Is Managerial Costing the Accountant’s “Invisible Gorilla”

In an experiment described in the book “The Invisible Gorilla,” volunteers were shown a video of young people tossing a basketball around and were told to keep track of how many times a basketball was passed between players wearing white shirts. Half way into the video, a person dressed in a gorilla suit entered the field of view, turned to face the camera, beat on his chest, and then walked out. Only about half of the volunteers noticed the gorilla. In fact, those in the half that didn’t notice the gorilla were confident in their belief that no such gorilla had ever appeared. This invisible gorilla experiment highlights a phenomenon called “inattentional blindness” – how paying close attention to one thing can cause an individual to totally overlook other things, even if those other things are obvious.

In another experiment, researchers at Brigham and Women’s Hospital asked a group of twenty-four experienced radiologists to identify white nodules within five CT scans made up of hundreds of images of lung tissue – a process used to identify potential lung cancer. In one of the scans, the researchers inserted an image of a gorilla almost fifty times the size of a nodule. Despite its large size and incongruous presence, only four of the twenty-four radiologists noticed the gorilla. Failure to notice the gorilla was not because it was difficult to see – eye-tracking data showed clearly that all the radiologists looked right at the gorilla – they were just paying close attention to something else. The experiment was later repeated with untrained volunteers and none of them noticed the gorilla.

For nearly four decades, the negative impact of traditional cost accounting information on executive decision making has been clearly documented and a vast body of knowledge and experience has been accumulated, documented and liberally disseminated, including solutions to the “costing problem” for organizations of any size and in any industry. Yet here in 2020, a vast majority of organizations continue to rely on over-simple and outdated costs models that provide their decision makers with inaccurate and often irrelevant cost information as support for making decisions critical to the survival and growth of their organizations. Could it be that the inaccuracy and irrelevance of traditionally measured cost information is simply “an invisible gorilla” to the accountants that generate that information?

An ever more complex business world continually burdens accountants with more and more financial reporting, regulatory compliance and financial administration responsibilities. The primary pressure from management is not for the accountant to provide them with accurate and relevant decision support information, but instead to make sure the company complies with all the rules, create post-decision analyses to justify those decisions, develop budgets and plans that project pre-established results, and provide the myriad of reports demanded by “higher-ups,” owners, banks and government agencies. Have these ever-growing responsibilities ballooned to make managerial costing the accountant’s “invisible gorilla?” The “inattentional blindness” resulting from all these value-measuring and value-preserving – but non-value-adding – responsibilities may provide accountants with a plausible reason for failing to address the decades old problem of inaccurate and misleading cost information, but can such a reason remain plausible for over thirty-five years?

If accountants are to survive and grow in a world of advancing technology – particularly artificial intelligence – they must take off their blinders, get out of their box, pay attention and expand their ability to add value to their organizations. As IMA’s President and CEO, Jeff Thomson, has stated, “Professionals should upskill with competencies that are not easily automated like decision support, data analytics and management and strategy.” The foundation on which those competencies are constructed is the ability to understand and measure the fundamental economics that underlie an organization. In other words, they’re built on sound managerial costing. But just mastering managerial costing isn’t enough. Accountants must also take steps to insure their organization’s decision makers understand the value of such accurate, relevant and actionable cost information and incorporate it into their decision making processes. The old, traditional views of cost accounting will not suffice. Accountants must focus on their “invisible gorilla” if they are to remain relevant in the challenging years ahead.