Podcast Episode #32 CorporateMOM turns April Fool’s Day to Goal Congruence Day

CorporateMOM turns
April Fool’s Day to
Goal Congruence Day


April Fool’s Day
* •April Fools’ Day or All Fools’ Day is an annual custom on 1 April consisting of practical jokes and hoaxes.
* •Is an important day for Corporate India and the Government of India. On this day New Fiscal Year starts, and the old one comes to a close.

Closing the books – Beating Retreat ceremony
* It is a frantic day. Scope 1 parameters spoil the broth. Upstream companies could not hold their fixed costs.
* It is matched with our own fixed costs that had gone awry, despite frantic efforts in the last month.
* Every company on this all Fools’ Day plays the game of passing the buck.

Profits, profits, profits
* The CFO team is the most important on April 1st. Drums and bugles herald the New Fiscal Year. ERP is ready. Let us look to the future, not the one that had gone away. We can’t do anything now.
* Journal entries after journal entries are passed. Profits, profits, and profits do not match the expectation. Worried faces wonder what would happen in the stock market, when would the bankers start crawling back to our office. Ha foolish to be an accountant, sighs the CFO on this eventful All fools’ day.

Emergency kitchen cabinet meet
* CEO, the retinue of VPs, and the CFO call for an emergency meeting of the kitchen cabinet. Adverse variances analytics make each VP jump and accusing the other responsible for the All Fools’ Day.
* CEO dismisses all but one.
* Can we do something? Our reputation is at stake.
* CFO returns and journal after journal entries passed are reversed. CEO comes to CFO’s office. A new recipe is put forward. CEO nods ok. The cooking is complete. Reputation restored.

Reality Check Flat Organization Structure

* My book extract:
* For decades, the structure has remained the same. The platform is a unidimensional organization that runs from procurement to manufacturing to sales and every other structure. It comprises the board of directors, CEO, and vice presidents. All form part of a flat organization, with all the eggs in a single basket. The results are completely anarchic. Where every individual is different, each is different in different places. In any organization, you see how each individual is governed by their own idiosyncrasies. There is no corporate goal congruence. What is comprehensible in an organization is how incomprehensible it is. Corporate must shake themselves free from the “earth is as flat as a trencher” outlook.

My experience Forestry Operations
* My book extract:

Working on wood accounting while I was a forestry operations accountant of WIMCO (a subsidiary of Swedish Match Company) in Mysore, in the south of India, also served as an interesting perspective. The Mysore branch supplied wood to two WIMCO factories—one in Ambernath (near Mumbai) and another at Chennai (in Tamil Nadu).

* My book extract:
The accounting year for WIMCO was January to December whereas forestry operations took place between September and April, on the basis of the monsoon. So, at the beginning of an accounting year in January, factory costing would have to take note of wood felling from one season of the current season (September previous year to April current year) and 4 months from the next season (September to December current year, as part of next season September current year to April next year), which is unpredictable. It is unpredictable, as the foresters mark the trees for felling for the next season and start their work in the following September.

* My book extract:
I introduced a cost accounting method called the likely ultimate cost (LUC) for the factories to get a uniform cost throughout the year so that their monthly profitability statements would not fluctuate from month to month. LUC is the cost figure related to the end of the accounting year charges for the wood supplied but a standard cost from the beginning of the year.
This LUC helped me in projecting a figure for the future and bringing it to today’s level in the form of compound annual growth rate (CAGR) and compound annual reduction rate (CARR) converted into CDGR and CDRR (D-Daily), which you see in CorporateMOM.

CorporateMOM adopts
When we discuss Scope 1 parameters to be met it extends to 2030, 2040, 2060, and 2070 targets to be met.
CorporateMOM converts CAGR to CDGR or CARR [Reduction Rate] to CDRR. That’s Daily. Keeps track of every component that makes up the targets.

CorporateMOM adopts CREAM Report
Playing an ODI Cricket

In my case study of HUL P&L and Balance Sheets are analyzed from 2007. In one year when they switched to the April fool’s Day Fiscal Year the number of days for the fiscal year was 457.
Revenue or consumption per day was analyzed for uniform day-to-day ratios.
CREAM is an acronym for Corporate Governance, Risk management, Earnings, Accounting Quality, and Management Quality. Earnings are quantitative with 12 process blocks and the rest constitute 188 Process Blocks that are qualitative.
When companies adopt CDGR it is like playing an ODI cricket.

My experience
Shipping Construction

* My book extract:

I took up a consulting assignment for the Shipping Credit and Investment Company of India (SCICI) on cost accounting of shipping construction. SCICI was providing funds to shipowners at a low-interest rate (a third of the prevailing bank rates). There were three parties to it: the shipowner, the shipbuilder, and SCICI. Shipowners taking the funds from SCICI would divert them to other than shipbuilding in their group companies. SCICI asked me to bring out shipping construction stages so that it could release funds according to the stages completed. This called for a detailed shipping construction manual, literally.

* My book extract:
While working on this, I found Japan’s influence on the scenario in shipbuilding most interesting. After World War II, an air force veteran in Japan was entrusted with the charge of shipbuilding. He went around the globe visiting various shipyards and found they were building in the same pattern as before, from laying the keel upward.

* My book extract:
Being an air force man, he could not accept this practice and introduced the block development process of shipping construction. Different blocks constructed at the same time at different places and assembled at the shipyard reduced the time of construction substantially, from 16 years to 4 years. Placing an order 3 years in advance for items like the main engine, which would arrive in time for the requisite blocks, is an example of the kind of changes he effected.

CorporateMOM adopts process blocks technology
I adopted the shipping process block technology for the preparation of a CREAM— corporate governance, risk management, earnings, accounting quality, and management quality—Report.

In an organization, there are 200 open-ended process blocks. If there are 100k people in a company a 5-member team is formed of 20k teams. Each team is assigned specific tasks accomplishment – creative as well as action. Each member is yoked together but works independently.

CorporateMOM brings in Goal Congruence
* Return on Intangible is the equation CorporateMOM provides.
* Intangible is the effort and for each person the same capability that is 1 as the denominator.
* Numerator is action or inaction brings a binary value for each person.
* Each is a gold medalist. Silver and Bronze medalists strive to get gold in an organization, enabling the accomplishment of an infinite succession of finite purposes by controlling each goal.
* That goal is the same for all, optimize capability, the Goal Congruence.

My Message
Matter and Energy:
The three laws CorporateMOM uses for Corporate Sustainability are:
Law 1: Energy is liberated matter. We show under P&L and Balance Sheet.
Law 2: Matter is energy waiting to happen. Raw materials to godown to finished goods stores to NPAs.
Law 3: When anti-matter collides with matter it forms pure energy. That’s to say push Law 2 to Law 1.
Each process block is dealt with under these three laws of the Universe.

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Published by jayar

Author - CorporateMOM - Sustainability of Corporate Stability

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