'Organizations need to be brilliant on basics'

Ramani KANGARAARACHCHI

Organizations need to be brilliant on the basics and everyone in the organization should be intimately familiar with the strategic position of the organization and its business model. Postgraduate Institute of Management (PIM), Director Professor Uditha Liyanage said delivering the keynote address at the AAT Sri Lanka International Conference 2011, in Colombo yesterday.

He said the clarity in this regard is imperative for a business to thrive. Having a conducive culture in the organization which makes the business model operate as it ought to, is another requisite of business excellence.

Professor Uditha Liyanage

Prof Liyanage said it is of vital importance to separate performance drivers from performance outcomes leading one to the other. For instance, if an organization has a superior value proposition in relation to its competitors and is able to do so by maintaining a superior cost position, then these two factors will act as key drivers which will produce the outcome of superior financial position of the organization knowing one's 'hot buttons' and managing them to produce results that matter is a key to performance excellence.

He said that accountants must understand the 'Big Picture' of business and then, their place in it. A 'Silo Mentality' will make them short-sighted and therefore, ineffective.

Therefore, the organization must carefully craft its strategic position which its competitors cannot imitate readily .Is the organization going to offer superior value at a given price or is the organization's competitive position based on its superior cost structure? This competitive position of the organization must be clearly understood by the accountant.

If the accountant is not aware or does not appreciate the strategy context or the market context, he will not be able to perform core functions of the job in a meaningful manner.

Referring to commonplace profit and loss account, Prof. Liyanage said both the revenue or top-line and the profit or bottom-line are consequences.

Accountants, like good business persons must see the necessary link between those consequences and the key factors that produce the consequences.

He referred to this means-end nexus in terms of drivers and outcomes. Reinforcing the -same point, Prof. Liyanage presented the ideology of the Balanced Score Card (BSC).

The financial perspective, one that accountants focus on, is the outcome. It is produced by the value proposition of the organization (customer perspective) which is enabled by prudent process and resource management.

Prof. Liyanage said that inter-departmental conflicts that arise in many organizations is largely due to a myopic view of business, which is seeing business in terms of a single or multiple functions.

This functional perspective must be transcended by an overall business perspective.

He stressed that the accountant's focus on business drivers, beyond mere financial outcomes, and a deep-going appreciation of the business model of the organization and its underpinning strategic position are essential keys to the shaping of the account's world-view.

This in turn will make the accountant effective in an increasingly complex market setting.