Carrot or Stick? If it were only that simple
A purpose of the Society of Cost Engineers (SOCE) is to advocate that cost engineers, CFOs and accountants get out of the 1960s and into the 21st century by applying progressive management accounting methods and systems.
One of the debates that the PACE Directors, including me, have is whether to nudge and persuade cost engineers, CFOs and accountants to adopt progressive management accounting methods with a carrot or a stick. Here are the debate positions:
… Carrot – Educate cost engineers, accountants and the managers in their organizations, who they serve by providing information, with descriptions and explanations about the various progressive methods. Inspire the accountants to add value to their organization by facilitating better decisions to improve their organization’s performance.
… Stick – Criticize cost engineers, CFOs and accountants for being reluctant to be progressive and continuing to apply stale and arcane management accounting methods. That is, shame them for being irresponsible in their duty to provide reasonably accurate cost information and its derived profit information with transparency and visibility. Some of the progressive methods, such as driver-based budgeting, have existed for decades.
I subtitled this blog “If it were only that simple.” This is because the vast majority of CFOs and accountants have the misperception that ABC is so complex and unmaintainable that its benefits do not exceed the effort to implement ABC. They are misguided. A “right-sized” ABC system can be implemented in three weeks, not taking many months.
Carrot or Stick?
So, what do you believe is the more effective way to motivate cost engineers, CFOs and accountants to adopt progressive management accounting methods? A carrot or a stick?