One of the best books I’ve ever read on LEAN from a CFO’s perspective is Real Numbers by Jean Cunningham, one of the co-authors of that book. I was deeply thankful we could pull Jean out of retirement for this insightful and informative discussion about the mindset and methodology of LEAN that is about continuous improvement with respect for people. We discuss the goals of lean, plain-language financial reporting, the one-day close, kaizen, unit costs, her other books, and much more.
Who Is Jean Cunningham?
- former CFO at Lantech
- former CFO of Marshfield Door Systems
- former Chairman of Lean Enterprise Insitute (LEI)
- recipient of many awards including induction into the Association for Manufacturing Excellence (AME) Hall of Fame (2018)
- inducted into the prestigious Shingo Academy in 2019
- pioneer and global thought leader in lean accounting, business management, and the back office
- founded Jean Cunningham Consulting (JCC) in 2006
- author of three books – Real Numbers, Easier, Simpler, Faster, and The Value Add Accountant
Questions Asked During the Interview
- Can business leaders and managers outside of manufacturing gain value from Real Numbers?
- Did you find lean, or did lean find you?
- What are Kaizen events?
- Is lean more than just about removing waste and implementing various tactics?
- Why is lean hard to sustain?
- How did the one-day close come about?
- Why the love affair with unit costs?
- What are plain-language financials?
- Why do we keep getting scorecards wrong?
How was lean implemented in your company?
“We did it by learning an idea and applying it and seeing what would happen. And of course, it wasn’t perfect. We had to do it over and over again. And it was with the people from all different parts of the company working together without the same knowledge–we could bring our knowledge together.”
Keys to Cost Reporting
Jean suggests the following guidelines when it comes to providing useful and understandable reporting to management and all other readers of the information.
- The Customer
You have to understand the customer of the information first. Who is going to use it?
How precisely does the information need to be in order for it to be useful?
Is it for next week? Last week? Is it for a year? Know your relevant timeframe.
- Type of Cost
Know which types of cost need and can be broken down by units. Many fixed costs do not vary by volume and should not be included in the unit cost.
“Make sure the words that you use are easy for your user to understand. Words like variance, capitalization, amortization – try not to use those words.
Terms such as the labor and overhead absorption rate – maybe you just shouldn’t use that wording even if it’s required for external purposes. But it has no value internally. So why even provide that information?”
Jean Cuningham’s Books
Other Relevant Links
How to Engage the Front Line in Process Improvement – an HBR article on lean which includes quotes from the CEO of Lantech, a company where Jean was the once-CFO.
The Best Accounting Books Ever Written – I mentioned this post on the show where I’ve listed Jean’s book, Real Numbers, in my top 5.