Practicing PDCA in Lean Accounting

Practicing PDCA in Lean Accounting

Chapter 6 – Practicing PDCA

The Practicing Lean Accounting Blog Series are excerpts from a new book, Practicing Lean Accounting by Nick Katko and Mike De Luca. For updates on publication and purchase, please sign up for the BMA mailing list at

PDCA is Plan, Do, Check, Adjust 

The easiest and simplest way to describe Plan Do Check Adjust is the application of the scientific method inside businesses. The scientific method is a rational, rigorous methodology to test a hypothesis through systematic observation and measurement. It’s how scientists conduct an experiment and study the results of the experiment to determine if it was successful or not.

For lean organizations, PDCA is both a framework for thinking and the specific steps to solve problems. PDCA can be applied to a single issue, to deal with the natural problems that occur during a work day in any process and to reduce recurring problems through designing and implementing an improved process. Because PDCA is a rational thinking process, it must be learned and practiced regularly, which means not skipping any process steps or abandoning it in favor of top-down management practices when managers see fit.

PDCA for Improvement

In lean accounting, teams learn to apply PDCA to problems and opportunities of various scopes and sizes to drive continuous improvement. The PDCA approach always follows the same thinking, but the amount of effort to complete an improvement activity is directly related to the scope. For small scope improvement activities the PDCA cycle can be quite short and can be part of a regular daily work routine in daily lean management. Larger-scope improvement activities take more time and effort to complete the PDCA cycle and they need to be planned and scheduled. 

Scoping and managing continuous improvement is necessary for a few reasons. Employees must dedicate time to improvement, so there needs to be a balance between improvement activities and work responsibilities. Continuous improvement should be considered a team-based learning process (rather than just something that is done alone), so it’s important to create coordinated activities and also share. Some employees may pick up on continuous improvement faster than others and it’s important not to get too far ahead of those who may need more time to learn. Finally, it’s important to strike a balance between smaller scope and larger scope improvement activities. 

Based on our experience helping companies improve accounting, we’ve developed a framework to scope improvement activities:

Quick Wins 

Quick Win improvements focus on the simple, obvious non-value added and unnecessary activities which can simply be stopped with no negative impact on delivering value. These can, and should, be completed in a short period of time, such as a day, once the team agrees on the change and how to check that it made an improvement.

Daily Improvement

When an improvement idea comes up that is within the accounting team’s control but bigger in scope than a Quick Win, the PDCA cycle typically takes one to two weeks. When the team holds itself to a short improvement cycle, it helps them move more quickly on small, incremental changes that will build on each other rather than trying to “boil the ocean” or get stuck in analysis-paralysis. These daily PDCA improvements can be accomplished in a series of short meetings (30 minutes) which follow the PDCA steps with follow ups in between each one. 

Process Improvements

Process improvements are planned in advance with an objective of achieving specific, measurable improvements in process performance. Process improvement events usually focus on:

  • Achieving a specific rate of improvement in a performance measure over a specified time frame
  • Solving a recurring problem that was not able to be solved in Quick Wins or Daily Improvement activities
  • Responding to a significant, sudden disruption in process performance.

Innovative and Transformational Improvements 

These improvements focus on radical redesign of a process. In accounting processes, conventional transformational changes typically focus on software-based automation and workflow management. Many of these types of changes are top-down company driven rather than lean focused. 

PDCA for Daily Lean Management

Daily lean management incorporates the four foundational practices (understand value, identify waste, using PDCA and lean measures) into a coordinated set of tools and routines designed for accounting teams to gain experience in these practices in the normal course of their work:

  1. Tools:
    1. Visual boards that the team uses to show the most important information about their work.
    1. Performance measurements that cover how the process is working as well as track improvement in outcomes.
  2. Routines:
    1. Daily huddles, stand-up meetings or status checks.
    1. Team problem-solving meetings.

Daily lean management focuses on planning the work, executing the work, reacting to abnormalities and identifying improvement opportunities for all accounting processes. 

Planning the Work

Planning the work is a three step process:

  1. Understand the demand on the process
  2. Understand the available capacity of the process
  3. Prioritize demand against available capacity

Executing the Work

Disruptions are a natural occurrence in any business process, so “executing the work” in daily lean management is not only performing the tasks to meet the daily work plan, it is also establishing real-time “check and adjust” routines to identify abnormalities and having standard responses that minimize the impact on completing a daily work plan. Another way to say this is to developing “routines to handle the non-routine” or “standards to handle the non-standard.”

The Daily Huddle – Plan, Check and Adjust

The final component of daily lean management is the daily team huddle. Daily huddles are short (10-15 minute) “stand-up” meetings around a visual board. Daily huddles are conducted using a standard agenda to answer five basic questions:

  • What is the plan for today?
  • How did the process perform yesterday? 
  • What problems and issues did we encounter? (Capture data and analyze themes)
  • What were the root causes of the problems and issues?
  • How should we address the problems and issues?

PDCA is natural for Accountants

Because PDCA is an analytical, objective and numbers-driven improvement system, it plays right into accountants’ strengths and skills. Accountants spend a great deal of time performing financial analyses and drawing conclusions. PDCA leverages these natural skills, applying them to operational analyses and conclusions. An accountant’s world revolves around numbers. PCDA uses numbers and data focused on operational improvement, which accountants must learn how to use through the use of daily lean management practices, then apply to process improvements.