Some examples (that I have seen in reality):
Finance departments are cost centres, until you give them enough resource and they find you a more efficient tax structure. Cut finance departments start to struggle with things like credit control which affects your revenue.
Distribution Centres are usually seen as a cost centre, until you drop spend and it impacts COGS or customer lead times, or inventory in shops raises because of less frequent deliveries and you get out of stocks.
IT is a cost centre, but when funding is reduced change across the whole business slows and other areas are impacted (eg the customer web experience).
In reality the distinction of “some areas generate profit” and “some areas just cost” isn’t true in the end. All areas contribute to profit - some just do so indirectly.
I think the idea of Michael Porters “value chain” is better, where everything contributes to customer value (including indirect functions). The argument this makes is if you see some areas as just cost centres (e.g. fulfilment centres) then you can miss your ability to maximise customer value (e.g. offering faster delivery options).
Even sales people don’t usually generate profit on their own because without the other business areas they would be selling hot air.
Expecting enough of them to just volunteer their time doesn't appear to be a sustainable answer.
I spent a few years in IT as a Product Manager (or a similar role), and I viewed my primary role as protecting my team from the barrage of shit that I got, so that they could focus. This involved making sure I was politically the first point of contact and reducing back-channels (some are fine, but not ones that change functionality, involve significant work or are too distracting), placating the people requesting functionality or fixes by understanding how serious the dependency/issue was, triaging it and either placing it on the roadmap or saying no. We also had an engineering manager that could be the contact for specific bugs who could then triage and pass it on.
You're so, so spectacularly wrong on this, I am honestly gasping for air.
Accountants are the only people who know if your company is alive or a walking dead. How do you expect to run a company if you don't know reliably and with precision how much money it actually has/makes/spends? Money is the lifeblood of a company! Don't you want to be constantly improving the way you make, spend, and report it to investors and the public?
The biggest companies in the world typically end up with CEOs that come either from sales or from accounting. That is not an accident. Business is about money, and you want smart and innovative people to look after it. Conservative CFOs can be the death knell of a company, among other things.
Calm the fuck down. It’s a conversation.
> Accountants are the only people who know if your company is alive or a walking dead. How do you expect to run a company if you don't know reliably and with precision how much money it actually has/makes/spends? Money is the lifeblood of a company! Don't you want to be constantly improving the way you make, spend, and report it to investors and the public?
You entirely missed the point. At no point did I say accounting was not important. I pointed out though that investing more and more into accounting does not boost returns. If that were true, every company could just hire thousands of accountants to boost their profits. This is what separates a cost center from a profit center. Your department provides value in the same way that running water does. It’s critical and you don’t want to skimp on it, but it’s just a part of the business that isn’t helping grow the total market capture.
> The biggest companies in the world typically end up with CEOs that come either from sales or from accounting.
Why would you include sales together with accounting? Sales is precisely the opposite of accounting in this regard because it’s very easy to tie sales directly to revenue. So easy their compensation is literally based on it.
Not so hot take: CEOs that come from accounting and not a customer-oriented profit center are the worst. They know what the numbers look like but are fundamentally disconnected from why customers give money to the business. Seeing the minutiae of the ins and outs of money gives a super false sense of understanding the business. Accounting CEOs are terrible in any industry that requires innovation or getting ahead of trends.
However this:
“Accountants are the only people who know if your company is alive or a walking dead.“
I disagree with.
A walking dead company is only walking dead until one of its initiatives pays off.
The accountants will only know this after the fact, whereas numerous other functions may know it to varying degrees of confidence before the fact.
The accountants know when your debits have to be repaid, how likely they are to be repaid or refinanced by then, and what the penalty for not doing so will be. I'd argue that, in most cases, nobody employed in the development/production chain will have that information, possibly not even the CEO.
Yes, they may have models and estimates, but the real information will be in the hands of those involved directly.
Even things like refinancing and the options for doing so can be affected by things like letters of intent from potential large clients, industry validation, etc.
Just knowing numbers and dates isn’t enough.
I’m not saying accounting isn’t important, but it just isn’t the only source of truth.
Unless you’re into fraud, “accounting” and “accounts payable” are examples of cost centers. You don’t hire a bunch of innovative people to boost it because it’s not going to ever increase your revenue.
The distinction is made from a strategic perspective because scaling up “cost centers” should be avoided at all costs and scaling up “profit centers” is something you want to do as much as you can.
It has no overlap with “interesting work”. Very often the boring parts of an industry are the profit centers (e.g. in academia the profit comes from packing students into classrooms, not research).