Chapter 2 - Normalizing the Numbers
Make Numbers Comparable Before Seeking to Understand Them
At this point, the data exists.
It has been collected.
It is technically readable.
It is usable, source by source.
Each entity is coherent.
Each system is doing what it should do.
And yet, as soon as we try to produce an overall reading,
something blocks.
The numbers are not wrong.
They are simply not comparable.
Data Can Be Accurate Without Being Usable
Normalization often starts very low, at the finest level.
A fee account, for example.
From an accounting perspective, it is perfectly correct.
It groups fees, and fulfills its regulatory function.
But from an analytical perspective, this same account can contain:
marketing fees,
sales fees,
IT fees,
HR fees,
finance fees.
The data is accurate.
But it does not allow us to read the activity.
To analyze by department,
we need to break down what has been grouped.
It is not a correction.
It is a translation.
Align Entities That Do Not Tell The Same Story
The same problem quickly arises between legal entities.
Same country.
Same regulatory framework.
Same currency.
And yet:
different charts of accounts,
differing practices,
accounts that reflect different realities.
Each entity is coherent when taken in isolation.
But their addition mixes concepts.
Addition without normalization,
means aggregating things that do not speak about the same object.
One then needs to:
define a target structure,
establish mappings by entity,
sometimes reclassify or clean up certain accounts.
Not to correct the accounting.
But to make overall reading possible.
When There Is No Common Language Left
As soon as we go beyond a single country,
the question becomes even more visible.
The charts of accounts differ.
Nomenclatures change.
Sometimes, there isn't even a mandatory structure.
There is no natural common reference.
To read the whole,
one must create one.
A chosen nomenclature.
An imposed common language.
A framework that is not perfectly native to anyone.
This framework is neither true nor false.
It is necessary.
Normalize Time Before Discussing Performance
Normalization is not just about structures.
It also concerns time.
Regulatory constraints mainly fall within long horizons.
Year.
Semester.
Sometimes quarter.
Management, on the other hand, relies on a shorter rhythm.
Some entries have thus been recorded according to logics
that do not match the expected reading rhythm.
From an accounting standpoint, everything is correct.
But without a common time framework,
comparisons become unstable.
Before any performance analysis,
you must therefore align time.
Decide on a reading unit.
Realign certain entries.
Neutralize purely calendar effects.
This is not an interpretation.
It is a compatibility adjustment.
Normalization as a Silent Framework
At each level, the mechanism is the same.
Normalization does not seek to explain.
It seeks to make comparable.
It:
aligns,
homogenizes,
simplifies.
But in doing so,
it imposes a common framework.
This framework:
precedes any analysis,
structures possible comparisons,
defines the language of management.
Normalization does not freeze conclusions.
It freezes the framework within which they can be formulated.
The Invisible Condition of Management
Without normalization:
the numbers do not communicate,
comparisons make no sense,
analysis is impossible.
It is a necessary step.
Rational.
Indisputable.
But it sets a common framework very early,
in which everything else must fit.