting is a combination of the two. This approach stems back to Toyota, which introduced lean, Motorola designed Six Sigma and General Electrics put the two together. In this edition you will learn more about lean accounting.

As in every edition you will first find several articles about the central theme to give you a better understanding of the topic. The first article is written by Brian Maskell. In his article Brian Maskell explains what lean accounting is all about. He also explains why most companies embarking on lean manufacturing soon find that their accounting processes and management methods are at odds with the lean changes they are making.

The second article is written by Thomas Johnson. In this article Thomas Johnson explains the dilemmas in lean accounting, gives examples and gives his opinion about the dilemmas.

The third article is a summary of the article ‘Management Accounting System problems in context of lean: development of a proposed solution’ by Thomas Borup Kristensen and Poul Israelsen. In this article they write about how implementation of lean interacts with the company’s management accounting system. There are two research questions in this article: what are the problems that companies encounter when lean implementation meets the company’s cost and management accounting system? And which changes can be made to have the goals of lean and the financial measures of the management accounting system better cohere?

For this edition we had an interview with Raquel Verwei. Raquel Verwei started her career at the government where she has served various ministries. In 2012 she started the business Ra’Quel. Ra’Quel is a financial consulting firm that assists in solving companies’ financial and organizational issues. In this interview she explains more about lean accounting. She talks about the advantages and problems of lean accounting.

This time the Professors Column is written bij Victor Maas. Victor Maas is Professor of Management Accounting at the Erasmus School of Economics. In his column he discusses why many management accounting innovation projects in organizations fail and why participants fail to choose action strategies that are congruent with the organizations goals.

Mister Groeneveld talks in his recurring column about the economic effects of breaking up in a relationship and that one must be aware of lawyers, who want to benefit of the break-up. He explains why harmony is so important in a break-up.

In the news update you will find an article that explains the effect of lean accounting. Besides reducing work-in-process and streamlining production, lean accounting provides an unexpected windfall in the form of a lower carbon footprint.

2 • Preface

As in every edition, we also have a column of a former board member, a column of an FSR member and the activity reports. In the Former Board Member column Niek Bosmans talks about his time as Chairman of the FSR. He talks about the skills he has learned and the great events he experienced at the FSR. The FSR Member column is written by Filip Shen. In his column he talks about his time as active member at the FSR and about organizing the European Finance Tour. In the activity reports you will find a report about the Dutch Cleantech Challenge, Female Business Tour, Valuation and Traders Masterclass.

The fourth and almost final edition also means that we are looking for new active members who want to organize the events for the year 2013-2014. A committee gives you the opportunity to develop yourself, acquire new skills, meet interesting companies and become acquainted with the financial world. Every committee focuses on one or more events and together with your fellow committee members, you will make this event to a success! We are now recruiting for the International Research Project, the International Banking Cycle and the Accountancy Committee, three committees that will start during the summer. More information can be found at our website www.fsr.nl. If you want to know more about fulfilling a committee at the FSR, please contact us at info@fsr.nl or visit our office on H14-06.

Be aware that the deadline for the first committees is already on the 8th of July.

Hopefully you will enjoy reading this FSR Forum and that it will enrich your knowledge about lean accounting.

Sincerely, Maaike Lanphen Editor in Chief FSR Forum FSR board 2012-2013

Preface • 3

fsrforum • volume 15 • issue #4

Lean Accounting

Table of contents

What is Lean Accounting Brian Maskell

In his article Brian Maskell explains what lean accounting is all about. He also explains why most companies embarking on lean manufacturing soon find that their accounting processes and management methods are at odds with the lean changes they are making.

6

Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both Thomas Johnson

In this article Thomas Johnson explains the dilemmas in lean accounting, gives examples and gives his opinion about the dilemmas.

12

Management Accounting System problems in context of lean: development of a proposed solution Thomas Borup Kristensen and Poul Israelsen

In this article they write about how implementation of Lean interacts with the company’s management accounting system. There are two research questions in this article: what are the problems that companies encounter when lean implementation meets the company’s cost and management accounting system? And which changes can be made to have the goals of lean and the financial measures of the management accounting system better cohere?

18

Colofon FSR FORUM appears five times a year and is an edition of the Financial Study Association Rotterdam KvK Rotterdam no: V 40346422 VAT no: NL 805159125 B01 ISSN no: 1389-0913 15th volume, number 4, circulation 1900 copies

4 • Table of contents

Editor in chief Maaike Lanphen Editorial department Petra van den Akker Roija Rasuli Editorial advisory Dr. M.B.J. Schauten Dr. W.F.C. Verschoor Drs. R. Van der Wal RA

With the cooperation of N. Bosman Drs. J.G. Groeneveld RA RV P. Israelsen T. Johnson T. Kristensen V. Maas B. Maskell F. Shen R. Verwei

Editorial address Editiorial office FSR Forum, Erasmus Universiteit Rotterdam Room H14-06 Postbus 1738, 3000 DR Rotterdam Tel. 010 408 1830 E-mail: forum@fsr.nu

Interview R. Verwei

Advertisers

26

Founder Ra’Quel Column professor

Baker Tilly Berk www.werkenbijbakertillyberk.nl Ernst & Young www.ey.nl/carriere Flow Traders www.flowtraders.com KPMG www.gaaan.nu Mazars www.mazars.nl NIBC www.careeratnibc.com PwC www.werkenbijpwc.nl

30

V. Maas Column Joost Groeneveld PhD

34

‘In harmonie uit elkaar’?

FSR News Word of the Chairman

36

News Update

37

FSR former board member

38

FSR member

39

Activity reports

42

FSR Activity Calendar

48

Company Presentations KPMG www.gaaan.nu Ernst & Young www.ey.nl/carriere NIBC www.nibc.nl

Subscription EUR Students through membership FSR; costs E 5,00.

Others through subscription. To obtain information, contact the editorial department; costs E 27,50 (including VAT and postage).

Bank ABN-AMRO 50.15.61.331

24 32 40

Address Changes Send an e-mail to secretary@fsr.nl or fill out the form on www.fsr.nl.

Graphic Design and printing Haveka the graphics partner www.haveka.nl Photos and illustrations www.istockphoto.com

Advertising acquisition Laurent Schmidt No portion of the information in this ­magazine may be reproduced in any form or by any means without the prior written consent of the editorial board. Although the information is with great care collected, the correct functioning is in no manner guaranteed.

Table of contents • 5

fsrforum • volume 15 • issue #4

What is lean accounting?

Brian H Maskell President, BMA Inc.

6 • What is lean accounting?

Lean Accounting is the general term used for the changes required to a company’s accounting, control, measurement, and management processes to support lean manufacturing and lean thinking. Most companies embarking on lean manufacturing soon find that their accounting processes and management methods are at odds with the lean changes they are making. The reason for this is that traditional accounting and management methods were designed to support traditional manufacturing; they are based upon mass production thinking.

Lean manufacturing breaks the rules of mass production, and so the traditional accounting and management methods are (at best) unsuitable and usually actively hostile to the lean changes the company is making.

Classic examples of these kinds of problems are: • Lean improvements showing cost increases as a result of the way standard costing applies labor and overhead costs.

There is many an excellent lean strategy that has been cancelled or held back because the standard costing system shows a negative impact.

• Traditional performance measurements motivating the people to take anti-lean actions like building inventory, running large batches, “cherry picking” production jobs to maximize earned hours, combining jobs into more “efficient” runs, buying large (so called) economic order quantities of raw materials & components, and so forth. These problems are caused by measurements like labor efficiency, machine utilization, purchase price variance, and - perhaps worst of all - overhead absorption variance (and other variances).

• The lean team working hard to eliminate waste from the value stream only to find that profitability goes down owing to the adjustments made by significant inventory reduction.

Looking at the other side of this same problem, the finance people are told about all the savings being made in operations but they see (at best) no financial improvement; and often a negative impact.

Underlying these rather obvious issues is a broader problem.

Lean thinking turns in its head most of our “given wisdom” in manufacturing. Why? Because the fundamental assumptions of traditional mass production are contrary to the assumptions of lean manufacturing. Lean manufacturing is not a set of interesting and useful shop-floor tools. It is a very different way to manage the business. Yet in many companies embarking on lean manufacturing, these radical changes do not move

outside of the production floor. Sure, some companies are applying lean flow in the offices, and others are using leanstyle methods in product design; but there is a much bigger cultural impact to changing the way you think about the accounting, measurement, control, decision-making, and management of the enterprise.

Figure 1 shows an overview of the primary topics of Lean Accounting.

What Will Lean Accounting Do For Us? There are several tools included in Lean Accounting and they each work together to create a framework for the control & management of a lean enterprise. The benefits of Lean Accounting include: 1. Lean accounting increases sales because it provides better information for decision-making. If you use standard cost information for decisions relating to such things as pricing, quoting, profitability, make/buy, product rationalization, capital investment, and new product introduction, you will very often make the wrong decisions. Standard costs are just plain wrong when it comes to these kinds of decisions. Lean companies need better tools like Value Stream Costing and Lean Decision-Making.

We have worked with many companies over the last few years that have been in the habit of turning down profitable business because standard costs show it to be “low margin”. These companies also tend to out-source ­products or processes that would be highly beneficial if done in-house, because the standard cost is higher than the out-source price. Figure 2 shows and example of a make/buy decision using value stream costing instead of standard costs.

» What is lean accounting? • 7

fsrforum • volume 15 • issue #4

Figure 2: Example of Lean Approach to Decision-Making for Make/Buy.

2. Lean accounting clearly identifies the financial impact of lean improvements. Most companies use traditional costsaving models to assess the benefit of lean improvement, and many companies look for short-term cost reductions as a result of lean changes. These companies are frequently disappointed. But the financial people have no other methods to assess the financial impact of lean improvement.

Lean accounting recognizes that the primary impact of waste elimination is the creation of available capacity. The financial impact of lean improvement is almost entirely dependent upon what you do with that newly available capacity. You can lay people off, increase sales & grow the business, or use the capacity in other ways. But you must have a strategy for making money from the lean changes.

In our experience, many companies embark on lean manufacturing without having a clear strategy for using their newly acquired lean skills to benefit the company financially. Lean accounting methods make these issues very clear. Figure 3 shows a “live” example of assessing the financial impact of lean improvement.

Figure 3: Example Showing the Financial Impact of Lean Changes and a Longer Term Strategy.

8 • What is lean accounting?

4. Lean Accounting saves money and reduces costs. Have you ever worked out the cost of your accounting systems?

Most companies have no idea what they cost because they are deeply embedded into the company’s processes. As an organization matures with Lean Accounting they are able to systematically(yet prudently) eliminate 1000's & 1000's of transactions and the reports, reconciliations, & meetings that go with them. These are all waste; and as you bring your processes under control operationally you will be able to eliminate most of the traditional accounting & control systems and their required transactions.

Work orders on the shop-floor together with all the tracking and reporting (or backflushing) of labor hours, job-step tracking, scrap reporting, and other wasteful transactions can - over time - be eliminated. The majority of the procurement and purchasing processes can be eliminated as the pulling of materials, components, MRO items, and supplies are brought under control using lean manufacturing and supply chain methods. This includes the traditional AP 3-way match as you begin to expense materials on receipt or backflush them on shipment. Much of the perpetual inventory systems can be eliminated as you bring your inventory down and bring it under tight operational control through the use of visual management and pull systems.

The use of Value Stream Costing and Plain English Financial Statements radically simplifies the financial accounting reports, leading to much less work on the part of the financial team and the people who have to use them.

Value Stream Costing eliminates the need for traditional cost tracking and the thousands of wasteful transactions that go with it. Value Stream Costing provides easy-tounderstand, timely, valid, and actionable cost and profitability information with a fraction of work. Figures 5 shows a Value Stream Income Statement. Figure 6 shows a consolidated Income Statement across multiple value streams.

Figure 6: Example of a Consolidated Value Stream P&L for the Company.

Figure 5: Contrast a Traditional Income Statement with a “Plain English” Statement

Sales, Operations, & Financial Planning (SOFP) provides an orderly planning that is integrated across value streams. The result is excellent planning with much less work than traditional companies usually expend; and with much better results. SOFP provides monthly rolling budgets that are up-to-date and actionable, and eliminate most of the wasteful annual budgeting processes most companies go through.

6. Lean Accounting motivates long-term lean improvement through lean-focused information and measurements.

Lean Performance Measurements are the cornerstone of visual management and control for lean production cells, the value streams, and the overall plant or company. Similar performance measurements are used at the non-production “cells” and processes. These performance measurements are designed to motivate thoroughly lean behavior and to drive continuous improvement at every level of the organization.

Figure 7 shows the set of performance measurements used by one company for cell level, value stream level, and plant level measurements. These measurements all derive originally for the company’s business strategy.

Figure 5: Example of Value Stream Costing P&L

The Box Score is used widely in Lean Accounting and shows a three-dimensional view of a value stream; operational, financial, and capacity usage. The Box Score is used to provide an “A3" summarized report of a value stream. It can be used for weekly value stream reporting, for strategic decision-making, for financial impact calculations, and

» What is lean accounting? • 9

fsrforum • volume 15 • issue #4

Figure 7: Example of Performance Measurements Reflecting Lean Motivation and Focus on the Company’s Strategy

other times when there is a need to show value stream information succinctly. Figures 8 & 9 show the use of Box Scores for different kinds of value stream reporting.

Target Cost exemplifies the first and fifth principles of lean thinking; focus on customer value, and the pursuit of perfection. Using the methods of QFD (Quality Function Deployment) and Value Engineering, we thoroughly understand the value created by a product for the customer.

From this we can calculate the target cost for the product (or product family). This target cost is driven down through the value stream to initiate improvement and cost reduction projects to bring the value stream costs in line with the target costs, providing high levels of customer value and the right level of profitability for the company.

The outcome is a series of improvement initiatives touching our sales & marketing, product design, procurement, operations, and administrative processes, resulting in significantly better cost and profitability.

Figure 9: Example of a Box Score to Show Strategic Decisions

using Features & Characteristics Costing. Features & Characteristics Costing creates a cost for individual products from an understanding of what truly affects the cost of one product as it flows through the value stream. The rate of flow of product is a prime driver of conversion cost. We identify the features and characteristics of a product that affect this rate of flow.

Features & Characteristics Costing is a faster, easier, and more accurate way of calculating a product's cost. It is also quite intuitive for people across the company, from sales & marketing, through engineering, and production. Figure 10 shows an example of a features & characteristics cost table.

Figure 10: Example of a Features & Characteristic Cost Table

Figure 8: Example of a Box Score used for Weekly Value Stream Reporting

There is rarely a need to know the cost of an individual product when using Lean Accounting because the important reporting and decision-making is done at a value stream level rather than a product level. But when product costs are needed, they can usually be calculated simply by

10 • What is lean accounting?

NOTHING BEATS WINNING

Do you thrive on outsmarting your competition?

Flow Traders is looking for Junior Traders with excellent mathematical and analytical skills combined with an interest in global financial markets. In this challenging position you manage and optimize our daily position in a wide range of financial products.

If you want to be part of our winning team, don’t hesitate to sign up for our monthly trading challenge at www.flowtraders.com For more information call Dainahara Polonia at 020 7996799.

Flow Traders is an international leading trading house.

Amsterdam

•

New York

•

Singapore

fsrforum • volume 15 • issue #4

Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both H. Thomas Johnson

12 • Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both

1.1 Lean Cure: Symptom Versus Root Cause Businesses everywhere have given enormous attention to “lean” management programs for over a decade. However, none emulates what Toyota, the creator of “lean,” has achieved. To be sure, many businesses temporarily improve their performance, some greatly, by adopting Toyota practices. But none succeeds as Toyota has at continuously improving lead time, cost, productivity, quality, and overall financial performance year after year after year, for decades.

Failure to reach a desired goal despite repeated attempts often reflects a systemic pattern of problem solving in which people ameliorate symptoms of a problem without removing the problem’s root cause. Because they find relief from its symptoms, if only for a while, businesses postpone looking for the problem’s deeper root causes. The problem persists and continues to produce troubling symptoms that one temporary fix after another merely alleviates, without ever eradicating the core problem. Does this mode of problem solving characterize most “lean” initiatives? If it does, then such initiatives fit the popular definition of insanity: “doing the same thing over and over again while hoping for different results.”

All businesses desire high and stable profitability, period after period for as long as possible. That surely is the goal of most performance improvement programs, including “lean” initiatives.

However, such programs invariably boost profitability for only a while, followed by increasing instability and reduced performance until the cycle repeats and management once again rolls out another improvement program that boosts profitability for a while, followed by another disappointing downturn that leads to yet another improvement program, and so on. As a consequence of such improvement-initiative cycles, average results over the long term move in opposite direction to the desired result, despite brief periods of improvement in the short run.

1.2 Business Results: Mechanism Versus Life System I believe this unintended consequence of improvement ­initiatives occurs in most businesses because management’s view of what causes business results differs greatly from how the business system itself naturally produces those results.

In virtually all businesses today, and for the past fifty years or more, management actions meant to improve financial performance reflect a mechanistic view of what causes financial results. In that view, financial results are a linear, additive sum of independent contributions from different parts of the business. In other words, managers believe that reducing an operation’s annual cost by $1 million simply requires them to manipulate parts of the business that generate spending in the amount of $1 million each year, say by reducing employee compensation or payments to suppliers. Because managers assume that all parts of their operations make independent contributions to overall financial performance, like the parts of a machine, they would consider any or all of the following steps to be equally effective: lay off employees whose annual pay equals $1 million; reduce wages, salaries or benefit payments by that amount; force suppliers to accept reduced prices for their goods or services; outsource employment or contract purchases to less developed countries. It doesn’t matter what steps are chosen, as long as they eliminate one million dollars of annual spending.

Were managers to assume, however, that the financial performance of business operations results from a pattern of relationships among a community of interrelated parts, and is not merely the sum of individual contributions from a collection of independent parts, their approach to reducing cost could be entirely different. In that case, managers might attempt to reduce costs by improving the system of relationships that determines how the business consumes resources to meet customer requirements. This would suggest that they view “improvement” primarily in terms of a system of relationships – the human social system that is the business

In that case, managers might attempt to reduce costs by improving the system of relationships that determines how the business consumes resources to meet customer requirements.

– and not simply in terms of an arithmetic sum of separate parts. More specifically, this would imply that they define and “measure” continuous improvement in terms of a long-term vision of how work should be conducted to best satisfy customer needs with the least consumption of resources. Viewing current operations through the lens of this vision would enable everyone in the organization to see the direction that change must take to move operations closer to that vision.

This is how managers might act if they viewed the operations of a business as part of a natural living system. As I have noted many times in the past two decades, it is not uncommon for scientists today to view human social systems, such as business organizations, as examples of self-organizing and self-identifying living systems.However, such thinking has not yet influenced business education and practice. Indeed, the thinking and behavior of almost all managers in today’s business world reflect a worldview grounded in the whole-equals-sumof-parts and win-lose competitive principles of nineteenthcentury mechanics and eighteenth-century classical physics, not the systemic, cooperative and win-win symbiotic principles of twenty-first century cosmology and life science. In short, today’s managers and business educators typically view the financial performance of a business as the sum of independent contributions from separate parts of a machine, not as the emergent outcome from complex interactions among the interrelated parts of a life system. That explains, I believe, why virtually all improvement initiatives, including so-called lean initiatives, inevitably generate long-run financial results that fall far short of what was intended by the initiatives’ designers.

It all has to do with a “confusion of levels,” a phrase writers often use to describe what the twentieth-century systems thinker Gregory Bateson called a type of epistemological error. Bateson said that humans in any culture share certain

»

Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both • 13

fsrforum • volume 15 • issue #4

premises about epistemology, that is, premises “about the nature of knowing and the nature of the universe in which we live and how we know about it.”Many of these premises, because they work at some levels and under certain circumstances, are misapplied to other levels. Problems occur when this happens.

People in Western cultures have premises for explaining or understanding the world at two main levels, referred to briefly above. At one level, call it the mechanical, all events are explained by the influence of external force or impact on independent objects. At the other level, call it the living, all events are explained by patterns of relationships connecting a world of self-organizing beings. The premises at the first level have been successfully used for nearly two centuries to study mechanical processes and to promote engineering technology. They are the basis for scientific and business education and practice in the Western world today. But problems have grown increasingly severe from the erroneous application of these premises to human dealings with nature and to social organizations, such as businesses, that embody principles of living systems. For example, viewing reality through the premises of the first level, a management accountant in modern business views a spreadsheet of financial results as the company. Oblivious to premises at the second level, this person fails to see the system of human relationships that produces those financial results as the company. As a consequence, the person promotes policies to “improve financial results” by arbitrarily destroying relationships through layoffs or outsourcing, not by nurturing and reinforcing the features of those relationships that produce robust results. The long-term outcome, predictably, is less than expected.

Therein lies what I refer to as a “confusion of levels” – failure to see that whereas in a mechanical system one-dimensional quantities can both describe results and enable one to control the linear process that produces those results, in a living system quantities can only describe results, but cannot explain or enable one to control the multi-dimensional interactions and feedback loops of the process that produces the results. As I discuss in more detail below, this “confusion of levels” invalidates all management accounting practices in which businesses attempt to use financial quantities to explain and to control financial results. Those practices, which are endemic to American management but are not ­evident at Toyota, are the main reason why lean initiatives fail to have their desired impact on financial performance in American business.

An example of the damaging impact of this confusion is in a case (co-authored with MIT Professor David Cochran) I describe elsewhere that compares the financial (and other quantitative) results in two automobile bumper-making plants. One is run by an American “Big Three” automaker whose managers continually manipulate separate parts of the plant’s operations and arbitrarily increase output in order to achieve unit cost targets defined by an abstract financial cost equation. The other is run by Toyota, whose managers focus on nurturing systemic relationships in the plant according to a constant vision that has guided all operations in the company for many decades. The case demonstrates that the lowest cost and highest overall performance are achieved by Toyota, the company that does not confuse linear cause-effect connections at the abstract level of financial cost equations with the complex cause-effect connections at the concrete operating level of human relationships.

Their business training and experience cause managers to believe that linear cause-effect connections at the abstract quantitative level apply everywhere in the world, including the level of real operations.

1.3 Confusion of Levels: Lean Practices Versus Toyota Results In their customary way of doing things in business, managers confuse linear cause-effect connections at the abstract quantitative level of financial results with the nonlinear, complex cause-effect connections that naturally exist at the concrete level of relationships among employees, suppliers, customers, owners and community. Their business training and experience cause managers to believe that linear cause-effect connections at the abstract quantitative level apply everywhere in the world, including the level of real operations. Thus, they proceed to manipulate and control people and things at the complex and nonlinear operating level as though they behaved according to the linear principles that apply at the abstract quantitative level.

14 • Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both

I believe it is because lean initiatives do not change the underlying mechanistic thinking that has guided management decisions in virtually all American businesses for the past half century or more that those initiatives fail to achieve results for American companies like the results observed at Toyota. Lean initiatives in non-Toyota companies invariably fail to embody the unique way of thinking about business and the fundamentally different approach to management in which Toyota’s practices evolved. Thus, businesses transplant Toyota practices into a context of alien thinking that overpowers and dilutes the effectiveness of those practices.

As a consequence, such companies can demonstrate Toyotastyle management practices, but not Toyota performance results.

1.4 Management Accounting Control Systems Block Lean The prevalence of management accounting control systems in American business probably contributes more than any single thing to the confusion of levels that causes American managers to believe they can run operations mechanically by chasing financial targets, not by nurturing and improving the underlying system of human relationships from which such results emerge. It is significant, then, to note that where this confusion of levels is not present, as in Toyota, one sees virtually no use of management accounting targets (or “levers”) to control or motivate operations. I argue that this is an important reason why Toyota’s financial performance is unsurpassed in its industry.

People at Toyota place great importance in problem solving on genchi genbutsu, or “going to the place” where the problem occurs to see for yourself, firsthand. You don’t rely on second-hand reports or tables and charts of data to get true understanding of root cause. Instead, you go to the place (gemba) where you can watch, observe and “ask why five times.” This attitude reflects, of course, no “confusion of levels.” Instead, it shows a deep appreciation that results (and problems) ultimately emanate from and are explained by complex processes and concrete relationships, not by abstract quantitative relationships that describe results in simple, linear, additive terms. It should not be surprising, then, to realize that managers in a Toyota plant, unlike their counterparts in American organizations, do not refer to accounting documents such as standard cost variance budgets to discuss the state of current operations. Indeed, in 1992, during my first of scores of trips to Toyota’s Georgetown, Kentucky plant, I was told that the Toyota accounting system treats daily plant operations essentially as a “black box” that it does not enter. Accountants of course record everything that goes into the plant and all the products that come out.

But within the plant they don’t track the flow between incoming resources and outgoing finished product. Everything one needs to know about the transformation that takes place inside the plant is inherent in the flow of the work itself. Indeed, a key feature of the Toyota Production System is that the work itself provides the information needed to control its state. In other words, all the information needed to control operations is in the work.

Professor Kazuhiro Mishina introduced me to this aspect of the Toyota Production System in 1992 when he showed me a high-level “material and information flow map” for the Georgetown plant. He explained that the map is designed to show material flowing from left (raw material) to right ­(finished autos) and information flowing from right to left.

Basically there was only one line going from right to left – a line to represent the customers’ orders entering the plant each day and going directly to the body welding operation.

Today this type of map is familiar to anyone who has studied “value-stream mapping.” But Kazuhiro pointed out to me that no lines representing information enter the plant from either the accounting system or the production control system. The work itself provides all the information that in non-Toyota plants customarily comes from computerized MRP and standard cost variance reports.

While the value-stream mapping literature does an excellent job of showing how the Toyota Production System (TPS) dispenses with the need for production controls (e.g., MRP) in daily operations, it is silent on how TPS also dispenses with the need for accounting controls in daily operations. This is an unfortunate lapse, in my opinion, because it has left the door open to the idea that “lean” manufacturing programs must include “lean” accounting controls, something that Toyota people, especially the late Taiichi Ohno, often referred to as muda (waste).

In Toyota plants, all information needed to control operations is in the work simply because all work flows continuously at a balanced rate through virtually every operation, from the beginning to the end of the manufacturing process. The work has been carefully designed so that one can “see” its current state quite literally. Is it on time to meet the day’s orders? If not, how much additional time will be needed?

Have defects or other errors occurred along the way? Are components to final assembly being replenished on a timely basis? Has any undue inventory accumulated anywhere? Are problems being identified and addressed according to standard procedures? Such questions, and hundreds more, can be answered every moment in every step of the process throughout the plant. No accounting system can alert managers as well or as fast if anticipated costs and revenues will not be achieved. Any “exceptions” that managers might need to address to keep financial results on track are visible real time as the work is being done, not days, weeks or months later in a report from the accounting department.

1.5 Lean Accounting Answers the Wrong Question If traditional management accounting practices are the key problem preventing American businesses from emulating Toyota’s performance, what should companies do? Many proponents of lean accounting suggest that companies should reform management accounting itself by doing things such as activity-based value-stream costing, direct costing, cashflow accounting, value-add capacity analysis, and more.

These proposals should cause a sense of deja-vu among those who are old enough to recall some twenty years ago the proposals to gain better control over burgeoning overhead costs with activity-based cost (ABC) information. ABC seemed like a good idea at the time, but in retrospect it was a good answer to the wrong question. We see better today, when we understand more fully what Toyota does, that reducing manufacturing overhead costs requires a new way to organize work, not better cost information. The question that proponents of ABC should have been asking was how to organize work to eliminate the causes of overhead activity, not how to trace costs of overhead activities to products in more discriminating ways. Perhaps now is the time for companies interested in becoming “lean” to reframe the question that management accounting control systems are supposed to answer. It is time to recognize that management accounting controls are a good answer to a wrong question, that if the question were properly reframed management accounting controls probably would not be a valid answer.

The question most companies ask now is how to control the financial results of business operations as if financial results are a linear sum of individual contributions from separate

»

Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both • 15

fsrforum • volume 15 • issue #4

parts of the business. Accounting control information seems the logical way to show how those contributions, and changes in those contributions, add up to the organization’s overall financial results. But if we assume that financial results emerge from complex interactions and nonlinear feedback loops in the interrelated parts of a natural living system, then attempting to control those results with linear accounting information is not only erroneous, but possibly destructive to the system’s operations in the long run. In this case, the new question is: how does one control, if at all, the financial results that emerge from operations that abide by the principles that govern a natural living system?

1.6 Answers to the Right Question – from Shewhart and Deming to Toyota An early answer to this question was provided in the 1930s and 1940s by Walter Shewhart and W. Edwards Deming, both trained in mathematical physics and both experienced in using state-of-the-art statistical tools in business and government. One of their lasting contributions was to devise a scientific way to estimate the “control limits” within which a business system’s results would normally fall until one of two steps were taken that altered the limits. One step was to ignore all but abnormal variation in results and work to improve the system itself, thereby narrowing the control limits and improving long-term performance. The other step, a less desirable but more common way of managing, was to try to improve long-term performance by intervening in the system every time results varied from a desired target.

The inevitable consequence of the second step, Shewhart and Deming proved, is to widen the system’s control limits and impair its long-term performance.

In essence, Shewhart and Deming likened a well-designed business system to a living system in nature. Its results vary over time, but the range of variation has limits. However, in a human system such as the operations of a business, managers can improve performance by taking steps to reduce that range of variation. The key to performance improvement, then, is to nurture the system that produces results, not to drive the system to achieve targets that fall outside its normal performance limits. In his early work, Deming articulated 14 principles (or points) that defined what he meant by nurturing the system. Those principles included things such as create constancy of purpose, constantly improve systems by reducing variation, cease dependence on inspection, do not base purchases on price alone, do not reward individual performance, institute training, eliminate management by objectives, and more.

This is precisely the approach that Toyota takes to manage its operations. Toyota lives by a set of deep underlying system principles that, after observing their system on many study missions to their plants in the 1990s, I tried to sum up in my own words with the concept “managing by means.” As I outlined it in my book Profit Beyond Measure, the essence of that concept, which compares Toyota’s system to a living system, is that satisfactory business results follow from nurturing the company’s system (the “means”), not from manipulating and wrenching its processes in order to achieve pre-determined financial results (a mechanistic strategy ­ popularly known as “managing by results”). In his own

16 • Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both

recent and excellent synthesis of Toyota’s system principles, Jeffrey Liker articulates the same concept in his book The Toyota Way with the phrase “creating the right process will produce the right results.”

This sentiment is central to the Toyota organization’s deepseated belief that one cannot improve financial performance by intervening in the system and forcing operations people to achieve results targets. Instead, they emphasize the importance of defining the properties their operating system should manifest and of having everyone in the organization work assiduously to continuously move the system toward those properties. Frequently one hears Toyota people refer to those properties as “True North.” True North in Toyota’s system includes properties such as safety (for employees and for customers), moving work always in a continuous flow, one order at a time on time, with no defects, with all steps adding value, and with the lowest consumption of resources possible. The assumption is that the more that every process in the system manifests the properties of True North, the better will be the company’s long-term performance.

These three approaches to managing operations – the Shewhart-Deming approach, managing by means (MBM), and the Toyota Way – all suggest how different it is to nurture the system that produces a company’s financial results than it is to arbitrarily intervene in and wrench the system in an attempt to force it to produce a desired result beyond its current capabilities. The latter strategy is, of course, followed by virtually all large companies in the United States today, especially the large publicly-traded companies whose top managers are pressured to deliver results demanded by financial markets and other outside interests. It seems unbelievable, but many of those companies are pursuing lean initiatives in the expectation of achieving performance like Toyota’s. The fact that they will not or cannot forego pressure to drive operations with management accounting “levers of control” makes the likelihood of their realizing such expectations nearly zero.

1.7 Management Accounting Controls or System Principles: Pick One, not Both If managers look primarily at financial information to judge the performance of a business, then they are certain to be working in the dark, unless I am mistaken and the operations they manage do in fact behave according to mechanistic principles. But anyone who is aware of modern life science can never again view a human social organization, such as a business, as anything but a natural living system. That being the case, it stands to reason that the key to favorable longterm financial performance is to design and run operations according to the principles that guide living systems. Such principles resemble Deming’s 14 points, the principles of managing by means (MBM), and those that Toyota refers to today as The Toyota Way or True North. Only if a company can describe its operating system in terms of such principles can it know whether or not the system is improving.

Financial quantities cannot reveal if a system is improving or not. To assume otherwise is to fall prey to “confusion of levels.” If a company requires cost information to show the “savings” from “going lean” it is lost and will never get there.

Requiring cost information to justify taking the steps that are necessary to become lean discourages people from continuously removing sources of delay and error that stand in the way of moving closer to achieving system principles such as those underlying living systems or Toyota’s True North.

Instead, they will create work-arounds such as rework loops, forks, and inventory to keep work moving (even if it is not continuously flowing) in the hope of eliminating unfavorable unit cost variances. In other words, the demand to justify operational decisions with cost information confuses levels, causing people to forego root-cause problem solving and, instead, to build “cost-effective” work-arounds that violate system principles. Eventually the system principles are forgotten and managers spend increasing amounts of time working to improve the efficiency of the work-arounds. No company that talks about improving performance can know what it is doing if its primary window on results is financial information and not system principles. No amount of financial manipulation will ever improve long-term results. Performance in the long run will improve only if managers ensure that the system from which the performance emerges adheres more and more closely to principles resembling those that guide the operations of a living system. The dilemma facing all companies that intend to become “lean” is that they can follow a truly systemic path to lean or they can continue to use management accounting “levers of control.”

They can’t do both.

company in the world were to become as “lean” as Toyota, today’s economy in which they operate is not sustainable.

Forces drive it to focus on quantitative goals, hence, on extensive growth. Government tax, spending, and monetary policies promote more and more production and consumption, to grow GDP endlessly. Financial markets drive companies, including Toyota, to play in the same game. But an economy that lives on steroids is no more sustainable than any growthdriven organization operating within it. Until they can escape the curse of endless growth, both the economy and all its members are doomed to collapse and die.

This is precisely

By using quantitative targets to manage results without regard to the effect our actions have on the underlying system from which the results emerge we close fields of possibility and limit ourselves to what our measures will produce. In effect, that describes existence inside a machine, not life. Life implies flourishing in fields of continuously renewing possibility. Mechanistic existence suggests a repetitive, homo­ geneous system running down to death, without hope of renewal or new possibility. Our worship of quantity virtually guarantees that the economy we inhabit today and the businesses within it are life-denying, not life-enhancing. Businesses, like any living systems, should grow to be what they are supposed to be, not more. Ants grow to be ants, elephants grow to be elephants and humans grow to be humans. Each in its context flourishes in life, in being – not in growing, accumulating, or having. Sustainability, as my colleague John Ehrenfeld has said, is the possibility that humans and other life flourish on the Earth forever. Nurturing that possibility is the challenge that companies, citizens and the communities we inhabit must accept in the name of sustainability. “Lean” management in the sense of running companies according to living system principles is an important first step in meeting this challenge. Then comes the hard part: conducting our economic activities within the limits of Earth’s regenerative processes. To fail at that will make all the lean initiatives irrelevant. But we can succeed, as long as we choose to live according to the principles of living systems and not according to the imperative of quantitative growth.

the approach that Toyota takes to manage its operations.

1.8 Epilogue: Lean and the Question of Sustainability Management accounting controls impose a curse on lean management programs; they cause managers to believe that addressing the imperative of growth is compatible with the possibility of systemic wellbeing. Abstract quantities by themselves can of course grow without limit. However, the universe has never allowed any real, concrete system within it to grow endlessly. Such attempts to grow endlessly inevitably fail. Had it been otherwise the universe by now would be only one thing – the system that never stopped growing until it became everything, and nothing.

Nevertheless, all businesses that chase accounting targets for revenue, cost, profit, or return on investment somehow believe they are an exception to this universal pattern. They “confuse levels” and are deaf to the primordial message being delivered every time their real operations fail to deliver the long-term performance that their abstract equations and their occasionally favorable short-term returns seem to promise. They fail to see that the pursuit of endless growth is incompatible with the long-term survival of the system.

Our Earth and its life-sustaining biosystem, as well as all ­systems in the entire universe from which Earth emerged, reflect the existence of continuously open fields of possibility.

The most fundamental and most pervasive process in the universe, and especially on our Earth, is the constant emergence of newness out of what went before. Nothing ever constrained the flourishing of possibility in that process until humans introduced the idea of quantitative choice to the system. Quantity automatically limits possibility and emergence to outcomes that can be measured. Quantum physicists have suggested that undisturbed systems in the universe naturally stay in multiple states simultaneously, unless someone intervenes with a measurement device. Then all states collapse, except the one being measured. Perhaps what you measure is what you get. More likely, what you measure is all you get.

What you don’t (or can’t) measure is lost.

This message applies to the entire human economy as well as to individual businesses in the economy. Even if every

Lean Dilemma: Choose System Principles or Management Accounting Controls, Not Both • 17

fsrforum • volume 15 • issue #4

Management Accounting System problems in context of Lean: development of a proposed solution Thomas Borup Kristensen and Poul Israelsen

18 • Management Accounting System problems in context of Lean: development of a proposed solution

1. Introduction Lean manufacturing philosophy, based on Toyota’s production system, has been around for years (Schoenberger, 1986, 1990, 1996; Womack et al., 1991) and forwarded as an ideal – world class manufacturing – system to enable companies to compete on quality, product variety, and timeliness in a cost effective and profitable manner. As a manufacturing philosophy it combines just-in-time (JIT), total quality management (TQM), and total preventive maintenance (TPM). In this paper we are interested in how implementation of Lean interacts with the company’s management accounting system.

In the words of Åhlström and Karlsson (1996) there are seven main principles of Lean manufacturing: (i) elimination of waste (i.e. all non-value adding activities, e.g. inventory, transportation, unnecessary movements), (ii) strive for zero defects as a prerequisite for JIT, (iii) pull instead of push manufacturing (i.e. production to order as opposed to forecast), (iv) creation of multifunctional teams around productdedicated production cells (as opposed single-skilled employees in a functional machine layout), (v) decentralization of responsibility to these multi-skilled teams (i.e. delegation of procurement, materials handling, planning and control, maintenance, and quality control), (vi) creation of vertical and horizontal information systems that provides timely information continuously and directly in the production flow, and finally (vii) creation of a continuous improvement culture where improvements towards perfection is the goal.

In these Lean principles no or very little mentioning of the implications for the company’s cost and management accounting system is forwarded. However, if we look into the authorship of Schoenberger cost accounting can actually be abandoned: “non-monetary process data are the lifeblood of improvement projects – [they] tell what needs to be done and, to a very large extent, prioritize those needs. Cost data are not part of that improvement methodology” (1996: 104) and further “Don’t try to pin down all cost…. Instead, drive costs down and quality, response time, and flexibility up by plotting quality, cycle time, setup time etc. on large visible screens on the wall. This is the cost effective way there is for upper managers and line employees alike to size up results…”

(1996: 113). In the eyes of Schoenberger cost accounting is a problem rather than a solution to Lean implementation (Mouritsen and Hansen, 2006: 271). In this reasoning

­ on-financial process data form input for decision-making n on improvements and cost reductions will automatically follow. This is puzzling to this paper: is it always the case that improvements decisions based non-financial performance measures will lead to cost efficient cost reductions? Will it lead to the same type of improvement initiatives had the decisions been informed by cost calculations? If financial as well as nonfinancial measures are in use at the cell level what happens if they are in conflict, and how can this conflict be resolved?

Extant case-based research papers on the interaction between Lean implementation and management accounting change are limited. Among the limited number are three in-depth single case studies by Åhlström and Karlsson (1996), Lind (2001), and Kennedy and Widener (2008). These studies report on changes made during Lean implementation encompassing, for example, organizational structure (e.g. functional vs. product groups), control forms (e.g. output, behavioral vs. social controls), and elements of the costing system (e.g. standard vs. actual cost). In none of the companies have the cost accounting system been abandoned but changes have been made. All three studies directly or indirectly confirm that responsibility accounting must shift from the performance of the individual and individual machines to the cell level/team to align decision authority and aggregation level of information. All companies also have a mix of financial and non-financial performance measures, and Lind (2001: 61) concludes that “Non-financial measures became dominant for day-to-day control; for long-term control both financial and non-financial measures were used”. This is part of our intellectual puzzle: does short term control using non-financial performance measures automatically align with long term financial measures? Additionally, in one of the studies (Kennedy and Widener, 2008) standard cost were given up in favor of using only actual cost whereas in the two other studies standard cost were kept but changed to accommodate the cellular structure. This widens our puzzle: why is standard costing a potential problem in Lean settings?

The above leads to our research questions: what are the problems that companies encounter when Lean implementation meets the company’s cost and management accounting system? And based on this, which changes can be made to have the goals of Lean and the financial measures of the management accounting system better cohere?

»

Management Accounting System problems in context of Lean: development of a proposed solution • 19

fsrforum • volume 15 • issue #4

In addition, we find our endeavor justified by Kalagnanam and Lindsay (1993) forwarding the concern that if management accounting is not able to measure the consequences of Justin-Time and Lean, there is a danger that it will become a potential blocker of Lean.

The remainder of the paper is organized as follows. In section 2 we introduce the research design and the case method.

Section 3 summarizes across cases the interactions problems identified between Lean and the companies’ management accounting systems. The full paper presents section 4, the main section, which develops and describes a new cost measurement system that is coherent with Lean, Lean financial accounting. This new model is contrasted to value stream mapping (usually used in Lean) and traditional cost models in relation to the decision support they provide. This summary version of the paper only presents section 5, which sums up the paper and contains limitations of the model developed and points to avenues of further research.

Common to the selected companies is that they are concerned with their ability to measure profitability of their Lean efforts. While still convinced of having substantial Lean benefit they have recognized what they believed to be shortcomings within their existing management accounting and control systems. In understanding and dealing with this we are inspired by seeing this as a first step in researching “a real problem” (Nørreklit et al., 2006), i.e. it is neither just a practical nor solely a theoretical problem (Henriksen et al., 2004). If this was the case, and it merely comprised a practical problem, the actors would already have found suitable tools for solving it, and yet it is not only a theoretical problem as the actors care about it.

In order to work in a manner consistent with finding real problems in the interaction between the cost models used and Lean, we employ Merchant’s (2006) six general criteria for a complete measurement system. In addition, we use the theory of coherent systems (Nørreklit, 2000) in understanding these problems.

2. Method The case study method is chosen to be able to thoroughly understand which interaction problems between Lean control and management accounting control companies face. Yin (2003) defines case study as an investigation of a contemporary ­phenomenon within its real life context with the benefits of prior theoretical development to guide data collection and analysis. In this paper the “contemporary phenomenon” is the interaction between Lean and the companies’ management accounting system. The particular case studies have the advantage of being longitudinal and the researchers spent three years collaborating with the companies. It has taken many hours of dialog (approximately 200 hours) with different company actors to understand how their Lean control package and management accounting system clashes, and why they believe they needed to be integrated and adapted to fit their specific context. Using a longitudinal approach we have witnessed the development of the actors’ understanding of Lean and management accounting system interaction as implementation of Lean is an ongoing process. We entered all companies at the point where they began to discuss the research topic, and it soon became obvious that they all had the somewhat same discussions on how to measure the Lean implementation, and how to guide the implementation in a financially informed way.

20 • Management Accounting System problems in context of Lean: development of a proposed solution

Speaking of cost models, i.e. how they are constructed and used in the Lean organization, we use this term interchangeable with management accounting system (MAS). According to Chenhall (2003) MAS refers to a collection of practices such as costing used to achieve some goals. In this paper the goals are those of Lean. This focus on MAS leaves out discussions on other controls such as clan or personal control referred to as organizational control (Chenhall, 2003).

Merchant (2006) presents six criteria against which a ­management accounting system may be evaluated. These criteria are used to understand how well a particular MAS is developed to comply with them. There may be tradeoffs among the criteria in question, and if so, they can be used to understand the weight put on each. In the paper, we use the six criteria to describe why particular MAS causes problems when interacting with Lean.

The use of coherence theory serves the same purpose, i.e. understanding the problems caused by management accounting systems in the Lean organization, and indicating how to develop solutions.

The six criteria that Merchant (2006) believes to be generic

Is it always the case that improvements decisions based non-financial performance measures will lead to cost efficient cost reductions?

are: (i) whether the MAS is congruent with the organizational objectives, (ii) controllable by the manager whose behavior is being influenced, and whether or not the information is (iii) timely, (iv) accurate, (v) understandable and (vi) cost effective.

Merchant (2006) argues that goal congruence is the most important of these criteria, since “good” actions should cause an increase in the measured performance, while the reverse ought to be the case for “bad” actions. If this criterion is not fulfilled, then all the other criteria seem irrelevant (Otley, 1999). It is important to note that it is not only necessary for the measurement to be congruent with one of the organizational objectives, ideally speaking; it should be congruent with all of them.

The second criterion describes the importance of controllability by the manager. If a manager or team is not able to control the level of a measure it cannot provide information on the desirability of actions. The third criterion, timeliness, is about closing the time lag between actions and measurement feedback. Accuracy is the fourth criterion and consists of two dimensions: precision and objectivity. A measure is precise if it is free of noise. Noise is random variation in the level of the measure that cannot be attributed to a systematic change in actions. Objectivity refers to the freedom from bias; bias could be the ability to manipulate the measure. The ability to withstand manipulation would strengthen the accuracy of the measure in question. The measure should also be readily understandable, which is the fifth criterion. It should be clear what the measure conveys and how it is calculated. ­Furthermore, it should be clear how the actors influence the measure, i.e. how they can improve it. The last criterion involves the cost effectiveness of the measure. Preferably, cost of producing the measures should be as low as possible, and the benefits should exceed the costs of obtaining them.

As mentioned in the introduction we would expect the Lean organization in manufacturing to use a mix of financial and non-financial performance measures. It is this papers interest to find out if these measures induce decision-making and improvement behavior in the same direction, i.e. if they work together, if they cohere. For example, lead time is often an important measure in Lean (Kennedy and Brewer, 2005), but improved lead time does not always cause improved labor

consumption variance in a standard cost model. On the one hand, while increasing the number of manpower hours on the production line will often cause improved lead time, it can also cause increased unfavorable time consumption variance, mainly due to increased available capacity not ­ being used. On the other hand, a higher unfavorable time variance does not necessarily cause an improved lead time, as the faster processing time might just result in a longer stock time. Therefore, lead time and time consumption clearly have to be considered simultaneously in a balanced manner if the overall profit goal is to be improved. When the actors understand the nature of the mutual logical dependencies, and act to balance these in order to increase the overall goals, these relations becomes coherent (Nørreklit, 2000).

3. Identified interaction problems between Lean and MAS The analysis of the three case companies can be summarized in a number of bullet points. Below 10 bullets cover problems with the current cost models in the three case companies visà-vis the six principles of Merchant and the theory of coherence.

1. The companies have difficulty in measuring the profit improvement achieved through Lean.

2. Companies have difficulty in measuring Lean progress in financial terms through multiple periods during which standard costs are inevitably changed.

3. Cost of quality in their currently implemented cost model does not contain all waste categories of Lean, and traditional notions of waste is not always equivalent to the concepts of waste forwarded by Lean thinking.

4. Cost of capital does not include imputed cost which hampers costing of lead time, e.g. stocks.

5. Some capacity costs are misleadingly allocated to the unit level, e.g. cost of water spiders, which impedes insights as to what drives costs. (Water spiders are personnel mostly working in the productions cells as helpers, planners and transporters).

6. The rich data on deviations from takt time shown at the takt time boards (also called Andon boards) at the shop floor is not picked up and used in the management accounting system. (takt time is the time between finished products leaving the production cell).

7. Detailed process information, especially on waste, collected in the Value Stream Maps, VSMs, is not used in the

»

Management Accounting System problems in context of Lean: development of a proposed solution • 21

fsrforum • volume 15 • issue #4

Lean tools are the means to control and reduce the level of waste.

­ anagement accounting system. (VSM includes imporm tant information regarding process time, lead time, takt time, stock sizes, shared resources, shifts and the process- and planning-flow (Rother and Shook 1999)).

8. Normal learning curve effects are mixed with lean improvements.

The main behavioral effects identified are: 9. Line operators have no use of information stated in the traditional variance reports and, consequently, have no sense of ownership of the data registered to produce these reports, hampering data quality.

10. Traditional standard cost models support a management by exception way of thinking as opposed to Lean’s continuous improvement; standard cost models focus on unexpected cost of waste whereas Lean looks for expected as well as unexpected cost of waste.

The case companies currently used cost models are variations of textbook cost models, i.e. standard cost models and variance reporting. Thus, the findings offer some general cost model problems in which traditional cost models fail to fully complement the Lean journey. These shortcomings can be mended using a new Lean financial model outlined below.

4. Summary of the Lean financial model Lean is about removing waste and the tools in Lean are ­created to that end. Thus, Lean tools are the means to control and reduce the level of waste. To be logically close to the main goal of long term profit a costing model that measures the Lean tools’ ability to remove waste from within the organization is necessary. This would be goal congruent and point towards goal congruent actions. How to support this is the aim of the Lean financial model.

Results of the investigations at the case companies suggest that they are in need of a better cost model to measure (ex post) the progress of Lean but also in need of improved costing methods in order to achieve more precise decision-making support on where to develop the organization with the aid of Lean tools. Using Merchant’s six generic measurement system principles and the theory of coherent systems, we found several problems in the traditional standard costing model used in Lean organizations. These problems are previously summarized in section 3. The Lean Financial model

22 • Management Accounting System problems in context of Lean: development of a proposed solution

addresses these problems and the model consists of several new features on how to configure a Lean organization’s costing system. These features and their benefits are summarized below: A. The Lean financial model integrates information form the visual board used in Lean production.

Benefits: 1. It is a mandatory source in Lean and therefore an (almost) free resource to management accounting.

2. It provides actual data on variances making continuous registration of actual consumption unnecessary.

3. It improves data quality and creates one coherent system of variance calculations and increased chances of “one story of variance explanations”.

4. It supports shop floor people with information on cost saving potential per waste type.

B. The Lean financial model’s input on standards comes from value stream maps, VSMs. Benefits: 5. VSM is mandatory in Lean and therefore cost efficient to use in the management accounting system.

6. VSMs often contain detailed information on waste providing opportunity to calculate standards/expected cost of waste in many categories.

7. With the information from the visual board (item 1) and standards the Lean financial model calculates unexpected variances.

C. Lean financial model vis-à-vis a traditional standard cost model: a. The Lean financial model splits total cost and total variance into four main categories: (i) process consumed costs, (ii) cost of waste, (iii) cost of available capacity, and (iv) value stream sustaining costs. b. Within the waste category the model is open in resource categories (materials and labor) and in all Lean categories of waste (inspection, movement, rework etc.) showing maximum attainable cost savings per waste type. c. Within the availability category the model distinguishes between (i) available capacity at the potential bottleneck (pacemaker), at other (ii) resources due to imbalance between resource workloads, and at (iii) resources other than the bottleneck.

d. Imputed interest is used to cast lead time in stocks in cost terms. e. It separates unit and batch cost. f. Water spider costs are separate from labor cost to avoid confusion.

Benefits: 8. The four category division in C-a provides the advantage of measuring Lean progress in terms of cost effects which comes logically closer to the overall long term profit of the company than does any non-financial Lean KPI. 9. A relativity measure based on the four categories in C-a makes it possible to measure Lean progress over multiple periods.

10. The three availability categories in C-c are important measures in the Lean journey as there might be time lags between creations of more availability and the productive use of this through increased sales.

11. Separating unit and batch cost in C-e is important since Lean entails a journey towards reducing batch sizes.

12. The model rules out most of the normal learning curve effects and therefore a more accurate measure of Lean progress.

more advanced application is a number of departments involved and the model using automated data feeds from ERP systems. The ultimate implementation is where the Lean financial model substitutes the previous traditional standard cost system and is totally integrated in the company’s ERP system. For the latter to happen, however, every shop floor should use visual boards; this is Lean implemented company-wide. Even in the biggest and most well run Lean companies this is rare. Hence, it is the more modest implementation we can hope for.

4.1 Limitations and future research As with most models there are limitations of the Lean financial model presented, too. A potential limitation is the way it handles product mix changes stemming from introduction of new products to the value streams. New products may change the relative distribution between the four categories (cf. table 7 and 8) as some products may be designed to create less waste.

The model implicitly assumes that new products in the same value stream entail approximately the same relative distribution of costs between the four categories (see vertical dimension in table 8) of each resource type as the existing products. If new products contain less relative waste it will cause the value stream relativity measure to improve. And this improvement is not caused by operational improvements; it may be the result of more focus on Lean “friendly” product developed in the R&D department.

Another limitation of our model is that is has not passed the “put to use test” yet. However, we must think of different degrees of use, actually somewhat like companies using Activity Based Costing models. The simplest use is a standalone model in one department with manual data feed. A

Management Accounting System problems in context of Lean: development of a proposed solution • 23

w w w.g a a a n . n u

T i e n m i n u T e n v o o r d e p r e s e n TaT i e va n e e n p r o p o s a l a a n d e C F o

Š 2011 KPMG N.V., alle rechten voorbehouden.

w w w.g a a a n . n U

Je kunt als bedrijf nog zo veel willen, je krijgt pas wat voor elkaar met goede mensen Over KPMG

en ervaring hebt, krijg je een grotere rol binnen het

KPMG biedt vanuit zijn accountancy- en adviespraktijk

team met meer verantwoordelijkheid.

diensten aan uiteenlopende organisaties. Van multinationals tot de nationale- of regionale ‘middenmarkt’.

Of als adviseur

We hebben 135.000 medewerkers wereldwijd. Alleen

Bij KPMG Advisory begin je als junior adviseur en start

al in Nederland zijn er 4.000 actief, verspreid over 12

je direct met uitdagende adviesopdrachten voor

kantoren. We zijn een ambitieus bedrijf: we willen

verschillende organisaties. Daarbij lever je op diverse

nummer één zijn in ons vak. Op veel gebieden is dit al

gebieden een bijdrage aan rapportages, presentaties

zo. Zo controleren onze accountants de meeste aan de

en adviezen. Je ontwikkeling wordt aangevuld met

AEX- en MIDCAP-beurs genoteerde ondernemingen

doelgerichte opleidingen.

in Nederland. En onze adviseurs binnen de fusie- en

Afhankelijk van je universitaire studie en interesse kun je

overnamepraktijk zijn dagelijks betrokken bij veruit de

kiezen uit de verschillende onderdelen binnen Advisory.

meeste transacties in Nederland. Maar we willen ook

Van organisatieadvies tot fusies en overnames, van het

nummer één zijn in de markten en op de terreinen

kwantificeren van complexe financiële- en operationele

waar we dat nog niet zijn.

risico’s tot tactisch en strategisch IT-advies. De keuze is aan jou.

Gááán!

We zijn dan ook voortdurend op zoek naar talent.

Waar je ook voor gaat: kansen genoeg om samen

Naar mensen met dezelfde passie. Die gedreven en

met je collega’s aan iets moois te bouwen. Wij zouden

betrokken zijn en het beste uit zichzelf willen halen

zeggen: Gááán!

door heel goed samen te werken. Zit jij zo in elkaar en ben je daarnaast analytisch sterk? Dan wordt het tijd

Meer informatie

om kennis te maken. Dat kan via www.gaaan.nu, ons

Ga naar www.gaaan.nu of maak een afspraak met

talent- en ambitieplatform. Gááán! helpt je bij je studie

het KPMG Recruitment Centre (020) 656 7162 of

en je carrière en stelt je in staat contacten te leggen met

mail naar recruitment@kpmg.nl.

KPMG’ers. Maar je vindt er ook meer informatie over jouw carrièremogelijkheden als accountant of adviseur.

Aan de slag als accountant Bij KPMG Audit start je na afronding van je universitaire studie of hbo-opleiding als trainee. Je gaat direct

KPMG Recruitment Centre

in de praktijk aan de slag bij alle soorten klanten.

Tegelijk volg je een opleiding tot registeraccountant

Laan van Langerhuize 1

aan een business school. Na het afronden ben je

1186 DS Amstelveen

gekwalificeerd registeraccountant en beëdigd om

(020) 656 7162

de financiële rapportage (zoals jaarverslagen) van

recruitment@kpmg.nl www.gaaan.nu

grote (inter)nationale, veelal beursgenoteerde, ondernemingen te verzorgen. Naarmate je meer kennis

© 2011 KPMG N.V., alle rechten voorbehouden.

fsrforum • volume 15 • issue #4

Interview with Raquel Verwei Founder Ra'Quel

Petra van den Akker en Maaike Lanphen

Could you please tell us a bit about yourself?

Most recently, I started a business RA’Quel a financial consulting firm. At RA’Quel we assist in solving companies’ financial and organisational issues. I also teach at the NBA The Netherlands Institute of Chartered Accountants since 2003. Teaching at the NBA started out as a hobby. Now it also serves as a quality guarantee. Once we leave a company we need to make sure the business can pick up where we left off and therefore we have to educate them. By that time, say in one to two years, it is time for us to move on and work on a new case.

What is Lean accounting?

Lean accounting is derived from Lean Six Sigma designed to eliminate waste out of the production process. Lean is a hands-on approach to teach employees to work more ­efficiently. Six Sigma is the statistical foundation, which reveals where the inefficiencies lie. Lean accounting is a combination of the two. This approach stems back to Toyota, which introduced Lean. Motorola designed Six Sigma. And General Electrics put the two together.

Raquel Verwei (1973) studied business economics at Erasmus University in ­Rotterdam. She post graduated for Accountancy and since 2005 she is a chartered accountant (RA).

Raquel started her career at the Dutch central government where she worked in several audit and compliance positions at several ministries. In 2007 Raquel changed from central government life to business life and started up a fast-growing company. In 2012 she started Ra’Quel, which should become a quality-focused company in the area of finance solutions. Next to her work for Ra’quel she educates at NBA. ‘Raquel does not avoid confrontation and is always searching for solutions. She knows how to motivate, puts people first, a woman of integrity, aware of her environment, and open to different views.’

In practice we see Lean accounting as being widely implemented but companies fail to recognize the importance of reporting in Lean accounting. Managerial reporting changes tremendously by implementing Lean accounting. Where companies first pushed production through the cycle, they now pull production based on customer demand. This means management reports now need to reflect different information that mainly focuses on production processes. The information in managerial reports under Lean accounting needs to focus on elements that add value in the view of the customer.

Why should companies implement Lean accounting?

I think the current market demands companies to work more efficiently. Lean Six Sigma is a good tool to improve the atmosphere and the business culture on the work floor, which enables thinking in ways to save costs and to keep thinking about what is the use of everything that we are currently doing and how can we do things better. This is something we actually barely see in the Netherlands. The cost saving edge of Lean Six Sigma is hot this time on the market.

Lean Six Sigma is not only there to save costs. What is often overlooked is that Lean Six Sigma can also be a tool to actually

26 • Interview

By implementing Lean accounting companies can reorganize a lot more efficiently, which is an important result especially during these times.

generate revenue. Lean Six Sigma is about adding customer value. The customer is king. This is something accountancy has forgotten over the last couple of years. A lot of money can be made making the customer number one again. One example is customer service.

What is the difference between Lean accounting and traditional accounting?

In traditional accounting costs are categorized. The most important difference between Lean accounting and traditional accounting is that under Lean accounting the most important driver of how the reports are set up is what adds value to the customer. Under traditional accounting costs are categorized based on functionality. Lean accounting forgets about categorization and functionality and only focuses on customer value. If you do this every year, it becomes clear which activities add value and which do not so that companies can weed out the activities that do not add value to the customer.

Remarkable is that when companies try to cut costs and they do not base themselves on Lean accounting, they often cut the activities that add most value. Companies lose a lot of money on non-value added activities. By implementing Lean accounting companies can reorganize a lot more efficiently, which is an important result especially during these times.

Important to note is that Lean accounting does not affect financial reporting, rather managerial reporting. However, implementing Lean will affect the financial reports. How Lean affects items on financial reports is a thing, which is not investigated up until now but is something very relevant to look into in the future.

Do more companies make the switch towards Lean accounting because of the current crisis?

What we see now is that because of the crisis people are getting more interested in Lean since many companies have to cut costs. What they often really like is the mentality of Lean but they are not willing to invest in the statistical foundation of Lean accounting, Six Sigma. That is the time when companies start to mess around by randomly trying to cut non-value added activities without having a framework to guide these decisions. From what we have seen in the past this can only work out badly. Therefore companies have to be willing to invest in the entire package and be guided in the process towards Lean accounting because it only works if they are willing to go all the way.

Are there other advantages to Lean accounting?

Lean accounting changes the behavior of employees. This change in behavior changes the overall atmosphere within the company and improves the business culture. Employees not only care anymore for their own good, they care for the good of the company. This centralizes company decision-making and centralizes the customer. What we also see is that employees are more excited about going to work in the morning.

What problems are faced with Lean accounting?

First and foremost there are little companies in the Netherlands that implement Lean accounting.

The most important question a company considering Lean accounting should ask itself is how they will change their managerial reporting. What we often see is that the board does not consider

 Interview • 27

fsrforum • volume 15 • issue #4

The most important performance metric in Lean accounting is how long the production processes takes time.

enough how exactly they want to implement Lean accounting and they forget to involve their employees in the process. So my advice to these companies would be to draw attention within the company to the change to Lean accounting and to make a plan of how the reports will look like to support the switch.

How long does it take for a company to reap the advantages of Lean accounting?

It depends on the situation. I have had a company which wanted to save costs and successfully did so within six months. We have also had companies, which took over a year to finish the process. It really depends on the changes that have to be made. The changes do not have to be complete for companies to start noticing the benefits. In principle it should work really fast since the first change is on the work floor.

What are performance metrics for Lean accounting?

The most important performance metric in Lean accounting is how long the production processes takes time. Cutting time increases efficiency and reduces waste. There is a lot of profit to gain here and it is a huge value added activity to ­customers because your services are faster than that of competitors and of the same good quality.

Do you think Lean accounting will gain more adapters in the future?

I think so. What I notice where I teach is that more and more financials are getting interested in Lean Six Sigma. What they forget is the importance of the statistical framework Six Sigma. So what we see is that financials implement Lean thinking without having a clear view in mind of how to guide these changes. Within these companies Lean fails, companies get disappointed and say Lean does not work. This is a shame because it only failed because they did not implement Lean correctly. For Lean to work, the managerial reports need to support the changes. That is why I invite every accountant and auditor working in a Lean environment to keep thinking critically about the information that is needed for Lean. They can help the company to get the most out of Lean and to make Lean a structural improvement to the company. I think this is the crucial point for what will happen with Lean accounting in the future. If accountants and auditors help implementing Lean, Lean will be successful and

28 • Interview

gain more adapters. If they fail, Lean fails and it will lose adapters.

Will it succeed?

I think it depends. If companies are willing to invest and think it is important and recognize the opportunities Lean Six Sigma has to offer, I think the answer will be yes. Big companies already made the switch to Lean and it is becoming more common amongst schools and public institutions.

Lean is in fashion. What boards implementing Lean often forget is to involve their financial employees in the process.

In order for Lean accounting to succeed, financials need to take on their role as providers of information to support the changes of Lean.

fsrforum • volume 15 • issue #4

Mazars Van kennis naar kansen

Company presentation

Kennis is essentieel, maar ideeën zijn minstens zo belangrijk. Het gaat erom dat je je linker- en je rechterhersenhelft gebruikt. Bij Mazars werken accountants en belastingadviseurs die niet alleen analyseren en structureren, maar ook inspireren. Analyseren én kansen creëren, dat is wat onze medewerkers onderscheidt. Inzicht en creativiteit gaan hierbij hand in hand. We blikken niet alleen terug, maar kijken ook vooruit. Deze combinatie van kennis en inventiviteit is wat ons waardevol maakt, omdat we over grenzen heen durven te kijken.

Bij Mazars werk je in een professionele en internationale organisatie. In welke functie je bij ons ook aan de slag gaat, je werkt altijd samen met andere collega’s en met diverse disciplines.

Diversiteit in het werk en de ruimte om jezelf te ontwikkelen, in de meest brede zin van het woord. Dat maakt je werk boeiend en inspirerend.

Onze ontwikkeling Het daadkrachtige en breed opererende Paardekooper & Hoffman fuseerde met het internationale Mazars-netwerk. Hieruit ontstond Mazars, nu uitgegroeid tot een van de meest markante spelers in de accountancy. Mazars heeft niet de ambitie de grootste accountantsorganisatie te worden, maar wil zich onderscheiden door zijn actieve opstelling, brede dienstverlening, hoogwaardige kennis en effectieve, inventieve oplossingen. Als netwerkorganisatie zijn we een vertrouwde partner voor een toenemend aantal cliënten die Europa als hun thuismarkt zien en behoefte hebben aan een andere mentaliteit in accountancy. Wereldwijd werken er 13.500 professionals bij Mazars in 71 verschillende landen. In Nederland hebben we 10 kantoren.

Zet jij jouw kennis om in kansen?

Bij Mazars vinden we leren erg belangrijk. Kennis en inventiviteit zijn de peilers van onze dienstverlening. Daarom krijg je bij ons de ruimte om je eigen weg te vinden. Wil jij graag jouw kennis omzetten in kansen? Ben jij klaar om je te ontplooien in een organisatie waarin ruimte is voor eigen inbreng? Neem dan contact op met Evelien Appeldoorn : 088 277 15 50, via recruitment@mazars.nl. Of kijk op www.mazars.nl.

Company presentation • 29

fsrforum • volume 15 • issue #4

Why management accounting innovations fail

Prof. dr. Victor Maas

Many management accounting innovation projects in organizations fail. In fact, they are doomed to fail from the very moment that they are conceived. The reason is that the executives who initiate the projects give too little thought to how accounting and control systems shape the incentives and the decision environment of employees. Instead, they seem to assume that better information will automatically lead to better decisions and they eagerly buy in to consultants’ stories about how a new system or technique will solve their problems. Of course, managers are very busy people and we should not expect them to remain up-to-date with the academic body of knowledge of why and when specific management accounting systems succeed and fail. Moreover, a careful analysis of the executives’ incentives might very well reveal that it is more in their own interest to signal (to their boss, a parent company or shareholders, for example) that they are doing something than to actually spend time and effort critically analyzing the implicit assumptions underlying consultants’ ‘exciting new models.’ Nevertheless, paying just a little more attention to what actually drives employees’ decision-making behavior would prevent organizations from wasting valuable resources on projects that are destined to be discontinued after a short period of time because they induce anger, frustration and game playing rather than better decisions.

There are two basic reasons why organizational participants fail to choose action strategies that are congruent with the organization’s goals In general, management accounting systems exist because they increase the probability that employees and managers will behave in line with the objectives of the organization. There are two basic reasons why organizational participants fail to choose action strategies that are congruent with the organization’s goals: they are unable or unwilling (or both) to do what is in the interest of their employer. Management accounting systems help solving both problems. First, management accounting systems enable better decision making by providing people with information that allows them to assess the likely consequences of alternative action choices.

For example, cost information allows managers to improve products and processes. Next, accounting systems solve the problem of ‘unwilling’ employees by shaping organizational participants’ monetary and non-monetary incentives. For example, business unit managers’ pay is tied to their unit’s profit or cost center managers who spend more than budgeted will have to engage in unpleasant conversations with a corporate executive.

If we look at the management accounting innovations that have found their way into organizations over the last decades, it is clear that these are primarily focused on facilitating decision making and have largely neglected the important issue of getting the incentives right. (Time Driven) Activity-Based Costing is a technique to assign costs to products and processes in a

30 • Why management accounting innovations fail

more meaningful way, the Balanced Scorecard provides a more complete picture of an organization’s performance by combining leading and lagging indicators and Value-Based Management is focused on developing better measures of value creation than traditional accounting measures such as Return on Investment. Most recently, organizations have started to experiment with models and techniques that are focused on identifying and eliminating inefficiencies in operational processes, such as Six Sigma and Lean. The main idea here is that providing employees with real time information about the efficiency of operational processes will result in continuous improvement and reduction of various forms of waste.

However, a system that provides better (i.e., more accurate, timely, relevant etc.) information, does not automatically lead to better decisions. For example, research shows that employees that are provided with more detailed cost information will primarily use this information to their own benefit and not to reduce the costs of the organization as a whole. Thus, organizational units or work teams that after the introduction of Activity-Based Costing better understand the inefficiencies in their part of the value chain, might restructure their processes in ways that frustrate the operations in later stages and increase, instead of decrease, the overall costs of the firm. As another example, there is plenty of evidence that the introduction of a Balanced Scorecard does not always lead to more balanced performance evaluations. The reason is that evaluating managers do not have incentives to provide accurate, balanced evaluations.

Instead, their incentive is to spend as little time as possible on the evaluations and to keep everyone happy. The result is that nearly everyone ends up with a moderately positive evaluation, while the little variance that remains reflects evaluators’ cognitive biases and prejudices rather than differences in evaluees’ effort or skill.

Two years ago, I had the pleasure of observing the introduction of a Lean program from very close by. My girlfriend works at a large healthcare institute in which senior management had committed itself to the Lean philosophy. For months, every day, a Lean coach from a consulting firm drove from Brabant to Amsterdam for a 15 minute session in which a group of higheducated healthcare professionals had to attach Smiley stickers to a flip-over with Key Performance Indicators. If, for example, the number of ‘no shows’ (patients not showing up for an appointment) was lower than yesterday, they had to stick a green Happy Smiley to the paper and discuss the possible explanations for this ‘performance improvement.’ While the atmosphere during these daily get-togethers went from mildly positive to outright offensive (my girlfriend still screams when she sees a Toyota…), senior management, no doubt, had a great story to tell about their initiatives to improve the efficiency of their organization.

In summary, management (accounting) innovations only improve the performance of organizations because they affect the behavior of managers and employees. Behavior, in turn, reflects both ability and intentions. Designing - and implementing (!) - new systems therefore requires a deep understanding of how people decide about their behavior. Managers who realize this will build more effective and efficient organizations. Of course, whether this is really what their incentives motivate them to do, is another issue…

Why management accounting innovations fail • 31

‘De mensen maken de organisatie, niet andersom.’

Een werkomgeving waarin je professionele ontwikkeling centraal staat. Maar ook een werksfeer waarin je altijd bij elkaar kunt binnenlopen. Dat is wat Ernst & Young aanstormende financials te bieden heeft. Wil je weten wat nog meer? Lees hieronder wat voormalig FSR-lid Leonie van der Lugt te vertellen heeft. Of kijk op ey.nl/carriere.

Werken bij Ernst & Young Lastige adviezen of spannende presentaties. Het zijn momenten dat je over een drempel moet en juist van die momenten leer je het meest. Voorwaarde is dat je een werkgever vindt die je de ruimte geeft om nieuwe dingen te proberen. Om af en toe je hoofd te stoten. Ernst & Young is zo’n werkgever. We koesteren je kwaliteiten en investeren in je groei. Dat is niet alleen goed voor jou, maar ook voor onze klanten.

1

Wanneer viel je oog op Ernst & Young?

2

Kun je aangeven wat het bedrijf dan zo bijzonder maakt?

Veel van onze opdrachtgevers zijn grote internationale ondernemingen. We hebben een internationale structuur op basis van multiculturele en multidisciplinaire teams. Door deze structuur heb je toegang tot de support en expertise van collega’s over de hele wereld. En heb je volop mogelijkheden je loopbaan mondiaal te vorm te geven.

‘Tegen het einde van mijn bachelor Economie en Bedrijfseconomie kwam ik in contact met diverse accountantskantoren. De FSR promootte masterclasses van de BIG4; ik koos voor de masterclass van Ernst & Young. Een week in Londen, Parijs en Rotterdam vol cases, lekker eten en feestjes. Daarna was het alleen maar vanzelfsprekend dat ik hier mijn bachelorscriptie zou schrijven. Tijdens zo’n scriptiestage ontmoet je veel mensen. Bijvoorbeeld mede-scriptanten: vaak ook je toekomstige collega’s. Leuk om zo alvast kennis met ze te maken. Vervolgens de masterscriptie in het jaar erop. Die heb ik ook bij Ernst & Young geschreven. Het mooie daarvan waren de meeloopdagen. Deze geven je een compleet beeld van het werk van de accountant in de dagelijkse praktijk. En toen was ik overtuigd. Deze organisatie moest het worden.’

‘De cultuur. Het is een internationale onderneming die constant investeert in het niveau van haar dienstverlening. Ga je er werken, dan word je daar een exponent van. Je reflecteert de kwaliteit; je bent als persoon belangrijk. Oftewel: de mensen

Leonie van der Lugt

‘Ik ben Leonie van der Lugt, 24 jaar. In een niet zo ver verleden lid van FSR en student aan de Erasmus Universiteit Rotterdam.

Nu met een MSc in Accounting, Auditing and Control op zak in dienst van Ernst & Young. In september 2012 ben ik begonnen in de auditpraktijk.’

maken de organisatie, niet andersom. Hierdoor is de werksfeer zeer prettig. En is je ontwikkeling de leidraad bij alles wat je doet. Stel dus vooral veel vragen. Je bent immers nooit uitgeleerd, hoeveel ervaring je ook hebt opgebouwd.’

3

Vertel eens wat meer over de ontwikkelingsmogelijkheden.

4

Voor welk type cliënt heb je tot nu toe gewerkt?

‘Eigenlijk is je carrière bij Ernst & Young één groot leerproces. Letterlijk elke dag steek je iets nieuws op, ook omdat je collega’s hun kennis en ervaring graag met je delen.

Daarbij word je natuurlijk wel aangemoedigd om het onderste uit de kan te halen. Zo volg ik de opleiding tot registeraccountant.

Ik zit elke vrijdag met andere starters in de collegebanken.’

‘Voor een scala aan cliënten met uiteenlopende opdrachten. Ik heb een grote internationale klant, een aannemer in de waterbouwindustrie.

Daarvoor werk ik nauw samen met collega’s, vaak uit andere landen, die ontzettend veel reizen om projecten op locatie te bezoeken.

Inmiddels ben ik aardig vertrouwd met de

waterbouwwereld. Een andere klant is een landelijke. Opgesplitst in regiokantoren.

Samen met een team doe ik de controle van een van die vestigingen. Het spannende daarbij is het sparren met andere teams. Dat zorgt voor uitdagende situaties.’

5

Het leukste aspect van je baan?

‘Dat iedere dag iets nieuws brengt. De variatie in je werkzaamheden. Voor elke klus kom je weer in een ander team terecht, met mensen die andere professionele disciplines hebben en soms met mensen uit het buitenland.

Meestal doen we op vrijdagmiddag een hapje en een drankje om het weekend in te luiden.

Vorige week ben ik met de starters van mijn jaar een hapje wezen eten, waarna we naar de borrel van Ernst & Young in de wijnbar zijn gegaan.

Welke tips heb je voor FSR-leden?

‘In het laatste jaar van je studie komt er veel op je af. Het vinden van de juiste baan is niet makkelijk.

Mijn advies: doe mee aan bedrijfsevenementen. Op die manier ervaar je waar een onderneming voor staat. Wie ze zijn. Daarnaast is een scriptiestage de perfecte gelegenheid om de sfeer te proeven.

Kijk om je heen. En ontmoet de mensen.’

fsrforum • volume 15 • issue #4

“In harmonie uit elkaar”?

K(r)anttekening | Drs. Joost Groeneveld RA RV1

Zaterdag 27 april 2013 kreeg ik in een winkelstraat “De Volkskrant” van die dag cadeau. Als tegenprestatie beloofde ik die te zullen lezen. Daarna stelde de gulle gever mij toch een vraag. En nog een. Mijn antwoord was of ik mijn “gegeven paard” zonder het in de bek te kijken, mocht terug geven.

Nee, ik mocht het houden. Thuis gekomen ben ik dus gaan lezen.

Drie dagen voor de kroning staat er veel in over “Oranje”. Ik zag drie mensen gefotografeerd in een mantel met hermelijn afgezet. Konings(achterklein)kinderen, onder wie Annelies van der Heemst die een rechtstreekse afstammeling is van Willem van Oranje (16e generatie). In de mannelijke lijn. We hoeven ons over opvolging dus geen zorgen te maken.

Drs. Joost G. Groeneveld RA RV is directeur van Wingman Business Valuators B.V. te Breda en voorzitter van de Stichting WBO (register van business valuators).

Hij was hoofddocent aan de Economische Faculteit van de Erasmus Universiteit te Rotterdam.

Verder bladerend kwam ik uit bij een artikel met als titel “In harmonie uit elkaar”. Het staat in de rubriek “Tipgeld” en is geschreven door Reinout van der Heijden, die in het dagelijks leven hoofdredacteur is van de Geldgids. En dat is het tijdschrift van de Consumentenbond over geldzaken. Hij schetst een casus, waarin na 10 jaar met elkaar te zijn getrouwd, Paul het huwelijk met zijn 2e vrouw Emilie verbreekt. “Nadat de echtscheiding was uitgesproken, ging het paar in harmonie uiteen”. Waarbij Reinout met instemming Peter Hoefnagels citeert, die “een fel tegenstander (was) van de vechtscheiding, waar advocaten van profiteren en kinderen aan onderdoor gaan”. Ik denk dat Peter Hoefnagels een romanticus was.

Want zo eenvoudig gaat het vaak niet. Een scheiding heeft een oorzaak. Vaak is daar ook nog een derde bij betrokken.

Een scheiding heeft een oorzaak. Vaak is daar ook nog een derde bij betrokken.

Zelfs in het geval van Paul en Emilie waag ik veel harmonie te betwijfelen. Hij verbrak het huwelijk. Dat is een eenzijdige actie. Emilie zal niet zonder meer op dat zelfde moment hebben gedacht dat ook zij aan scheiding toe was. Zij zal zich misschien wel in de steek gelaten hebben gevoeld, miskend,

34 • Titel

ondergewaardeerd, gedumpt, beledigd. Dat zijn emoties die harmonie danig in de weg kunnen staan. Nog los van het financiële perspectief dat na de scheiding voor veel “Emilies” niet erg aanlokkelijk is. Die toekomst kan de moeite waard zijn om voor te vechten. Zoals bijvoorbeeld ook herstel van zelfrespect die moeite waard kan zijn. En vechten doe je in het algemeen niet als het niet heel erg hard nodig is. Hoefnagels kan hebben gedoeld op zoiets als een wraakmotief: je dacht dat je van me af was; mooi niet!

“Het is niet alleen een kwestie van elkaar iets gunnen”, schrijft Reinout. Hij vergeet te zeggen dat elkaar iets gunnen, bij scheiding vaak niet meer zo heel erg voor de hand ligt.

Beide exen hebben vanaf dat moment een eigen toekomst.

Met daardoor tegengestelde belangen. De een kan de ander wat gunnen, maar dat moet dan toch eigenlijk wederkerig zijn: voor wat, hoort wat. En als de twee exen elkaar al wat zouden gunnen, ziet die derde nieuwe partner dat echt niet altijd zitten. Hij/zij heeft een eigen belang dat in de strijd wordt geworpen. En de bijbehorende ex moet met zijn/haar nieuwe partner een harmonieuze gezamenlijke toekomst veilig stellen. Dus bij de scheiding logisch dan maar liever wat minder harmonie met je ex.

“Harmonieuze” scheidingen komen heus voor. Waar niet veel te verdelen valt. Of als de exen toch verantwoordelijkheidsgevoel jegens elkaar hebben. Of als een van beiden jarenlang gesteggel een te hoge losprijs vindt en het zich kan veroorloven alles maar op te geven. Maar is dat harmonie? Voor harmonie zijn meerdere tonen nodig. Niet alleen die ene terwijl de andere is verstomd.

“De scheiding moet ook zakelijk gezien goed afgehandeld worden”, schrijft Reinout. Zijn volgorde zou ik omkeren. Het is een voorwaarde voor de door hem geroemde “harmonie”.

Eerst weten waarover het gaat. En vaak is het zo dat partijen ongelijk zijn geïnformeerd. Dat laatste is vooral het geval wanneer er zakelijke belangen zijn. Een voorbeeld daarvan is de onderneming die in de te verdelen boedel valt (gemeenschap van goederen). Traditioneel is het de man die daar alles van weet. Zelfs bij huwelijkse voorwaarden met een verrekenbeding is de vrouw vaak onvoldoende geïnformeerd en wordt niet jaarlijks afgerekend. Zij heeft geen idee wat de onder­ neming waard kan zijn. Zij heeft geen idee welke aanspraak zij kan maken. Zij heeft geen idee (van marktconformiteit) van een directiesalaris. Kortom zij staat op grote achterstand.

Wanneer het initiatief voor de scheiding bij de man ligt, kan hij bovendien in de voorafgaande periode de onderneming nog negatief inkleuren.

De vrouw die zakelijk onvoldoende op de hoogte is, moet je niet aan de mediationtafel laten zitten zonder dat zij over de onderneming eerst grondig is geïnformeerd en geadviseerd. Een mediator moet zich daarvan vooraf vergewissen. Dat gebeurt lang niet altijd. De mediator zelf heeft van de zakelijke aspecten vaak onvoldoende kennis. Zonder goed advies kan een oplossing die door mediation wordt bereikt (de oplossing van partijen zelf) niet duurzaam zijn.

Als hij dat wel doet, is haar achterstand des te groter.

De vrouw wendt zich traditioneel tot de accountant van de onderneming. Die kent zij goed doordat zijn adviesrelatie met de onderneming van haar man betrekkelijk informeel was. Als zij een inkomen heeft van de zaak, doet hij ook haar fiscale aangifte. Desondanks adviseert hij de man. Terecht begrijpt zij dat niet. Als hij accountant is van de onderneming waarbij beide partners een zakelijk belang hebben, moet hij geen van beide partners in hun privésituatie adviseren. Als hij dat wel doet, is haar achterstand des te groter.

Zo ontstaat een situatie waarin een advocaat en/of een businessvaluator, een fiscalist, een pensioendeskundige en een andere accountant noodzakelijk advies moeten geven. Advies kost inderdaad geld. Reinout spreekt van “profiterende advocaten”. Daarmee geeft hij blijk van vooringenomenheid (de Geldgids niet waardig). Dat Paul en Emilie “elkaar niet om de oren (hebben) geslagen, heeft ze bovendien heel wat advocaatkosten bespaard”. Reinout legt hiermee de nadruk op een door hem niet nader bepaalde besparing. De besparing is volgens hem kennelijk ‘gratis’. De kosten noemt hij niet. Maar met goed advies van niet alleen de advocaat zul je vaak minder kwijt raken dan in je eentje zonder dat advies. En weggeven ter wille van de harmonie kan altijd nog. Maar dan moet je eerst weten wat je hebt. Juist een zakelijke benadering kan het gevecht overbodig maken.

De besparing op de advocaatkosten is bij Reinout een extra; die is er “bovendien”. Er is dus meer. Dat moet de “harmonie” zijn. Met een advocaat krijg je geen harmonie, lijkt hij te zeggen.

Ik denk juist dat zonder deskundig advies er misschien wel een akkoord komt, maar geen harmonie.

Harmonie gebaseerd op onmacht, onkunde, informatie-achterstand, vrees voor erger, chantage via de kinderen en wat dies meer zij heeft te veel valse tonen.

Notes 1 Directeur Wingman Business Valuators B.V., Breda

Titel • 35

fsrforum • volume 15 • issue #4

Word of the chairman

Sep Vermeulen

Dear members, The end of the academic year is near and many of us are studying hard for the final exams of their study year. As well as the students, we were working hard organizing the last but certainly not the least FSR events in cooperation with our partners for the last period. On the 5th of May both our international events departed. The European Finance Tour departed to Zurich, the financial capital of Switzerland, for a week full of company visits, case solving, dinners and sight-seeing. The participants of the second international event, the International Research Project, took their plane to Beijing. On location they will do research for the charity of this year: Right-to-Play.

For the second time, this year we organized the Dutch Cleantech Challenge in association with YES!Delft, Energy Club and Eureos. Above all expectations, last year the Dutch team Sunuru was the winning finalist in the global finals in London. With this great performance in the back of our head, we advanced in the organization of the events and this fortunately resulted in another global finalist winner: Power Window! With the prize money from both the Dutch final and the Global final they will develop their idea of implementing solar cells into windows even further to make the future a cleaner one.

In the past two months we initiated two new events: The Valuation and the Traders Masterclass.

The valuation was a two-day event, consisting of a first day of training by “Training the Street” and a second day of case-solving in cooperation with BDO Corporate Finance and Ernst & Young FAS. It was a great experience for the participants with the first class training on the first day. They could instantly apply the gained knowledge during the second day. The other new event, Traders Masterclass, was a three-hour training arranged by Alex Academy. The Alex Academy trainer taught all 80 participants how to invest on yourself for the long-term pension on the one hand and the short term profit on the other.

For the bachelor students we held the Bachelor Accountancy Day in cooperation with the Big 4 companies and some of the other study associations at the university. Not to forget a lady like Female Business Tour with three company visits at the Boston Consulting Group, ING and APG in Amsterdam and the nationwide Multinational Battle with Shell, KPN, Unilever and Ahold and which ended in a final in “Kasteel ‘t Kerckebosch”.

FSR News

Column Niek Bosman

Column Filip Shen

FBT

38 39 44

As you can see a lot of events have taken place this year and new membership enrolments keep flowing in. We foresee this trend will continue in the future, not only by the growth in numbers of starting students but also by our coverage at several faculties.

As mentioned above, the academic year is coming to an end and so is our board year. We have been looking for talented and enthusiastic successors and we are very pleased with the six ambitious students we found to form the XVIth FSR Board. They will present their selves in the next edition of the FSR Forum. They cannot wait to start and I am sure they will give their best to the benefits of our association. I wish you all the best of luck with your last exams and hope you have a great summer period.

36 • FSR news

Active Members weekend

46

fsrforum • volume 15 • issue #4

Lean Manufacturing's Unexpected Windfall Most recent news update about the subject.

"I usually talk about how lean manufacturing makes companies more profitable and gives them a competitive advantage," began Charles Cohon, CEO of Prime Devices Corp., in his presentation at ABB Automation & Power World this week in Orlando, Fla. "But today, let's talk about carbon footprint the amount of electricity you use, the fossil fuel you burn, raw material utilization, water usage, sewer emissions things like that."

Imagine your job is to lower carbon footprint. If you have many employees each driving to the plant, you might institute a carpooling program. A very successful carpooling program might reduce vehicles in half — a 50% reduction in commuting emissions. You might look at the building envelope and HVAC system, and make improvements that reduce natural gas consumption 20%. You could look at your lighting, ovens and fork lifts, and buy more efficient equipment, make operational improvements, or switch fuels to reduce their associated carbon footprints.

Now consider the effect of lean manufacturing. Striving to eliminate waste by reducing work-in-process (WIP) and streamlining production can improve sustainability and provide an unexpected windfall in the form of a lower carbon footprint.

This is not a new concept: "Consider the waste of over-production, for example," Cohon said, quoting Taiichi Ohno, father of the Toyota Production System: "It is not an exaggeration to say that in a low-growth period such waste is a crime against society more than a business loss."

Cohon asserted that lean manufacturing can not only cut the carbon footprint of a plant or company, but also of an entire industry.

For example, when FNGP Seal & Gasket Co. transitioned from batch and queue processing to a lean, single-piece production flow, it reduced large inventories of incoming materials, WIP at each process step and finished product. Less warehousing and storage allowed the redesigned production area to shrink from 2,300 to 1,200 ft.², about 50%, while monthly production rose from 1,200 to 1,800 units. By reducing material handling and buying more efficient equipment, the workforce of 21 support and production people was reduced to three, a reduction of 84%.

Alone, those personnel and space requirements could reduce HVAC and lighting emissions by half and reduce the number of commuter miles by 84% — more on a per-unit-production basis and far more than typical conventional carbon reduction projects.

Lift truck emissions are eliminated, and quality requirements enforced by lean manufacturing result in less rework and scrap, further reducing the product's carbon footprint.

"But look," Cohon said. "We also see that we might easily and efficiently absorb our non-lean competitor's production and close his wasteful, dirty plant." If FNGP Seal & Gasket's competitor was like the old FNGP, the competitor's production could be performed at FNGP by two employees in 800 ft.², cutting the industry's carbon footprint by 19 more people, 1,500 ft.², and the accompanying energy, equipment and supply footprint. "It's simplistic, but someone is going to do it best," Cohon said. "If it's not you, then maybe your competitor.

"That dirty plant's emissions are now zero," Cohon said. "The last person turned off the lights."

Bron: www.controlglobal.com

FSR news • 37

fsrforum • volume 15 • issue #4

FSR Former board member

Niek Bosman

It’s unbelievable that four years have passed since I became chairman of the Financial Study Association Rotterdam.

Looking at some old photos brings back the good old memories.

Memories from events like the ‘wissel-ALV’, the ‘dies’ drink, the trip to Brussels with all the active members and of course our ski trip. Great moments, together with great people.

When my predecessor approached me to potentially become the new chairman of the FSR board I was not fully acquainted with the formal and informal activities the FSR organizes throughout a year. Within a short period of time I became impressed about all these events and the level of professionalism of the association. Given that I was very positive about a board year in general, I quickly knew that such a journey at the FSR would be a great next step.

My position as chairman gave me the opportunity to develop myself and gain experiences like; leading a team, organizing several events, connecting with professors and other study associations, and having a great time with FSR members. I also got in contact with many companies because I worked closely together with the commissioner external relations, especially given the challenging economic conditions which started at that time. All in all a unique opportunity I still benefit from, even in my working life today.

Of course I learned a lot and got a great impression about many potential employers, but besides this I met a lot of fun people and became really good friends with my fellow board members. After having so many drinks and dinners together during that year, we couldn’t simply stop doing that afterwards. Maybe that’s even the best part of a board year after all.

Energized after this board year, I continued my studies in Financial Economics and Corporate Law, while looking for an interesting internship opportunity. I decided to apply at Heineken International for a finance internship, preferably abroad. Fortunately I got this opportunity; my internship started off in Heineken’s Africa Middle East office in Amsterdam and continued in Lagos, Nigeria. Together with a couple of other interns I had a fantastic time in this crazy but interesting and fun place. A great experience, but the question remained whether a position as a finance trainee would be my ideal career start. By participating in several recruiting events I was able to confirm that the diverse and challenging work of

38 • FSR news

strategy consultants attracted me more and would be a great fit with my personal ambitions. Due to the international environment, the opportunity to get exposed to different industries, the focus on personal development and the good office atmosphere I knew Booz & Company would be a perfect match. After having received my offer in May 2012 I still had to finish my thesis in Law, luckily I had the opportunity to write this in Panama City while visiting my girlfriend for almost three months.

Passport

I joined Booz & Company in September 2012 and I am having an amazing time. The combination of working on challenging projects while being surrounded by smart and enthusiastic people gives me a lot of energy. Hopefully the FSR can strengthen their relationship with strategy consultants in the near future, so more students can experience this interesting environment!

Employed at Booz & Company

Name Niek Bosman Age 26 Residence Amsterdam

Current position Consultant Which FSR Board 11th Board function Chairman Study Economics and Dutch Law Year of graduation 2011 (Economics), 2012 (Law) Which car do you drive BMW 1-series What do you drink on a Friday night Heineken, without a doubt Life Motto Don’t worry, be happy!

fsrforum • volume 15 • issue #4

FSR Member

Filip Shen

Passport Name Filip Shen Age 24 Residence Dublin, Ireland Study MSc in Finance & Investments, BSc in International Business Administration (cum laude) - both at the Rotterdam School of Management, Erasmus University FSR event European Finance Tour, Financial Business Cycle, International Banking Cycle, Investment Banking Masterclass and many others Job at Google Department of job Large Customer Sales Life motto Work Hard, Play Harder

Driven by curiosity, I already came into contact with the FSR in my second year of bachelor studies, when I started my ­orientation of the corporate world. As such, I quickly joined the FSR as a member and participated in different company events.

These had definitely helped me to get acquainted with various interesting companies and their corporate culture while getting a better understanding of their businesses from a financial perspective. For example, I remembered participating in the Financial Business Cycle, during which I visited an investment bank, a consultancy company and a multinational with a group of students. I found this was very well organized and insightful as I learned about the business model of each type of company. Beside participating in a wide range of careerrelated events, I often went to FSR social events, during which I got to meet fellow FSR members in an informal setting.

Thankful to the FSR, I became an active member myself and co-organized the European Finance Tour to Milan last year.

With a team of four committee members, we planned, coordinated and executed an one-week business trip for a group of 24 ambitious finance students. During the day, we visited multiple renowned companies and (financial) institutions in Milan from which we received interesting presentations and for which we solved case studies. After "aperitivo time", we explored the Milanese nightlife with the whole group, resulting in lots of fun and great memories. I really enjoyed the whole process of this successful event: from company acquisition and participant selection to on-site visits and social activities planning.

Despite being a finance student, I have always had a broad interest in other areas of international business too and a great passion for entrepreneurship. Therefore, I wanted to work for an impactful multinational company in which I could combine my analytical and social qualities while having enough room for personal development and innovation.

After taking into account all of these aspects, I felt that Google is just the right company for me to kickoff my career with.

this is a truly multinational and diverse company to work for.

The culture at Google can be described as open (great ideas are always embraced regardless of your hierarchy), dynamic (changes happen here every day in such a fast-paced environment), team-oriented (everyone is very helpful and supportive), young (the average age of Googlers is in the 20s) and most importantly: unique people (no matter to whom you talk, he or she has a very special story to tell). As indicated by its founders (Larry Page and Sergey Brin) in their prospectus for the 2004 IPO, Google is and does not intend to become a conventional company. This is a very powerful statement which very well concludes this.

More about my role at Google, I am an Online Sales Account Manager for over ten large Dutch automotive customers, with whom I develop their business and grow revenue. With Google's broad range of digital products and solutions, such as AdWords, YouTube and Mobile, I consult them on how to get the most out of the web and achieve higher return on their advertising investment. I really like the diversity of my role, which requires both analytical thinking and relationship management skills. When looking back at the past ten weeks since I started working at Google, my learning curve has never been so steep over such a period: I have increased my knowledge about different Google products which I had not heard about before and I have learned to multi-task from facing various customer requests at the same time. Furthermore, I have already made impact by helping various customers with the launch of their new car campaign online.

Finally, certainly not to forget mentioning, I have been enjoying all the great benefits that Googlers receive, such as free food and snacks all day, free gym, free massages and above all, a business trip to Las Vegas!

P.S. Please contact me on LinkedIn if you are interested in getting in touch with Google for a job or an internship position, I would be happy to share my insights with you.

After going through various rounds of interviews, I recently joined Google as an Online Sales Account Manager in its European headquarters in Dublin, Ireland. With over 3,000 employees (Googlers, as we call them) from 65 nationalities,

FSR news • 39

fsrforum • volume 15 • issue #4

NIBC

Company presentation

Kun je wat meer over jezelf vertellen?

Ik heb aan de Erasmus Universiteit een bachelor bedrijfskunde en master Finance & Investments gevolgd. In die periode heb ik vier maanden in Reykjavík gestudeerd en ben ik actief geweest in diverse commissies van studievereniging STAR. Daarna heb ik de master Financieel Recht gedaan aan de ESL. Ik denk dat deze combinatie vooral bij een bank erg sterk is, omdat je aan de ene kant je je namelijk bezig houdt met financiële en strategische analyses, terwijl je aan de andere kant moet zorgen dat de kredietdocumentatie op orde is.

Waarom ben je bij NIBC gaan werken?

Aan het eind van mijn studie heb ik bij NIBC stage gelopen. Vanaf het eerste moment vond ik de open en ondernemende cultuur erg aangenaam. Ik werd direct betrokken bij projecten en kreeg hierbinnen eigen verantwoordelijkheid. Dat gaf voldoening. Doordat NIBC een van de kleinere spelers binnen het Nederlandse bankenlandschap is, biedt dit de mogelijkheid een goed overzicht te krijgen van alle processen die zich binnen een bank afspelen. Daarnaast zorgt het voor korte lijnen en doorlooptijden. Toen mij tijdens mijn stageperiode de mogelijkheid geboden werd om bij NIBC in dienst te treden hoefde ik hierover dan ook niet lang na te denken!

Wat is je functie bij NIBC? Mijn functie bij NIBC is analyst in het sectorteam Industries & Manufacturing. Ons team focust zich onder andere op industriële ondernemingen, automotive, scheepsbouw en technisch installateurs. Als analyst werk je samen met een senior banker en eventueel een productspecialist in een deal team aan nieuwe financieringsverzoeken. De kleine teamomvang zorgt ervoor dat je snel beslissingen kunt nemen. Daarnaast ben ik verantwoordelijk voor portfoliobeheer van bestaande leningen. Hiervoor heb je regelmatig contact met klanten. Dat maakt het werk erg leuk.

Kun je een voorbeeld geven van een deal die je hebt gedaan, en wat was jouw rol?

In de tweede week van mijn stage werd ik betrokken bij een acquisitiefinanciering. De vele tientallen miljoenen en uiteenlopende belangen die hier op het spel stonden, de onderhandelingen en de samenwerking met andere banken maakten dit een dynamisch proces. Op dat moment was alles nog nieuw en ging er een wereld voor mij open. Ik had zoiets van “dit is geen theoretische casus, this is real!”. Op deze deal heb ik onder andere meegeholpen aan financiële en marktanalyses, heb ik samen met juristen de financieringsdocumentatie beoordeeld en vooral veel vragen gesteld. Uiteindelijk is deze deal succesvol afgesloten.

40 • Company presentation

NIBC heeft haar hoofdkantoor in Den Haag, naast kantoren in Frankfurt, Londen en Brussel

Wat heb je aan training en ontwikkeling gedaan bij NIBC? NIBC biedt een perfecte leeromgeving. Ten eerste doe je on-the-job veel ervaring op, terwijl er daarnaast volop kansen zijn om trainingen te volgen. Zo doe ik komend jaar samen met andere nieuwe analysten mee aan het Analyst Program. Dit programma duurt een jaar en bestaat uit vier intensieve weken training bij het Amsterdam Institute of Finance. Verder heb je ook de gelegenheid om bijvoorbeeld voor een aantal maanden mee te werken binnen een andere afdeling van de bank. Zo heb ik drie maanden meegelopen bij ons M&A team.

Wat spreekt je het meest aan in je werk?

De afwisseling van klantenbezoeken, het maken van analyses en de samenwerking met andere afdelingen zorgen voor diversiteit in je dagelijkse werkzaamheden. Dat bevalt me erg goed.

Daarnaast is het enorm interessant om betrokken te zijn bij belangrijke beslissingen van onze klanten. Of het nu gaat om overnamefinanciering, een strategische investering in bedrijfsmiddelen of een herfinanciering, het zijn vaak beslissende momenten waarover je pas weken later in het FD leest.

Company presentation • 41

fsrforum • volume 15 • issue #4

The Valuation

The first edition of The Valuation took place on the 10th and the 11th of April together with BDO and Ernst & Young FAS. The entire event was about two days with the following slogan: “One day theory, one day practice”.

The first day we had our theoretical part together with Training the Street.

Around 9am our instructor, Zane Hurst, introduced us to the topics he was planning to discuss with us. The general subject was Corporate Valuation and the topics were about Buyouts, Discounted Cash Flow analyses, Acquisition Comparables and Public Comparable analyses.

During the day we continuously draw on the deal of Kraft acquiring Cadbury.

After we discussed the Acquisition comparable, we had some coffee and donuts during the break while everyone could ask their questions about the comparables.

During the second part, Zane told us something more about the Comparable Analysis.

Around 1pm we had lunch together and in the afternoon Zane had some explanation and exercises about Discounted Cash Flow and finally the Leveraged Buy Out. After a long day of valuation, the students went home to get ready for the next day, the day of practice!

On Thursday 8:30 am all students arrived at NH Hotel Atlanta in Rotterdam to get in touch with BDO and Ernst & Young FAS. In the morning the corporate finance team of BDO was representing their company. After a short introduction the group was divided into four teams with a color for every team. The first two teams were representing the buyside and the other two teams the sell-side during the case and team Red won the case.

After the lunch with BDO, Ernst & Young FAS arrived for the session during the afternoon. First there was a presentation about Ernst & Young FAS and the advisory department.

The cases were with the same teams, but unfortunately team Red could not prolong their winner’s status.

In the evening we had a dinner together with both companies, the students and the committee.

During the dinner we could ask our last questions, could get to know the companies even better and afterwards we had some drinks in the bar. After all we had a great experience in the field of valuation and even received a certificate of Corporate Valuation from Training the Street.

42 • FSR news

fsrforum • volume 15 • issue #4

Female Business Tour

The Female Business Tour took place for the third year in a row on Thursday the 11th and Friday the 12th of April. A group of highly motivated female ­students visited three different companies with a focus on finance during this tour. This year’s partners were APG, Boston Consulting Group and ING, all located in Amsterdam. All these companies recognize the importance of women at the top and female leadership.

On Thursday we travelled to Amsterdam where we first checked in at the hotel and dropped the luggage. After a quick brush up, we went to the Boston Consulting Group for the first company visit. Starting with a lunch, we had the opportunity to meet the employees.

Then we were challenged with a case where we had to make strategic decisions, together with the BCG employees. After the presentation of this case, we had the chance to meet some of the top women and ask all our questions.

After this great start of the tour, we travelled to Brasserie Richard for informal drinks and a delicious dinner. During the dinner, we switched between the tables of the companies each course. This gave us the opportunity to meet all the employees and ask them about their proceedings at the different firms. After the closing drinks, we returned to the hotel to start well-rested on the second day of the tour.

The first company visit of the day took place at APG. One of the top women joined to tell more about her career path and the obstacles. After this session it was time for us to show their skills with an allocation game where we had to invest the pensions that are under APG’s management. During the lunch the winners of the case were announced and were invited for another lunch with the employees (at a later point in time). After the lunch, it was time to travel to ING. They told us more about their traineeships and the possibilities as a starter at ING. Enthusiastic about these options, it was ‘’time to shine’’ during the case. We were challenged to find the most optimal balance position of a bank in just 45 minutes. Two groups, with the exact same balance sheet, won and received a price. During the closing drink the students had the opportunity to ask their last questions about ING and hear more about the experiences of the trainees.

Looking back, it was a great tour for the students to meet the different companies, different sectors and different employees. We want to thank all participants and all partners for this great event!

FSR news • 43

fsrforum • volume 15 • issue #4

FSR Active Members Weekend 2013

During one’s FSR career, there are a couple of highlights every year. Without any doubt, the Active Members Weekend is the one that will be remembered. A group of 28 excited FSR members, last year’s board and the current board ­gathered at Schiphol’s Burger King to grab a quick snack so everyone was full of energy to start the FSR Active Members Weekend. After a lot of guessing and uncertainty, the participants were finally informed about the destination of this year’s weekend: Milan.

Without any delay we arrived at Milano Malpensa where we took the bus to our hotel. After arriving at the hotel, everyone refreshed themselves quickly before heading to the city center. We went to “La Fontanella”, the specialist beer pub of Milan, where we had a great kick-off of the FSR Active Members Weekend. If you ever think of going to Milan this pub should really be on your to-do list.

After a short night, the next day started early with breakfast at the hotel. The first group left to “Cable Milano”, a cable-ski near Milan. Luckily the cable-ski season had just started and we one of the first groups of the season. This sometimes resulted in some goose bumps at the participants because of the freezing water. Some of the participants turned out to be perfect candidates for making face plants, while others waterskied like pro's. In the meanwhile the other group went to the city center.

After an exhausting day there was some time to rest at the hotel or to explore Milan a bit more. The dinner was planned at an authentic Italian restaurant where we experienced the Italian way of dinner, Aperitivo. This consisted of two drinks and all kinds of Italian snacks during the evening. After the dinner we went back to the hotel to get dressed for the night out at a fancy club. Seen the fact that we are a Financial Study Association we had to choose for a club called La Banque, a former bank in Milan that has been transformed into a fancy club.

The next day there was a bit more time for resting and sightseeing in Milan while enjoying the perfect weather with sun and 25 celsius. After a relaxing lunch in the center of Milan we went back to the hotel to get our luggage and started our trip back to the airport. During the flight a lot of us fell asleep within 5 minutes. At 9 o'clock we were back at Schiphol after which everyone was dying to get home to go to bed.

We are proud to look back on a fantastic weekend with our active members and our former board. With this weekend in mind, we can already look forward to next year’s FSR Active Members Weekend where we will participate as the former board!

44 • FSR news

fsrforum • volume 15 • issue #4

Traders Masterclass

On the 16th of April, the first edition of the Traders Masterclass in association with Alex Academy took place. It was our first event in the field of private trading and the participants were very enthusiastic about the new insights in the possibilities of trading at Alex. We began with a short introduction about long term investments for ones retirement.

Our instructor Peter Siks first showed us a graph about the risk and rewards. On the left side he putcash with very low risk and very low reward and on the right side derivatives with a very high risk and a very high reward. The last topic he discussed was about option strategies. The students could ask all their questions about investing and at the end they had a great insight in private investing.

FSR news • 45

fsrforum • volume 15 • issue #4

Cleantech Challenge 2013

The CleanTech Challenge debuted in 2009 with a goal of generating actual cleantech businesses rather than simply rewarding the best “on paper” business plan.

Last year, the Dutch team Sunuru won the global competition in Londen. This company produces lightweight, highly customisable solar panels that can be installed by businesses who then sell the resulting green energy to end consumers.

Following the Cleantech Challenge, the Sunuru team founded their own business and they are currently planning to expand beyond the border.

This year we started the second edition of the Dutch Cleantech Challenge, an event which is organized by the FSR, Yes!Delft Students and the Energy Club. We knew we had a lot to live up to, since the Dutch performed so well in the 2011 edition. This year we wanted to really wanted to involve more business students, since we felt that the combination of technical and business students could create a lot of synergies.

That is why we started off with an extensive campaign in Rotterdam, reaching out for entrepreneurial students with an interest in clean technology, and made knew partnership agreements with the entrepreneurial student association Eureos and with Greeneur , which strives for a greener campus.

The Cleantech Challenge 2013 kicked off on the 20th of February with a small congress involving inspiring speakers with a business or entrepreneurial background in clean technology. After the kick off, the teams that submitted their clean technology idea were facing a busy month.

The 18 selected teams got the opportunity to improve their ideas with advice from the energy institute ECN, the financial firm Kempen & Co. After submitting an elaborate business plan, a selection of 8 finalists was made. These teams received a pitch workshop by Beth Suzanne and got consultancy advice from BCG to prepare them for the finals. On the 5th of April, all finalists pitched their business plan in front of an expert jury. Team Upcycle received third place,

46 • FSR news

­ limacoustics second place and Power Window first place, allowing them to travel to London C to participate in the global finals next to receiving 3,000 in prize money.

The Cleantech Committee joined Power Window in their quest to the finals at the London Business School on the 25th and 26th of April. For two days the team worked with professional coaches to prepare a challenge proposed by the jury:

What would you do, if you received 100,000 of seed money and 100 days to invest it in your start-up company?

The setting at the London Business School was very diverse, with 10 teams participating from France, Russia, Italy, Sweden, the U.S. and the U.K. amongst others. This year the Dutch team proved to be the most innovative once again: Power Window took first place in the global finals, receiving 10,000 pounds in prize money! Needless to say that the FSR and all other participating partners are very proud to have a Dutch team win the global finals for the second time in a row. We look forward to organize the third edition of this event and get even more students from different studies and places involved in the Cleantech Challenge!

FSR news • 47

fsrforum • volume 15 • issue #4

Preliminary FSR Activity Agenda 2013-2014

September - October - November BIG 4 Cycle

April The Valuation

Get to know the 4 leading accounting firms

One day theory, one day practice

Erasmus Banking Congress

Female Business Tour

The official kickoff of the International Banking Cycle

It might be a men’s world but it would be nothing without women

International Banking Cycle The investment in your career

Traders Masterclass Beat the Bear, be the Bull

November The Audit Interested in Accountancy and do you want to meet four leading medium-sized firms?

April - May International Research Project Using your intellect for a charity!

Finance Day

National Investment Competition

Want to know what finance is all about…

Invest and be a winner!

November - December Traders Trophy

May Bachelor Accountancy Day

Can you handle the pressure?

Will you choose for a career in accounting?

January Multinational Dinner Get in touch with the multinationals

Finance Dinner Get acquainted with the world of banking

January - April CleanTech Challenge Grow your green ideas!

March Multinational Battle Four multinationals, five battling cities, are you part of it?

48 • FSR news

Asset Management Tour What’s your investment strategy?

European Finance Tour Exploring European financial world

www.werkenbijpwc.nl

Soms weet je precies wat je wilt

Soms sta je open voor suggesties Je hebt tijdens je studie alle mogelijke kennis opgedaan.

En nu wil je aan de slag. Op een plek waar je al je ambities kwijt kunt. Waar de lat hoog ligt en waar je samenwerkt met professionals. Je start je carrière vliegend en gaat recht op je doel af. Dat is: het beste in jezelf naar boven halen.

Kom verder op werkenbijpwc.nl

Neem voor meer informatie contact op met een recruiter: 088 792 87 77 werkenbijpwc@nl.pwc.com www.werkenbijpwc.nl/contact Volg werkenbijpwc op Facebook en Twitter

Š 2012 PricewaterhouseCoopers B.V. (KvK 3412089) Alle rechten voorbehouden.

Š 2012: Ernst & Young Nederland LLP. All Rights Reserved.

Zenuwachtig?

Mooi.

Je lichaam liegt niet. Je voelt de spanning voor een belangrijk gesprek of een presentatie.

Dat heb je nodig om te presteren.

Elk spannend moment is een leermoment. Ook als het een keer minder goed gaat. Maar dan moet je wel werken in een organisatie die je steunt. Die erop is gericht je beter te maken. Zo’n organisatie is Ernst & Young. Kijk voor jouw mogelijkheden op ey.nl/carriere