Amoeba Management requires each group or a unit (normally consists of 20 or less people for a manufacturing/distribution company) to have a group based income statement. As previously stated in an earlier post, the Amoeba Management has three main objectives. They are:

1. Establishing a system of group-based profitability analysis. This system must be directly connected to the current market conditions.
2. Developing leaders of each group by giving opportunities to treat his/her group as an independent company. It is a superb tool to develop future leaders.
3. Ensure that every member of the organization pays attention to improve the profitability of his/her unit.  It fosters a strong sense of teamwork.

Typically, a manufacturing department pays attention to how to minimize their cost structures. However, they do not often think about how to maximize sales. On the other hand, the sales department usually tries hard to maximize sales, but tends to neglect minimizing expenses. Under the Amoeba, each unit pays attention to both aspects of business, i.e., maximizing revenues and minimizing expenses. Under the Amoeba, the manufacturing section records sales to the sales department. The sales department buys inventory from the manufacturing section and sells them to the market.

The concept appears very cumbersome. However, the essence of Amoeba is to give a sense of contribution margin (unit profit) to each unit. Each unit makes efforts to maximize the contribution. When all of the P/L of each unit is presented, the top management can clearly see where the issue is. As you can tell, Amoeba is a massive amount of data and a massive consolidation process. When each small unit pays keen attention to its expenses as well as sales, this will lead to a significant company-wide profit maximization.

When a company fully adopts Amoeba Management, it should enjoy over 10% of operating margin.  In addition, the company should enjoy far greater profit margin than its competitors.

Koh Fujimoto, Principal in Charge, International Practice
kfujimoto@cdhcpa.com

David Maister recently stated, “I don’t want to work with anyone: I want to work with people who share my philosophies. I really am a believer that , Passion, People and Principles are the keys.”

Maister goes on to say that as a leader, speaker, or other influencer—your views and values (passion, people, and principles) resonate with others, and that is when you have synergy and begin building a team or a following, as it were.

The lesson here is simple—be true to your values. Others with like values will be with you and you can accomplish great things.

Corbett, Duncan & Hubly agrees with Maister’s philosophy regarding passion, people and principles, and they know that great things can result. CDH was just named One of the Best Workplaces in Illinois.

Proof that your energy is better spent with similarly-minded people.

If your organization rapidly grows and you are part of the top management team, you have to constantly find ways to better manage an ever-changing organization. One typical method is to divide your organization into divisions and departments and assign a manager to each department. Under Amoeba Management, the differences are (1) department is evenly divided into the Amoeba, a group of about 10 to 20 people, and (2) each Amoeba will have its own Amoeba-based profit and loss statement.

A regular profit and loss statement is often difficult for non-accountants to comprehend. Therefore, the Amoeba-based profit and loss statement is more simplified and is built to present added profitability per hour of each Amoeba.  I call this Ameba P/L. Dr. Inamori, who invented and executed Amoeba Management believed that the essence of management is to maximize revenues and minimize expenses. Dr. Inamori exemplified this essence (he often calls this his management philosophy) in Amoeba P/L.

By using Amoeba P/L, each Amoeba’s profitability (or added value to the entire organization) is easily captured. A leader of each Amoeba can identify specific expenses to improve his/her Amoeba’s contribution to the entire organization. Since Amoeba P/L is so easy to comprehend, all the Amoeba members can understand the profitability of his/her group. This means that each member of an Amoeba can participate in the management of his/her Amoeba.

to be continued…

Koh Fujimoto, Principal in Charge, International Practice
kfujimoto@cdhcpa.com

This management accounting is truly unique and extremely interesting. I would like to introduce this management accounting process to you in a series of blog posts.

The amoeba is one of the simplest forms of living creatures. Its shape is constantly changing as it moves along.

The purposes of Amoeba Management Accounting are threefold;

1. Create section based financial statements through which the management can touch and feel the market.
2. Develop true leaders for each amoeba unit (i.e. small section) of the company.
3. Ensure that everyone gets involved to achieve the organization’s success.

Stay tuned for additional posts that further explain the details of the Amoeba Management Accounting process and whether it fits you and your organization.

Koh Fujimoto, Principal in Charge, International Practice
kfujimoto@cdhcpa.com

We’ve been through one of the most difficult economic times in our country’s history—and some say that there is a glimmer of light at the end of the tunnel. Most agree we have a way to go. A valuable characteristic of managing in hard times is true, effective leadership. With more down time or slow time than usual, leaders’ roles change drastically compared to when business is booming. Leaders today have to make difficult decisions—decisions that may be uncomfortable, controversial, or even include a drastic change in not only people, but processes, in order to operate more effectively and as efficient as possible.

A leader today has to be more assertive, more direct, and have a reduced opportunity for delegation. Today’s effective leaders are not just seen at the top, but instead, at all levels of the company. Therefore, successful leaders assert different skills, particularly in challenging times. Here are a few suggestions.

Honesty

Must be open and honest at all levels and involve all employees in activities that lead to ownership and problem-solving activities. Communication needs to be elevated, showing knowledge of the industry and current events, and leveraging talent within your organization.

Day-to-Day Presence

Although it is important to continue at a high level strategically, an understanding of the current times at all levels in an organization is of great value. Continue to look at ways to improve and streamline processes and gain insight from all levels.

Optimism

Be realistic about problem-solving and do not focus on problems—instead, solutions and reward smart solutions and team members that are involved. Don’t be overly pessimistic or optimistic. Do not give a false sense of security or one of insecurity in a slow down.

Make Smart Decisions

Leaders need to make tough personnel decisions, particularly during difficult times. Be sure that changes are based upon performance and an overall contribution to the company. Develop and implement improved performance guidelines and measurement tools for evaluations, both ongoing and periodic reviews. You may be able to replace low performers with outside talent who are currently in an uncertain situation or have been laid off.

Future Watch

The economy will turn around at some point. What can you do now to position yourself for the rebound?  This is the time to enhance processes, evaluate gaps, and learn new techniques.

Do these things now and reap benefits in the long run. However, you must be willing to change.

Think back. Can you remember the details of your first job? I can, like it was yesterday. Actually, I remember the first couple of weeks. You see, it was two weeks before I was to go for my driver’s license, therefore, I had the embarrassing situation of having my parents drop off and pick me up from work. It was then that I realized that I had to take my first paycheck and my puny savings to buy transportation.

I learned two lessons in these first two weeks—honesty and integrity—two hard to find at times, yet admirable values in today’s business climate. Now back to the story. So I made it through the first two weeks of embarrassment as my coworkers left the men’s wear store and I quickly ducked into my parent’s Camaro. At least the Camaro was cool. I passed my driver’s test and then was ready for my own wheels. My paycheck was due in a few days when one of my co-workers, who knew I was looking for basic transportation, said he had a VW bug for sale and might I be interested? He wanted only $200, which I could afford after my paycheck arrived, and asked me if I wanted to take it for a test ride. I jumped at the opportunity. What he didn’t tell me was it was a manual transmission.

Lesson 1—I shouldn’t have told him that I knew how to drive a stick shift.

My first paycheck arrived. I was so excited, even though it was going right to buying that VW that I would have to learn how to drive. I did the basic hours to hourly rate calculation, and they overpaid me by $20.00. It doesn’t seem like much, but at that hourly rate, it was about 20%.

Lesson 2—Remember, sometimes mistakes are intentional.

We all remember our leaders and veteran workers who we looked up to. We hoped we could develop into leaders just like them. As current leaders in your company, division, department or anywhere in the workplace, remember you have responsibility, and an opportunity to help others develop. Do not take it lightly.