Mental Model Posts ‘Oscillations’

How to Understand Accounting: Translating Geek to English

Print
Topics: Accounting
Accounting Pic

Photo by Timm Suess

Accounting is needlessly complicated.  And there is often a huge communication barrier between the Accounting department and the rest of an organization.  Maybe that Intro to Accounting class was supposed to help you understand the difference between Debits and Credits, but in my experience, very few (if any) people actually retain this concept.

Debits and credits are part of Double-Entry Bookkeeping, which can trace its roots back to the ancient Greek mathematicians – it’s just a simple Algebraic equation.  But the concept was first codified and published by an Italian Friar named Luca Pacioli in 1494.  It seems pretty clear that Pacioli was using this system as a tool concerned mainly with who owed what to whom.  And there was clear benefit to this system.  Each transaction had to balance out (the debit side equaled the credit side); double-entry bookkeeping is one of those closed systems that must always be in balance.  It forced discipline, it forced transparency, and it forced honesty.  And while this system originally created great virtue effects, those effects are not quite so clear today.

So in order to understand Accounting, we first have to overcome the following aspects of it:  Read More »

How to Increase Employee Productivity: The Science of Making Work Happen

BoredEmployee Pic

Photo by 9likenave.com

Most businesses I talk to would like to figure out healthy ways to grow.  And in almost all of those businesses, that requires people (or employees).  It may simply require greater capabilities amongst current employees, or it may require adding more employees.  In either situation, it makes sense to design the organization so that each person within it can reach peak performance.  And eliciting peak performance from employees is the result of two things: training and motivation.  As Andy Grove says, “A manager generally has two ways to raise the level of individual performance of his subordinates: by increasing motivation, the desire of each person to do his job well, and by increasing individual capability, which is where training comes in.”  Read More »