This time, Inamori* spoke about the above motto in his book : Practical Accounting -Business Administration and Accounting -. What Inamori said is quoted with “”.
“In the manufacturing departments of large companies, `standard cost accounting,’which calculates the standard costs in advance based on past track records and comparing them with the actual costs incurred, has been the market practice in management accounting. According to this, the cost control is carried out in comparison with the targets, which is, the standardized costs, and the manufacturing department makes the maximum efforts to achieve these standardized costs. In addition, the standard cost targets are not set by each department to strive for higher goals, but are usually set slightly higher than past performance by the cost control department as well as the management team. On the other hand, in amoeba management system, as a management entity, we first obtain as many orders as possible, and then plan and execute production based on those orders at the lowest cost. Creating the maximum value with the minimum expenses consequently leads us to maximize the added value. Through this activity, Amoeba becomes a creative unit that constantly takes on challenges.”
Inamori highlighted the following two points as the features of amoeba.
1 Human centered unit
2 Represent the perfectionism
Let me explain one by one.
1 Human centered unit
“Under the amoeba management system , each amoeba is defined as a group of `people’ who are harmonized to maximize sales with the minimum expenses, and the focus is on the added value that the amoeba generates as a whole. On the other hand, under the cost management system based on standard cost accounting, the focus is on the “materials” called the product, and the cost of each individual product process should be highlighted. ”
→When we want to increase sales, we naturally tend to focus on what to sell. If we consider the ultimate objective of a company, which is to pursuit both material and mental fulfillment for all the employees, it will naturally make sense that we must put people at the center. I once again reflected on how poorly I did and will keep the value of human centered.
2 Represent the perfectionism
“Another reason why Ameba management does not use cost accounting to control costs is because we must make sure that the perfectionism has been implemented. Uncompleted products have no market value from the customers view points. In amoeba management system , an amoeba recognizes a production / sales only after it completed its processes and is ready to deliver to the customer. In other words, work in progress is not subject to evaluation except for the year end inventory valuation. However, under the standard accounting system, work-in-progress is valued at its cost, just like finished products. However, the value of work-in-progress and finished products under the standard cost accounting system are usually the sum of the total production cost. This does not reflect the value to the customers who purchase and use them. …”
→I looked back what I have done and am afraid that I was managing the business in a sort of selfish manner. I’m also afraid of pursuing only my self-satisfaction. At the same time, this also means conducting a thorough numerical analysis of in which items customers find value. I realized that I had been compromising myself and was incomplete in customer satisfaction.
In summary, I realized that amoeba management is a process in which each amoeba creates value and pursues its abilities as a human being, and acts based on the customer oriented principles.
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* Mr. Kazuo Inamori, the founder of Kyocera, KDDI (one of the top tele communication companies in Japan) and the top of revitalization project of JAL. As a well-known Japanese entrepreneur, he has been sharing his experiences and management know-how with managements of small to middle companies in Japan.
Further queries or doubts, please email to ytomizuka@abrilsjp.com
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