Does the claim hold water?
In this week we will look at the fields of Accounting and Finance. Your readings this week consider ways in which accounting and finance measure value and, in doing so, may possess tools by which to address some of the current issues facing business today. We also learn about assessing causal claims, and the various kinds of problems that can weaken them.
- By the end of this week, you should be able to:
- Describe the basic origins and current practices of accounting and finance
- Critically evaluate practices of measuring value
- Identify and evaluate causal claims
Does the Claim Hold Water?
According to Dyer (2006), a claim refers to the key conclusion that the author is attempting to persuade the reader to accept. A claim helps in interpretation of effect and cause relationships, which plays a great role in helping individuals to understand the world. A claim helps in answering the question of why, in showing the cause and effect relationship. It also offers the basis for reasoned action and decision making. However, determining causes that result in an effect can be quite difficult sometimes, especially in uncertain and complex situations in business. These situations are normally characterized by either rival causes or multiple causes. In this case, one claim argument is likely to be weakened by an alternative argument or a counter-argument. In some cases, one may need to conduct an experiment or research to determine the cause with a stronger effect compared to the other. This plays a great role in making decisions on the cause to focus on or to address to control the effect. Claims can be used to explain various accounting situations based on the evaluation of causes.
The use of claims to explain cause and effect relation is demonstrated by different accounting writers. Kaplan and Norton (1992) used the balanced scorecard to demonstrate how the set organization’s goals influence workers and management behaviors, which eventually influence the organization’s performance or competitive advantage. A balanced scorecard is in this case perceived as a strategy that links the organization’s goals to the performance measurement in an organization. These measurements help in determining whether the set goals have been attained or not, and to what extent they have been attained. The set goals play a great role in defining the behavior of people in an organization. The adopted behavior plays a great role in determining how operation processes, which mostly include continuous improvement, with the intention of enhancing the attainment of the set goals. This initiates the need for continuous improvement, with the intention of enhancing the attainment of the set goals. This eventually plays a great role in improving organization competitiveness in the market. It can thus be claimed that the balanced scorecard helps in setting organizational goals and their measures (cause), which influences workers’ behavior and eventually influencing the organization’s competitiveness in the marker (effect).
Bakker (n.d.) also offers a claim on how accounting can be used to save the world. According to Bakker (n.d.), accounting rules need to be changed to set rules that govern social capital use and environmental capital use. Bakker based his argument on a balance scorecard concept by claiming that people should measure the things they want to improve and which are pertinent to performance. Social and environmental capitals are two important resources that are highly influenced by organizations’ operations. However, there no rules set to measuring the impact organizations are creating on our social and environmental capital while making money. This threatens sustainability in the world, and that is why Bakker argues that rules should be imposed to assess how organizations are making money or impact they are creating on environmental and social capital while making money, and not how much money they make.
According to Korten (2001), traditionally, money was used as a figurative measure of value. However, this has changed with time, such that money has been losing its initial link to the value over time to the disadvantage of society and business. This means there has been a shift from the known finance theory to a new concept represented by Korten (2001) regarding money relation to economic growth and social change. According to the finance theory availability of money enhanced the level of investment (cause), which influenced economic growth and social quality of life (effect). With the new changes where money is delinked to value; money game concept, the investment becomes speculative rather than obvious (cause), resulting in economic instability, which eventually causing harm to the society (effect). Although this claim can be challenged, however, one may need to determine the role played by rival causes in determining the outcome in the money game argument.
Bakker, P. (n.d.). Accountants will save the world. Harvard Business Review. Retrieved October 28, 2019, from http://blogs.hbr.org/2013/03/accountants-will-save-the-worl/
Dyer, L. (2006). Critical thinking for business students. Captus Press.
Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard-measures that drive performance. Harvard Business Review, 70(1), 71–79.
Korten, D. C. (2001). When corporations rule the world. Bloomfield, CT: Kumarian Press, Inc.