Is your accounting department loafing?

• Author: Couch, Robin L.
• Position: Business Talk - Column

IS YOUR ACCOUNTING DEPARTMENT LOAFING?

Financial executives love the quantifiable. Give a CFO a cleanly sliced pie chart over a well-written executive summary anyday. That's why, if the executive works for a service firm, measuring his or her staff's productivity is often painful, because the quality of work doesn't translate smoothly into numbers.

John Y. Lee, professor of accounting and chairman of the accounting department at California State University in Los Angeles, thinks he's devised a better yardstick. He's come up with a grid for measuring the productivity of accounting departments, especially those that operate within the service industry. It's based on an objectives matrix developed by the Oregon Productivity Center.

"Productivity should focus on a service firm's overall capabilities," explains Lee, "rather than on labor expenses alone. . . . Relate productivity to all the strategies you identify as elements of your company's success."

To do this, skip the "theoretically elegant models," he advises, and opt for a meaningful and easy-to-understand formula, such as the one described below, that requires neither middle-man interpretation by an economist nor sophisticated computing equipment to apply. According to Lee, all you need is access to a calculator or, better yet, a personal computer with simple spread-sheet software.

To set up your own matrix measurement system (see a sample matrix at right), first identify the most important objectives for your accounting staff. Lee suggests selecting three to seven criteria. These are some possibilities that other service firms use to measure their accounting departments' productivity:

* Work is done correctly. * The department deals well with nonrepetitive and new types of work. * It exercises good cost control over projects. * Its work has increased revenues. * The department is innovative. * Due dates are met. * The department maintains good communication with clients and coworkers.

Here's Lee's approach summarized:

After you've selected the criteria most important to you, decide what's a normal performance level for your department for each criterion. In some instances, you can translate the normal level into an easy-to-understand number. For example, if you know your accounting department routinely spends 25 hours each month correcting errors, then use 25 as the norm.

On the 11-point grid (remember it runs from a low performance-level ranking of zero to a high of ten), place the...