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Finance for Non-Financial Managers
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Design Incentives to Match
the Results You Want
It’s not uncommon for managers to incentivize their work-
ers to achieve more with less cost.That’s called increasing productivity.
But the most successful management performance reward programs
recognize the distinction between costs that employees can control
and those that they cannot.Avoid simply challenging an employee or a
supervisor to meet bottom-line goals that he or she cannot really
control or significantly influence.
trollable, until you sign another lease, after which they again
become uncontrollable. Labor costs are always controllable to a
degree, but not totally. You cannot run an organization without
people, but you probably can run one with fewer people than
are normally employed there, if you’re willing to redistribute the
essential work and forgo the less essential work that people do.
Consider the possibilities. What if you were able to distin-
guish between the essential work and the less essential work
every day? What if you could focus on minimizing the unessen-
tial and expediting the essential? Would your department be
more successful? The power of financial analysis is its ability to
help identify the financial ramifications of doing just that and to
quantify the benefits to be gained in dollars and cents. It is a
wonderful tool for helping to make decisions from a place of
knowing, rather than estimating or, worse, guessing.
That’s why this book was written.

Standard Costs—Little Things Mean a Lot

One of the challenges of financial reporting for cost accounting
purposes is determining the actual cost of a unit of finished
goods that was produced during the month, in time to issue a
financial statement within a reasonable timeframe after the end
of that month. Accounting departments are sometimes criticized
for issuing financial reports too far after the accounting month is
over, when the reports are of little value in attempting to man-
age the succeeding month (or two, in some cases). Financial