The Hindu Business Line : Go beyond the `revenue minus cost equals profit' mindset

ANIMOSITY is often mutual between CAs and CWAs. That, perhaps, explains why the ICAI sets tough papers when it comes to costing exam, so much so that even qualified cost accountants have been known to have failed in the very paper of their core competence. Be that as it may, Essentials of Cost Management by Catherine and Joe Stenzel, published by Wiley (www.wiley.com), comes as welcome relief in comparison to the bugbear one endured in CA.

"To successfully manage cost, you will need to engage the hard and creative work of all successful cost managers," advise the authors, in the preface. The work involves "evaluating, testing, changing, intuiting, and blending the array of available cost management tools and techniques." Most CWAs whose world doesn't go beyond `revenue minus cost equals profit' may find it difficult to accept the authors' thought of value being "the common thread that knits together the fabric of cost management essentials."

More on value, you'd read in a chapter on `the future of cost management'. VBM or value-based management is a `systematic approach to creating shareholder value', as James Knight defines.

Another subtopic is `performance measurement' in which the authors identify three common characteristics of the measurement paradigms: One, using financial information and cost management systems as one element in "a balanced, linked set of financial and non-financial information resources".

This is popular because of the ease that measurable money provides. Two, measuring `continuous improvement' in `employees, activities, and functions', something that adds to stress, you'd agree. And three, the enlightened scenario where "the performance management system aligns all employees, business units, and constituents by means of a few, carefully articulated central management objectives." An instructive graphic shows `performance measurement information intelligence architecture'. Essential read, to manage costs better.

Good governance

Asian Development Bank (www.adb.org) has brought out a new book titled Governance in the Pacific: Focus for action 2005-2009 by Thuy Mellor and Jak Jabes. It talks of `four basic elements' of good governance. One, accountability, to make public officials answerable for government behaviour. Two, participation, so people are not just beneficiaries but are agents. Three, predictability, meaning, `the rule of law'. And four, transparency, making info available to the public. These elements tend to be `mutually supportive and reinforcing'.

We divide the world as `developed', `developing' and so forth, but when it comes to governance, every country, developed or not, has weaknesses, observe the authors. However, most developed countries have "a strong civil society, such as the media and non government organisations" to monitor government policies and activities, publicise anomalies, and blow the whistle on wrongdoers, point out Mellor and Jabes. In contrast, developing countries in the Pacific region don't have a model that is suitable for them, according to the ADB.

An important section of the book talks about improving `financial knowledge'. The authors reason thus: "While improved government planning and resource allocation capability and timely reporting on the use of public financial resources are critically important, disclosure of such information is useful if there are citizens at the receiving end of such information who can understand it and use it to ask questions of governments about the discharge of their accountability to the community."

Though good governance doesn't happen overnight, the book is important for taking one more step in that direction.

BooksOfAccount@TheHindu.co.in

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