An Episcopalian priest, a GE guy and a Consultant are in a bar…..I know it sounds like the beginning of bad joke but here’s how it really happened.
I vacillated for weeks about going to the networking event in Manhattan. I always have to be careful about the events I attend because in our business, management of time is paramount.
I finally decided to take a gamble and off I went to an exclusive club in New York to meet and network with “leaders of industry.”
I got there, checked my coat and entered the ballroom. I found the usual types milling around the (open) bar. Slick investment bankers, staid corporate types and the annoying bubbly personalities from the non profits.
As I made my way around the room, I ended up chatting with (you guessed it) an Episcopalian priest and a mid level guy from General Electric (GE). After we gave the obligatory elevator pitches about our backgrounds, the subject of executive travel came up. I don’t really remember how.
“Yea, Jeff takes the helicopter between Fairfield and Crotonville all the time”, the GE guy said.
“Jeff?…. Who the *%^$# is Jeff?”, I wondered.
The priest was looking at me smiling, nearly laughing actually, as he was undoubtedly aware that I had just cussed the guy in my head. Geez, the sixth sense of the clergy…go figure.
Anyway, all of the sudden it clicked with me. I knew who the GE guy was talking about.
“You mean Jeffrey Immelt, The Chairman and CEO of GE”, I asked.
“Yea, Jeff”, he responded.
The GE guy’s story continued and he continually referred to the CEO by his first name, as if he were an old college roommate.
During the following week, I thought about this peculiar behavior. I relayed this story to a good friend. I figured my friend would have some commentary and insight, he’s a smart guy, Ivy league MBA, a lot of common sense and very down to earth.
“Those guys do that all the time” he said about GE employees. They always refer to the CEO and CFO as Jeff and Keith, regardless of their position in the company and whether or not they actually know them personally.
“It’s almost like there’re talking about an uncle or something,” my friend said with a tinge of annoyance. He finished by saying that GE must have such a strong culture in order to influence the language that people use.
Language is after all what binds people together. Language is one of the hallmarks of a common culture. Without a common language people no longer feel connected to one another. Indeed, they even lose the ability to relate to one another.
In our business, one of the things we do best is explain highly technical and complex accounting and finance concepts to managers outside of the financial realm. General Managers, Engineers, Marketing types, etc., typically do not have an accounting background and find some financial concepts confusing.
Explaining these concepts has been getting harder and harder lately, as accounting has become more complex. Not only more complex, but the connection between accounting and tangible utility has become much more fragile.
OK..ok..even the Episcopalian priest is probably cussing at me right now. Let’s get to the point.
A college professor of mine once described accounting as the “language of business.” “Profits, losses, cash, liabilities and assets, are all words used to describe the results of business operations. When executives “talked business” they used accounting to express themselves. Nowadays, there is a big difference between talking business and talking accounting. They are no longer the same.
In many cases accounting is not performed to better reflect the results of business operations but for an amorphous concept called “better disclosure”. More likely than not (no pun intended), this “better disclosure” results in the financial statements becoming indecipherable. The “language of accounting” now includes such strange terms as Special Investment Vehicle and Off Balance Sheet Debt.
In many cases, accounting is no longer a means to an end, i.e explaining the results of operations to managers, shareholders and investors, but has become an end in itself.
I once sat next to a financial services executive on a plane ride home. This guy was one of the top 50 people at one of the largest financial institutions in the country and was the head of a major profit center.
We exchanged greetings and so forth. After finding out what I did for a living, he initially wasn’t that interested in chatting with me. Oddly enough, after a few vodkas he became a lot more talkative.
Doing his best to humor me by “talking accounting”, he made the following confession:
“I guess I’m at the point where I understand the income statement, but I still don’t get balance sheet…..nah.. I need my CFO to explain it to me.”
Weekly Recon readers might be aghast at this high ranking executive who doesn’t really understand his financial statements.
The sad truth is he doesn’t have to. He can operate the business using some common sense metrics that comport with reality: revenues, cash, expenses, gains and losses. He simply leaves the meaningless (to him) accounting esoterica to his CFO.
Supporters of an increasingly Byzantine accounting system will say accounting differs from the real world in order to provide greater clarity. I doubt that greater clarity is achieved when the majority of financial statement users cannot fully understand their contents.
As a shrewd CEO (with a wry sense of humor) once said after a lengthy accounting discussion, “This is all for clarity of course.”
But back to our little party at in Manhattan…..
The GE guy, sensing my amusement at him for calling the CEO by his first name, decided to confront the issue.
“Is something wrong”, he asked.
“Not at all” I replied. “I’m on a first name basis with our boss as well. In fact, when I get home I’m going to chew our Managing Director out for making me come to this event!”
The priest then bowed his head in prayer.
Have a great week,
Granite Consulting Group Inc.