Professional Optimism – Let’s Redefine Management Accounting

It was a little recognized bombshell! A few years ago the International Code of Ethics for Professional Accountants (published by the International Federation of Accountants and the International Ethics Standards Board for Accountants) dropped any association of the term “professional skepticism” with professional accountants in business (i.e. management accountants). It’s still very much there for professional accountants in public practice (i.e. assurance type activities).

This means management accountants can (and should) embrace optimism, professionally, of course. The relevant terms are now: “Having an enquiring mind”, “Exercising professional judgement”, and “Reasonable and informed third-party”. These focus on defining “professionalism” along with the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior that apply to all professional accountants.

Optimism is defined as: “hopefulness and confidence about the future or the successful outcome of something”. One can argue that such a view is overly fanciful and hence dangerous, but it seems to me that most great ideas and insights result from an optimistic view when looking at data, evaluating situations, and searching for options. When you are being skeptical and looking for problems and failures, that’s typically what you find…problems with the existing processes, not break through new possibilities. Risk aversion or minimization is necessary in business, but it is a pessimistic view that focuses on what can go wrong. I have seen businesses minimize risks, and due to the pessimistic mindset, miss out on opportunities when they weren’t ready for greater than expected success. Growth is a result of optimism - identifying and executing new opportunities – confidently and professionally.

Management accounting should enthusiastically embrace the concept of professional optimism! It is truly a differentiator within the accounting profession. Business needs accountants who focus on creating possibilities and designing new solutions. The Profitability Analytics (PA) Framework is fundamentally about creating and applying operational and monetary information in a manner that will find opportunities to improve profitability. This may mean identifying unprofitable products or services for elimination or change or identifying new revenue opportunities for existing resources or new investments. The PA Framework is balanced across revenue, operations/cost, and investment and ties in closely with the strategic planning, execution, and evaluation processes.

I encourage you to be a professionally optimistic accountant – a management accountant!