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About Dr. Kazuo Inamori's Management and Accounting Principles |
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| Dr. Kazuo Inamori regards the accounting system based on his management philosophy as the core of management. In his book, Kazuo Inamori's Pragmatic Studies: Management and Accounting, he describes the seven accounting principles designed for management as outlined below. |
In the process of learning to manage Kyocera, a company I founded at the age
of 27, I came to understand that accounting represents "the core of management"
in modern times. I realized that being aware of the true condition of the company
was essential for the long-term development of the corporation.
To undertake management in earnest, all management figures must show the true operating conditions of the company without any manipulation. All items and numbers in our income statement and balance sheet must be perfect, reflecting an absolutely accurate view of the company for everyone to see. I thought of this data as the instrument panel of an airplane. The financial figures are the readings that management must rely on to pilot the corporation toward the desired destination.
With these ideas in mind, I asked my accounting department to prepare financial documents that would help me steer the company. Using them at both Kyocera and DDI, we were thus able to achieve steady business growth without any adverse effects from the bubble economy. Looking back, I count my blessings that I was unskilled in accounting. This forced me to ask questions and learn the most basic principles of accounting. We had to rely on our management philosophy of "do the right thing as a human being" to establish the basic structure and of our own accounting principles.
I developed seven basic principles that are necessary for implementing this management accounting method and have been applying them in management ever since they were created. |
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1. Principle of Cash-Basis Management |
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| Cash-Basis Management describes a management style based on "substance," which focuses on the flow of cash. In other words, my first principle of accounting is that we should strive to manage business according to a cash basis. |
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2. Principle of One-to-One Correspondence |
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| One-to-One Correspondence needs to be followed strictly, not just as an accounting discipline, but also as a way to regulate enterprises and the people who work within them. Through its application, we can achieve "transparent management" that is free from any unfairness, either internal or external. |
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3. Principle of Muscular Management |
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| A corporation must continuously develop itself. If we were to compare a corporation to a human body, our company would strive to maintain a lean and athletic body with excellent blood circulation throughout. In other words, managers should aim to create a lean and muscular company. |
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4. Principle of Perfectionism |
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| "Perfectionism" refers to the basic posture of management that aims at perfection in every detail of our business, without any ambiguity or compromise whatsoever. |
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5. Principle of Double-Check |
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| "Double-Check" means a mechanism that sustains the soundness of personnel and organizations beyond accounting functions and reaches across many aspects of a business. |
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6. Principle of Profitability Improvement |
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| A corporation must see improved profitability as its most important mission. To improve profitability, it is not only important to increase sales, but also to simultaneously raise the added value of the company’s products and services. To raise the added value, we must create products and services that have higher market value using fewer resources. Improving profitability is the prerequisite that enables us to raise employees’ standards of living and contribute to the advancement of society through corporate activity. |
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7. Principle of Transparent Management |
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Since I founded Kyocera, the strong bonds formed between human minds have always been the basis for my business; in other words, I have managed the company based on a mutual trust with employees. It was necessary for a small company like Kyocera to have a strong bond between management and employees in order for it to survive in a highly competitive world. I realized then the importance of openly disclosing the true condition of our company to employees in order to build a strong trust between us. Such was the thinking that led me to build our sｔyｌe of transparent management, sharing the company’s true financial condition with all employees.
(From the publication, Kazuo Inamori's Pragmatic Studies: Management and Accounting) |
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About Dr. Kazuo Inamori's Management and Accounting Principles |
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