Leadership philosophies change as quickly as business does. Leaders need to be responsive to new consumer demographics, new competitor products, new technology, and new customer behaviors. If their product or service is not the first to market, they need to offer something their competitors don’t. Great leaders combine visionary thinking with sound management accounting principles.
Making a Cheaper Model-T
In 1908, Henry Ford, then President and CEO of Ford Motor Company, knew his Model T, priced at $825, made it inaccessible to most consumers. He considered ways of reducing production and labor costs. In 1916, he implemented a moving assembly line method to auto manufacturing where workers did not have to move around the factory floor to assemble cars, making their production cheaper and more efficient. In 1916, he offered the market the Model T at the more affordable price of $345, making auto ownership accessible to more families.
Ford’s plan to capture a greater share of the auto market also included improving employee retention through higher wages. Among his accomplishments, Ford is credited with increasing worker wages to $5 a day and limiting worker hours to eight a day. This decision allowed his factories to stay open 24 hours a day, with three daily shifts. Lee Iacocca, President and CEO of Ford in the 1970s, explained how this decision improved the bottom-line for Ford:
- “Because Ford had lowered his costs per car, the higher wages didn’t matter — except for making it feasible for more people to buy cars.”
Just like Ford explaining to Wall Street investors why higher wages and a shorter workday would result in more profitability, management accountants are asked to gather data and help executives justify decisions in which business models are shifted. IMA’s Strategy and Competitive Analysis certification (CSCA) covers how management accountants can make the business case for transformative changes based on shifting business models.
Solving Problems for 200 Subsidiaries of a Telecom Giant
Beginning in 1926, Robert Greenleaf served as a management guru for telecom giant AT&T. At that time, AT&T provided phone service for most households in the U.S. With a sprawling organizational structure and over 200 subsidiaries, Greenleaf helped troubleshoot problems and establish a unified corporate culture for the company.
During his 38-year career at AT&T, Greenleaf developed a management philosophy called servant leadership. He offered a radically different approach, asking leaders to support employees and manage them by coaching, rather than dictating. Attributes Greenleaf believed were important in a servant leader included:
- Actively listening to employees’ concerns
- Persuasive and morale boosting rhetoric to help them with difficult tasks
- High levels of empathy and emotional intelligence
- The intuition and foresight to anticipate how people would react to change
- Pragmatic measurements of outcomes that included employees’ input on what appropriate KPIs should be
- An ethical mindset
Greenleaf believed healthy corporate cultures were characterized by employees feeling as if they were part of something larger than themselves. Organizations could motivate employees to do their best work by reiterating the purpose and mission of their function. AT&T’s success speaks to the effectiveness of Greenleaf’s management style.
Just like Greenleaf’s emphasis on ethics, IMA offers many courses in its Ethics Series which incorporate concepts of servant leadership, including:
Think Different
In 1997, Apple launched a groundbreaking commercial with the following tagline, “The people who are crazy enough to think they can change the world are the ones that do.” Never before had a corporation used counter-culture sentiment to sell a product. But Steve Jobs, cofounder of Apple, had the remarkable ability to make personal computing feel like an act of rebellion.
Jobs co-founded Apple in his parents’ garage in 1976 and built it into the world’s most valuable company. Walter Isaacson, his biographer, explained Jobs’ management style and his ability to prioritize in a Harvard Business Review article:
- “In 1997, Apple was producing a random array of computers and peripherals, including a dozen different versions of the Macintosh. After a few weeks of product review sessions, Jobs finally had enough. ‘Stop!’ he shouted. ‘This is crazy.’ He grabbed a Magic Marker, padded in his bare feet to a whiteboard, and drew a two-by-two grid. ‘Here’s what we need,’ he declared. Atop the two columns, he wrote ‘Consumer’ and ‘Pro.’ He labeled the two rows ‘Desktop’ and ‘Portable.’ Their job, he told his team members, was to focus on four great products, one for each quadrant. All other products should be canceled. There was a stunned silence. But by getting Apple to focus on making just four computers, he saved the company. ‘Deciding what not to do is as important as deciding what to do,’ he told me. ‘That’s true for companies, and it’s true for products.’”
This focused approach freed up Apple to simplify and make machines which were user-friendly. Jobs had a rule, consumers should be able to interface and find what they needed in three clicks. Everything also needed to be integrated, from hardware to software to devices. Rather than delegating the user experience to marketing or product development, Jobs took responsibility for it end-to-end.
Just like Jobs’ focus on efficiency and simplicity, IMA offers a number of courses to help leaders break through the clutter and focus on their value proposition to consumers. Our Agile & Scrum series teaches modern project management approaches while our Design Thinking series teaches accounting and finance teams how to innovate.
Leaders like Jobs, Greenleaf, and Ford have valuable lessons to teach accounting and finance professionals. But many of the decisions they made track back to the fundamentals of management accounting. For leaders who want to boost their competencies in the core areas of management accounting, like Technology & Analytics or Strategy, Planning, and Performance, IMA has a course, article, webinar, or research report for you.