The late Don Istvan lectured us in Audit Theory at DePaul University in Chicago when I was studying to be a CPA. He railed that those running Fortune 500 American Businesses who were graduates of Business Schools (MBA types from elite private schools) would eventually kill US industry because of their absurd concentration on quarterly Earnings Per Share numbers.
Don told us this wasn’t always the case; until WWII major companies were run primarily by founders or their scions (e.g. Ford). It was after the war that ownership and management got detached, and companies lost their pride of product and service as those then managing the companies didn’t have their name on the product.
Istvan was prescient, wasn’t he? Those comments came in 1974, when GM and its brethren were strong, world-dominating companies. What happened?
The following CEOs all had something in common. I believe they are responsible in great part for running their companies into bankruptcy:
• Roger Smith (GM)
• Lynn Townsend (Chrysler)
• Leo Mullin (Delta)
Did you guess it? They were all CPAs!
It is the accountant mentality that will always be the bane of industry, until most of it dies or relocates elsewhere.
In 1994, Peter Drucker, acknowledged as the Father of Modern American Management, said in a Wall Street Journal article, “It is the cost accountant that has destroyed American Industry.” Drucker also said, “The purpose of business is to create and keep a customer.”
What a concept! I will add a tag line to his quote, “…and create a cheerleader who will tell all their buddies how great you are.” How few businesses are run this way, have you noticed? Uh – how few CPA firms are managed in this manner…
Off-hand, I think of Drucker’s quote and Publix Supermarkets in the South, “Where Shopping is a Pleasure.” It surely is, as it is run by people promoted internally who started at the company as mere bagboys (or girls) and worked their way up the ranks. Stop by Publix any time and you will see managers stocking the aisles themselves (they have shirts and ties). Got a complaint? Ask for the manager and someone will come streaking to the front of the store. George Jenkins revolutionized the grocery industry by putting his feet in the shoes of the customer, and created such little pleasures as air-conditioning his stores (first ones), creating the modern shopping cart, and using electric eye doors for his precious customers (first one).
George was not a CPA; he was a grocer.
Accountants, conversely, are good at one thing: managing the bottom line. If it means cutting your best employees because you can replace them with cheaper new hires, so what? So what if it destroys an airline’s culture in only one year (1993) and destroys Delta’s reputation as domestic airline of choice for the business traveler and turns it into a pariah? After all, didn’t profits increase throughout the 1990s?
Who but an accountant could have come up with the moronic notion that across 5 distinct entities, marketed that way for 70 years, a company (GM) could pass off cars that looked alike for years at a time to save on design and production costs (to put more $$$ to the bottom line)?
I remember owning a brand new Dodge Challenger in 1972 where the drive-shaft fell out when I took it to the auto mechanics prof to find out what the wierd noise was in the rear end. “Boress, I think the rear end just fell off,” he laughed (he drove a BMW).
Let’s contrast this accountant mentality to that of Toyota, and a few very successful CPA practices across the US. Toyota believes in packing maximum value into every dollar it charges for a car. Ever hear of a Toyota lemon? Ever known anyone who got rid of their Toyota because it was unreliable? How many of them do you see on used car lots? That’s because they tend to be passed down in families like heirlooms (“Give junior your old Camry and we’ll get you a new one”).
So, don’t blame the government, the unions, or anyone else for the demise of these once great car companies. They used to be run by “car guys” and then the finance morons came in and ruined it all with short-term thinking.
Don’t let the same happen to your firm.
By Allan Boress, CPA, CVA – author of The “I-Hate-Selling” Book, available at amazon.com