From the Editor: Get Off the Bench and Into the Game

Support from senior executives will advance your career—but you’ll have to reinterpret the language of cost accounting for them, using real-time value and KPis.

By Agnes Shanley, Editor in Chief

There’s a great divide in many companies today between the executives who run businesses and the scientists and engineers who allow those businesses to exist. Perhaps this separation is based on differences in talent and interest, perhaps it’s based on innate differences in the desire or ability to lead.

More likely, it’s due to conditioning and lack of communication. What else can explain the fact that so many well-trained, intelligent people are left out of most corporate technology selection decisions? Ironically, the same language that may have caused these two groups to drift apart can also bring them together, and give scientists and engineers more of a voice: accounting.

Sure, you all know your ROI from your NPV. But, as this month’s cover story by Invensys Process Systems’ Peter Martin points out, accounting principles need to be given an engineering twist—viewed in the context of continuous improvement and real-time value, rather than the oldfashioned monthly cost accounting sheet.

Traditional monthly accounting systems often fail to show executives the true value of investments, even those that would save their organizations plenty of money. Pharma already has a recent example of a great idea that excited technical specialists, but failed, on its own, to gain the support of most senior pharmaceutical corporate managers: Process Analytical Technologies (PAT).

Now that PAT has been folded into Quality by Design, a broader agenda to lower the cost of drug quality and development, more top executives are starting to buy in. But cost accounting makes even QbD a hard sell. Using real-time data, which today’s IT and control platforms make possible, financial and operational models can be developed. These models can then be used to optimize the facility’s key performance indicators (KPIs), Martin writes, and to demonstrate whether a new technology advances KPIs or not.

Siemens engineer Dan Collins has outlined a hierarchy of methods in a training course he gives to company staffers: payback and ROI are used as first passes, later moving to Net Present Value, Life Cycle Value and Internal Rate of Return. It is important, Collins says, to assess both the quantifiable and less tangible benefits of any project.

Hard issues would include:

  • Increased annual production due to less
    downtime, improved yield, greater throughput or
    debottlenecking
  • Energy savings per unit production
  • Maintenance cost savings
  • Savings in paid overtime, or staffing costs

Softer benefits could be:

  • Reductions in work-in-progress (WIP) inventories
    from debottlenecking or just-in-time production
  • Increased customer satisfaction due to better quality
    product or faster delivery
  • Lower turnover, assuming that it generally costs twice
    an employee’s annual salary to replace him or her.

Even if you don’t aspire to be a corporate executive, observers today agree that you will need to take a manager’s approach to your day-to-day job, and think in terms of accounting principles and KPIs. Don’t be content, like so many technical experts, to perfect your technical knowledge and skills but remain detached from management, in “back office” mode.

This detachment had become so entrenched in the U.S. that scientists and engineers at many companies used to begin their careers as “Members of the Technical Staff.” After years of excellence, a select few could become “Distinguished Members of the Technical Staff.”

Of course, there will always be some who won’t think beyond the back office, be that the laboratory or the plant floor, but their numbers are dwindling. In today’s competitive environment, nobody can afford to sit on the sidelines anymore.

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