Three Lessons from Dr. Horngren


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I remember I was in Palo Alto visiting Professor Charles Horngren to congratulate him on the 50th anniversary of the publishing of his epic textbook Cost Accounting: A Managerial Emphasis (14th edition 2011, Prentice Hall: Boston, MA). It has been the market leader since 1962. What is the secret to this book’s success? Let’s see what we can learn from Dr. Horngren.

One of the benefits of working with Dr. Horngren (who serves as the academic advisor to our Beyond Budgeting Round Table) is you get some insights into how he works. One way Dr. Horngren keeps his text alive is to always be learning. When I first invited him to participate in Best Practice research we were conducting on activity-based costing, I was only hoping that he would make time to provide some feedback on our summary report. Instead he joined us for five of the six site visits (the one he missed was due to a scheduled test he was giving that day but he took a red eye flight to be with us the following morning for the next site visit).

A second lesson from Dr. Horngren is illustrated by his textbook. In preparing to attend a dinner to celebrate the 50th anniversary of his book, I pulled a 1st edition copy. I noted that it had 808 pages. In comparison, the 14th edition which was just issued comes in at 896 pages. As a participant in this field I know that cost and performance management have had major changes over the last 50 years (activity-based costing, beyond budgeting, target costing, the rise of analytics, etc.). Horngren and his co-authors Skikant M. Datar and Madhav Rajan (as well as George Foster on earlier editions) have constantly updated the book. In speaking with Professor Rajan he noted that one of the hardest parts of editing is deciding what to add and what to modify and deleted.

This echoes a major change point we must all learn: change requires you to decide what you will stop doing just as much as it requires you to decide what you want to start doing. For Professor Horngren and his coauthors, book additions required simultaneous decisions on what to de-emphasize or delete. As I discussed this with Professor Rajan we noted that the academic semester only has so many weeks available for instruction. Likewise, organizations only have so much management capacity.

Change expert William Bridges does an excellent job describing this in his work on transitions. I strongly recommend his book Managing Transitions: How to Make the Most of Change (3rd edition 2009, Da Capo Press: Philadelphia, PA). He notes that transitions begin with ending. This is necessary to create the space to transition to a new approach. The way I visualize it is a table full of things – so full that there is no open space. How do you add something? The only way is to push something off.

The final point from Dr. Horngren is his constant reminder that the objective of cost information is effective decision making which provides the compass that guides so many design decisions. Having a sound compass is essential to successfully transition to new approaches. A compass makes sure that you won’t get lost on your journey.

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