THE NUMBERS PARADOX: The Profession’s Definition Limits Its Potential

By Posted in - Public Blog on November 21st, 2017 1 Comments

This post is an excerpt from MC Carter’s upcoming book — SHIFT: 12 Shifts in Thinking to Transition the Accounting Profession into the Modern Era. Click the button below to get a FREE PREVIEW of the first four chapters a week before release, and stay in the loop as we move closer to launch.

It’s ironic. The tag lines of various accounting professional bodies tend to include references to ‘numbers’ and ‘count’ in puns that no doubt please them and their marketing teams, but which reinforce the unhelpful perception the public has of accountants, namely that accountants are…

Bean counters and number crunchers.

These are not monikers the accounting profession should be proud of. Not if the profession wants to survive in the modern era we’re now in, of data flows, automation and artificial intelligence.

The irony is that whilst numeric tax and accounting skills are obviously at the basic core of the profession, they are not differentiating skills. They are not what make a great accountant. These numeric, number-crunching skills are expected prerequisites, not competitive advantages.

THE NUMBERS PARADOX

The accounting profession is
about more than numbers.

At its core, it’s about people.

You read that correctly.

Here’s some coffee to wake up and smell: Much of the basic tax and compliance work currently done by accountants will soon be performed by technology.

That is inevitable. You know it is. (And note that I said ‘Much of’ and ‘basic’ above, not ‘all’.)

The tax and compliance skill-sets on the low end of the spectrum are commodities. This is already evidenced by the outsourcing of this level of work, by many firms, to lower-cost providers globally. The next step along this cost-reduction path is automation.

In the history of commerce, across all industries and sectors, low-value skill-sets get replaced by machines. They get automated. Think vending machines. Think bank tellers. Think (low-value-adding) travel agents. Think… the low-end tax compliance work; work that has been the bread and butter of many accounting firms for decades.

That gravy train is stopping, next station.

Now is the time to start planning and making changes for a different future for accounting. Don’t wait for the need to change to be pressingly urgent. You don’t start paddling once the wave is upon you. You see the wave coming, point yourself in the right direction, then start paddling. In advance. Well before the wave arrives. Do that, and you’re riding it. Start paddling too late, and you’ll fall off the back of the wave, disappointed, watching others ride off.

Thankfully for accountants, the higher-level advisory work across more complex tax matters, business advisory and financial advice provide them with a solid future. But it will be a very different future.

The great thing is, all this work still has at its core, numbers.

But what is the point of a good set of numbers?

When you think about it, what is the ultimate purpose—beyond the basic compliance aspect of tax and regulatory lodgements—of a set of numbers for a business or an investor?

It’s for decision-making.

For taking action.

For business improvement.

For wealth creation.

In short, it’s for making changes and improving performance.

And the best way that a set of numbers will influence a business owner to make decisions, to take action, to embark on changes, is when they are guided by a great advisor: Someone who can explain the future scenarios that will result with and without corrective action, the suggested improvement strategies, the risks and how to reduce them, how to measure effectiveness of the changes.

The person to provide this advice should be the business owner’s accountant. After all, they have all the numbers. The data. The ‘intel’. More importantly—if they are true management accountants—they understand the dynamics between the numbers; they deeply understand the cause-and-effect machinations of a business, and these insights are crucial when managing a business and making decisions that will affect its future.

But all too often accountants don’t provide future-focused advice. They merely monitor their clients’ compliance and payment deadlines and report on their clients’ past. Important stuff, yes. But it won’t markedly improve their clients’ business performance or wealth position.

The ongoing lack of proactive advice given by accountants has spawned advisory spin-off professions such as business coaching. The clients of accounting firms wanted advice on how to improve their business, but they weren’t getting it from their accountant. Accountants showed no leadership. So their clients looked elsewhere.

The market had a need, and accountants failed to fill it.

What a missed opportunity for the profession.

Sadly, there are many flaky business coaching franchises where business coaches who have no training or understanding of management accounting principles and have simply paid a franchise fee and then spent a week in a training and induction process believe they have the ability to advise businesses on a range of crucial commercial matters.

They do not. Not in my opinion. These business coaches should be avoided.

Management accountants, on the other hand, have a deep understanding of the financials and drivers of a business’ performance. They can take into account various tax implications, do ‘What If’ sensitivity analyses on different scenarios, forecast and track cash in-flows and out-flows for a business, and—when trained in management accounting—advise on strategies for improving the liquidity, profitability and value of a business.

What a shame it is that the accounting profession, by and large, has let this opportunity pass them by.

What has caused this?

So much of the under-utilisation
of the accounting profession stems from
the very definition of the profession…

… as revolving around numbers, rather than around people.

It is advisory skills that matter more,
and these are largely people skills — the so-called ‘soft’ skills.

“We are number crunchers” is a limiting definition and over-arching paradigm that precludes the accounting profession from maximising its value to society.

In short, accountants aren’t nearly as useful as they could be. That saddens me, because their potential to add more value to society is immense.

But a field or profession limiting its usefulness to society through its misguided definition of itself has happened before.

Consider this fascinating historical example… (Grab a coffee. Settle in. It’s a wild ride.)

Back in ancient Greece, people believed that their lives were controlled by the Gods who wandered around in the sky, imposing their will upon them. (The word planet comes from the Greek planan which means ‘to wander.’)

This “Gods wandering the skies” idea seems quaint to us now, but that was the reigning belief system. It was not questioned.

People believed that it was the Gods who decided if crops would grow, whether it would rain, or snow or whether people would live or die.

The Greek philosopher Aristotle didn’t buy into this idea. He theorised in 340 B.C that the planets and other heavenly objects in the night sky were not Gods, but were spheres revolving around the Earth.

He got one major thing wrong there—by placing the earth at the centre of it all—but this new geocentric view of the world was a hugely controversial shift in thinking.

And it wasn’t questioned for the next 1,800 years, despite the fact that the calendar in use back then was—as a result of the erroneous assumption that the other planets revolved around the earth—inaccurate.

Imagine having a calendar system that just didn’t work. Here’s what used to happen…

About every 100 years or so it would be winter when the calendar said it should be summer, and the Pope would then announce, “Ok everyone, the calendar is out again. Let’s wind it back.” (And many of us think daylight savings is a big adjustment to make each time it comes around!)

That seems incredible, I know. But why was this happening?

It was because astronomy lacked an effective model. It simply was not working because its fundamental paradigm and assumption was wrong. Consider how crucial this was for an agricultural society, with the need to predict the timing of the seasons in order to maximise crop production to sustain lives.

But the plot thickens.

1,800 years after Aristotle’s incorrect geocentric assumption, in the early sixteenth century, Polish astronomer Nicolaus Copernicus calculated using mathematical equations that the sunnot the Earth—was at the centre of our planetary system. Clever guy. (That’s some serious ‘number crunching’, right there.)

However, at the time Copernicus’ new heliocentric view of the universe was considered heresy. The consequences of this were so grave that Copernicus waited half a century to publish his De Revolutionibus Orbium Coelestium in 1543, once he was on his deathbed.

But even after the theory’s publication, change took some time.

Another 66 years later, Galileo Galilei, the Italian mathematician and physicist, invented the telescope. This allowed him to see that the sun rather than the Earth was at the centre of ‘our universe’. (The term ‘solar system’ did not exist at this time, due to their belief that the Earth was at the centre.) Galileo had visual evidence to support Copernicus’ mathematical theory, and so he wrote a treatise about it.

In an attempt to spread the word—as this was one of the most fundamentally perception-shifting discoveries in the history of mankind, reshaping our view of where we ‘fit’ in the universe—Galileo wrote his treatise in Italian, rather than in the Latin of academia. This allowed the public to read it and as a result, the heliocentric model of the universe rapidly achieved support in the Italian community.

But not everyone was happy about that.

In 1616 the Church commanded Galileo to never again to “hold, teach, or defend […] in any way whatever […] the doctrine attributed to Copernicus.” The penalty for not complying was to be death. Heavy stuff.

Under attack from the Church, Galileo retreated in his promotion of the heliocentric view of the universe. Just as Copernicus before him, he decided that, for self-preservation, it was best to lay low with the idea.

Then nine years later, a childhood friend of Galileo’s became Pope Urban VIII. A lucky break, perhaps? Believing the ‘I have friends in high places’ factor gave him some protection, Galileo began writing about the theory again.

Alas, despite his childhood friendship, Galileo was forced to recant his belief in the Copernican system in front of the Inquisition. For disobeying the 1616 order, Galileo was condemned to life in prison, his childhood friendship most likely saving him from being burnt at the stake.

Galileo’s publications were listed on the Pope’s Index of Prohibited Books. And get this: It wasn’t until 1992 that the Roman Catholic Church re-examined the case and admitted its mistake.

Justice—and admitting when you are wrong—can take time, it seems.

So can change.

And here’s the point…

Throughout the almost 1,900 years of society enduring the effects of having an inaccurate calendar, astronomy was defined as the study of the movement of planets around the Earth.

How were the astronomers of the day ever going to come up with a working calendar when their very first, discipline-defining assumption and underlying paradigm was incorrect?

The very definition of the field of astronomy at this time
precluded it
from ever providing its full value to society.

This is precisely the issue I see with the accounting profession
thinking it revolves solely around numbers.

That’s tantamount to thinking the planets revolve around Earth. That’s old thinking. Yet, it remains the current paradigm. No-one questions it.

The flow-on effects and disadvantages that this out-dated paradigm brings to the profession are profound and at the very heart of what I believe is causing the accounting profession to under-deliver on its potential to add value to society. I’ll share the flow-on effects—and how we can collectively changes things for the better—with you in the coming chapters.

The accounting profession—being an advisory profession—ultimately revolves more around people and relationships, than it does around numbers. The advice game is a person-to-person game. Not a computer-to-person game. That’s why it can never be replaced by technology or fully automated.

Only once the accounting profession
redefines itself and shifts its paradigm
to being an advisory profession
rather than a calculation and reporting profession,
will it reach its full potential for adding value to society.

Heliocentric replaced geocentric in astronomy.

It’s time that people-centric replaced number-centric in accounting. 

Our hope is that the accounting professional bodies focus on this shift, but in the meantime, it needs to happen at a grassroots level — at the individual firm level. If you wait for the accounting professional bodies to change, you’ll be waiting for decades. They’re so immersed in their current paradigm they cannot see they are like the 15th century astronomers. They are unlikely to ever come up with a working model to maximise the value of the accounting profession to society.

So how can we effect change as individual accountants, advisors and firms?

To quote again something Mahatma Ghandi purportedly said:

“Be the change that you wish to see in the world.”

Make changes in your firm. And that starts with your own paradigm. See people as the centre of what you do, not numbers. Make your next hire a ‘people person’, not solely a ‘number cruncher’. Build a firm that becomes renowned for being full of ‘people people’ who relate well to clients and who provide a great client experience. (The two attributes—of being a people person and being good with numbers—are not mutually exclusive of course, but finding those attributes combined in the one person is a challenge, particularly when the current paradigm keeps attracting ‘high analyticals’ (a.k.a number crunchers) to the profession. We’ll discuss this tragic issue more, in the next chapter.)

But let’s not wait 1,900 years to bring about change.

Once the people-centric view of the accounting profession is widely accepted, the accounting profession can start on a more exciting path. One that will be far more valuable to society. This will flow on to allow the profession to more consistently attract the expressive and assertive ‘people people’ personality types that will give firms the ability to build teams with the mix of people required for providing a great client advisory experience.

Summarising, here’s the shift that the science of astronomy had to make in order to find an effective model that added the most value to society (such as having a reliable calendar to predict seasons):

THE PARADIGM SHIFT

SHIFT #1

I explore why, in the next chapter…The typical analytical, bean-counting, number-crunching, people-averse ‘Grinders’ that accounting firms tend to hire do not make good advisors.

(1) awesome folk have had something to say...

  • Christian Borkowski - Reply

    November 23, 2017 at 9:49 am

    A great read MC. I’m really looking forward to getting my hands on the book!

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