At some point in the recent past, I mentioned that if I had the choice I’d prefer that the best and brightest not take up accounting as a first career. (I even said something to the effect that, I’d prefer that those who did do accounting come from the lower middle or even lowest quartile.) Clearly, that statement would not have been appreciated by accountants. One individual, presumably an accountant, even accused me of saying that only “bottom feeders” do accounting (which was a mischaracterization/“slanderous accusation”, plain and simple). Naturally, his angry accusations were accompanied by some name calling.
While I did talk about what I felt to be the disciplines which are more far more strongly associated with value creation, this was lost on him/her and possibly others. Perhaps my statement was too blunt and thus elicited such an emotional response. (Well, my statement was too blunt, and I won’t sugarcoat that.) While I do not regret what I was trying to say, there is regret for the way I said it. Saying that I believe something generates little value does border on offensive, and it is poor form to respond to rudeness (which preceded my comment in the exchange) with such harshness. Let me refine what I said without loss of frankness and truthfulness.
There are two dominant domains within business “administration”: human resources and accounting. The less “administrative” side of business includes domains like supply chain management, (strategic) marketing, sales, and financial engineering. These are about as general as one can get. If we think about supply chain management as “product/service delivery”, all real world businesses have elements of the above.
Of two big business administration domains, HR has grown beyond its (prehistorically) original ambit of managing payroll, leave applications and doing the paperwork for hires and resignations. Now there is the notion of “strategic HR” where one considers company capability, capability development, current and future business opportunities given capabilities, manpower landscape projections, leadership development and the list goes on. I like how HR has expanded its role to the extent that some business commentators have begun to say that the first task of a CEO is HR. Various synonyms of impressive come to mind.
Accounting, however, remains mostly a job of reconciling and collating numbers from reports from disparate business functions. At a (slightly) more interesting level, there is “tax and P&L shaping” (issues relating to the recognition of revenue and expense), cash flow estimates for projects, cash flow projections for the issue of securities and debates on “goodwill”. (I googled after writing this, but have not found any activity beyond these that I have long been aware of.) Accountants need knowledge of accounting regulations, especially those whose firms need to comply with different reporting standards (especially if one can’t just “comply to the most stringent part of the supply chain”). Still, I am highly sceptical of the type of value that an accountant brings because most of the work can be automated away. Perhaps not the estimates for project value, but most can, given the will to impose greater consistency across departments. It may be that someone has to be there to ask questions of the type of financial strategy to pursue, but is that not the role of the C-Suite? (The CFO is not an accountant, he is there is use finance to enable business operations. The CFO is a financial engineer, typically served/supported by accountants.)
So, though accountants have a role to play in corporations, I do not believe that we should invest our stock of “best and brightest” in that discipline. Have some pursue HR plus some other discipline perhaps, but not accountancy.
I will not discount the usefulness in having accounting “skills”, the basics get one pretty far. Amateur investors look at financial reports and, with a few simple spread sheet operations to factor in (sometimes questionable) assumptions about future performance and activities, obtain an estimate of future earnings. (In tandem with a PE ratio, they obtain one of those x-month “target prices”.) Of course amateurs are unlikely to know the “tricks of the trade” for hiding some things and airbrushing others, which is why forensic accountants retain their value proposition (especially those working for short sellers).
I would like to quote from Ariel Rubenstein’s testimony before the university Senate (of The Hebrew University in Israel) with regards to a proposal to allow students to receive a bachelor’s degree after studying only accounting:
Some may assert the cliché that accounting is an academic subject, but with all due respect to this new pillar of scientific experience, I wonder how anyone can compare accounting to mathematics and biology and philosophy and linguistics. These are the subjects that we should be encouraging the outstanding students to study, rather than the elective course on “Accounting for Residents Committees”.
I agree with his position. While “Accounting for Residents’ Committees” is many orders of magnitude less complex than accounting for a global conglomerate with a diverse range of business activities and types of asset flows, the size of the task and the amount of work required to surmount it simply mean manifold variations on the same theme. I do not see it as intellectually challenging, but rather, tedious. At least the forensic accountants retain the element of discovery in their job. (And their adversaries, the Enron types, will be in a constant arms race with them. A sad waste of intellectual resources, I feel.)
I hope our best and brightest pursue fields like engineering, computer science and industrial product design. “High potentials” are a scarce resource that should be tapped to their fullest in direct value creation. Those are the kinds of disciplines such that where a job is unavailable, one with knowledge and an idea can create a cluster of jobs. (It would be blunt, but accurate to say that “Accountants take jobs; they don’t create jobs.”) So, unpleasant as it sounds, I do not believe that accounting is the way to go for the most promising young students. But it is their life and they will live it as they will.
(Perhaps we want some top talent to take on accounting so as to guard against those that slink to the dark side. But, as mentioned, I feel the arms race is a waste.)
I believe that I will be proven wrong eventually1. That would happen if and when accountants shift the focus of their profession in a big way to real time analysis of data, supported by the automation I said could “automate away” most of their current jobs. (As we used to call it: “Freeing up capacity to take on higher value work.”) That would enable “innovations” like generalizing (generalized versions of) “AB testing”, implementing them with respect to complex metrics that bring together global data (hence taking learning and earning to a higher level). In some sense, the era of data is one where accounting has the necessary catalyst to transform itself just as HR has. Given the clear value proposition, I believe it to be only a matter of time.
But until then…
[1]. In fact, change is long overdue. Have a look at this from 1960.
Jeremy Chen
* Jeremy is currently a PhD student at the Department of Decision Sciences at NUS Business School. Jeremy believes in the possibility of a beautiful synthesis of “social justice” and “the free market”. He also hopes for less politicking and more policy discussion in the political arena. He blogs at http://jeremy-chen.org.