Transforming the Bottom Line: Managing Performance with the Real Numbers.

• Author: Morrill, Christopher

Reviewed by Christopher Morrill, research and budget director, City of Savannah, Georgia, and member of GFOA's Committee on Governmental Budgeting and Management.

Finance professionals have been slow to get on the boat to quality management. In fact, some have missed the boat entirely. According to Tony and Jeremy Hope, this missed connection is due to the heavy baggage of antiquated financial systems, designed for "command and control" management structures. They argue that until an organization's financial information system is revamped to measure the real numbers, it will be hard pressed to survive in today's rapidly changing economy. Government finance professionals should find that Transforming the Bottom Line provides a new look at how financial information is collected and used in their organizations.

The argument advanced in the book is that management techniques such as total quality, activity-based costing, and empowerment cannot bring real transformation to an organization without a unifying information system. That system is not the traditional accounting system, but rather a horizontal "information system that will produce different numbers - numbers that will enable managers to eliminate huge amounts of unnecessary costs, speed up business processes, support quality programs, improve decision making, and promote innovation."

Horizontal information systems, complementing the movement to team-based structures organized around key business processes, turn centralized, vertical bureaucratic financial systems on their sides by creating an "activity ledger" which runs parallel to the general ledger. By collecting and reporting data across key processes rather than vertically by departments, horizontal information systems help managers determine whether to outsource work and how to cut costs without damaging customer relations. They do this by providing information to answer the question: does a piece of work add value for a customer? The key to answering this question is an index of value-adding work based on relevance and quality.

Not everything in Transforming the Bottom...