How is a Speedway Pace Car Similar to PACE?

Before answering the question in the subject title, let’s start with some definitions of a speedway pace car. Here are a few:

A speedway pace car sets the pace and positions racers for a rolling start in a warm-up lap or laps before a race, or that returns to control the pace in temporarily hazardous conditions.

A speedway pace car, both in NASCAR and IndyCar races, has two functions. It leads the field through several warm-up laps prior to the start of the race, and it also heads to the front of the field during caution periods to reduce the speed of the cars on the track. Cars are not allowed to pass during caution periods.

So, how is the Profitability Analytics Center for Excellence (PACE) similar to a speedway pace car?

Let’s consider an analogy or metaphor that PACE members are driving the race cars. Their organization is competing with others. The goal is to be a winner. Even public sector government agencies are competing, not as business competitors, but for a slice of the funding budget.

Executives, Managers, and Employee Teams Need Better Information

Review this PACE Forum article “User Bill of Rights” in this link:

A Bill of Rights for Users of Management Accounting Information | PACE (profitability-analytics.org)

Many CFOs and their accountants are denying their work colleagues the information they need for insights and to make better decisions. With regards to management accounting, the information is often incomplete without transparency and visibility to what is “causing” resource expenses to be consumed as output costs. Further the calculated costs are usually substantially flawed and misleading. (Activity-based costing [ABC] resolves this problem.)

The famous poet Maya Angelou wrote this:

“People will forget what you did. People will not forget how you made them feel.”

As just mentioned, most executives, managers, and employee teams feel underserved by their CFO and accountants. They feel deprived of the much better and more accurate cost information that they could receive from their CFO and accountants. And for businesses if the cost information is flawed, then so is the profit margin information. Profits are a derivative – a result. The simple equation is: Top line (revenues) – Middle line (costs) = Bottom line (profits).

PACE Serves as a Paraclete to Help Pace Members

To understand this subheading, you are probably asking yourself, “What is a Paraclete?” It is a Christian term that appears five times in the Bible. It refers to the Holy Ghost, the third person in the Trinity, as an 'advocate', 'counsellor or 'helper'. Simply put, a Paraclete is one who cares for and helps others.

PACE’s mission is to “help”. It is to help those who desire to improve their organization’s operational and financial performance.

Heartless or Clueless?

A valid question as to why CFOs and their accountants are underserving their executives, managers, and employee teams is “Are they heartless or clueless?” If they are heartless, then they simply do not care. If they are clueless (and that may be an exaggeration), then they may not have a sufficient understanding of the superiority of progressive management accounting, financial planning and analysis (FP&A), and enterprise performance management (EPM) methods.

As an example of the latter, there is an important distinction between external statutory and GAAP compliance financial reporting and internal management accounting. The former is for government regulatory agencies and investors. Its purpose is for “valuation” (e.g., inventories and COGS). The latter’s purpose is for “creating financial wealth value” for shareholders and owners by providing those insights for better decisions. Management accounting is much more important than external financial reporting.

Many CFOs and accountants are unaware of this imbalance. Accounting is much more than journal entries, T-accounts, reconciliations, and controls. It is about providing visibility and transparency in the language of money. In the proverb and axiom if “Cash is King”, then “Accounting information is Queen”.

Achieving Competency is Not Easy

It can be a challenge for CFOs and accountants to adopt progressive methods that are advocated by PACE. They need to keep learning and have their awareness raised about the inadequacies of stale and arcane traditional methods.

Chess or checkers? A young child can quickly learn how to play checkers. The game is simple, but it takes a while before how they learn to win a game of checkers. Chess is much more complex. But it has the same goal as with checkers – winning.

So, let’s return to the speedway pace car and PACE analogy and metaphor. The goal for organizations is to win. It is to win for their employees’ fulfilment of a job well done and to win for their business’ shareholders, owners, and stakeholders. PACE with its PACE Analytics Framework (PAF) helps organizations win. But it is like the game of chess. It requires an effort to learn progressive methods.

The Takeaway

The takeaway from this message is germane to understanding PACE’s Profitability Analytics Framework (PAF). While some seek a step-by-step instructional manual, the problem with these is that they take a one-size-fits-all approach, and the real world is more complex than that. In contrast, the Profitability Analytics Framework (PAF) provides one a methodology to find the answers and knowledge that managers and employee teams seek. It helps them investigate their organization through several lenses including formulation, validation and execution of their executives’ strategy by focusing on costs, revenues, and investments. It enables clear thinking to systematically investigate answers to critical questions and provide the wisdom needed to move forward in a profitable way.

If you are a seeking for your organization to be a winner, consider learning more about PACE and its Profitability Analytics Framework (PAF) and what it can do for your organization?

Gary … Gary Cokins .... gcokins@garycokins.com