Risk & Economy » Regulation » From accountant to business partner

When are management accountants more than just management accountants? When
they transform into business partners, according to the Chartered Institute of
Management Accountants, in a report that seeks to set the benchmark for how top
companies treat their finance functions henceforth.

The report, based on an extensive series of deliberations by the CIMA
Improved Decision Making in Organisations Forum, argues that in a world where
global markets give every company much the same access to resources, and where
business processes are converging on similar standards, the one real remaining
differentiator lies in the decision-making function.

As Peter Simons, one of the report’s authors and a technical specialist at
CIMA, explains, CIMA’s case is that some of the world’s leading companies, such
as Unilever, Shell, BP and Vodafone, are already transforming their finance
function. The main aim is to produce business partners instead of bean counters.

This initiative represents an enlargement of the traditional role of
management accountants as purveyors of ad hoc reports to line management and the
board. This was a necessity when enterprise systems were opaque data mountains
that required skilled financial analysis and presentation before line management
could make sense of them. However, corporate performance measurement systems are
now delivering much of what a management accountant used to do, direct to an
executive’s PC, with all the drill down facilities that any line manager could
wish for.

So what can the management accountant offer after the line manager has
digested the massaged and highlighted key performance ­indicators and
significant figures that pertain to their area of expertise, and which they now
get at the click of a mouse?

Sparring partners
What research shows, CIMA says, is that emerging best practice has the
(unusually skilled) ­management accountant taking on a new role as the “sparrin
g partner for the business”.

To do this effectively, the management accountant has to have a good
understanding of the line manager’s terrain and the challenges the manager
faces. They also need their core competence in finance, and they have to be able
to present their insights in a way which the line manager will find useful,
stimulating and interesting.

But first, let’s turn to the evidence that change is indeed happening and
corporates are behaving differently. Accenture and KPMG have carried out
substantial research and produced reports that show a very high correlation
between outperforming companies and outstanding finance functions, as measured
by criteria which focus on the extent to which finance professionals in top
performing companies are ­taking up the role of being true ­business partners.

Scott Parker, global head of financial management at KPMG, argues that what
FTSE-100 companies have grasped is that there is a global shortage of skilled
finance staff, and the pool of people you have in your finance function,
therefore, constitute an asset that you need to develop fully if you want your
business to continue to enjoy competitive advantage.

One indicator, he points out, is the fact that around half the FTSE-100
companies now have internal finance academies whose objective is to develop the
finance function team members and turn them into value-adding professionals.

However, Parker believes that it is still early days. “The majority of
companies, outside of the FTSE-100, still have highly trained finance ­people
doing a lot of number crunching. You bring in really bright people who could be
a huge help to the business, then you turn them into glorified spreadsheet
jockies,” he says.

Companies that persist in treating their finance function in this way will
lose their best people to the competition. “We identified outperforming
companies by looking at those with the highest rates of earnings growth in the
past three years, then we looked at the finance function to see what they were
doing that was different,” he says.

KPMG found a number of differences, but the key point was that outperforming
companies found it easier to attract and retain highly skilled finance people.
They could do this because they were getting their finance team involved in
­business decision making and that felt good to the finance function.

However, CIMA’s Peter Simons and KPMG’s Parker recognise that it is an open
question whether the role of competent financial expert in business strategic
planning will fall to management accountants or to other specialists. “There is
an interesting challenge and dialogue going on in business over this issue,”
says Parker.

For him, the advantage finance professionals have is a deep training in
objectivity. Sri Srikanthan, a senior lecturer in finance and accounting at
Cranfield School of Management and himself a CIMA member, agrees. However, he
argues that the downside of that objectivity is that accountants, by training,
tend to be very rules based and can often miss the bigger picture.

Like CIMA, Srikanthan argues that typically, today, management accountants
struggle with two gaps, the communications gap and the ­business culture gap.

“This cuts them off from the strategic focus of the organisation so they end
up being out of sync, focused on minor tasks and ripe candidates for
outsourcing,” he says.

Companies want more proactive decision ­making that is more financially
informed. Yet the lack of communication skills keep many ­management accountants
out of this process. “I have plenty of examples of management accountants in a
manufacturing company that haven’t seen the inside of the factory in years, or
where a management accountant in a plastics moulding company knew nothing of the
most basic ­elements of the moulding process.” To be a ­business partner, you
have to get over this gap or the line management will boot you out the door so
fast it will make your head swim, he says.

According to Srikanthan, the best way to broaden and deepen a management
accountant’s experience, he argues, is to have them work with other specialists,
including engineers and ­marketeers – and this is what business schools such as
Cranfield do all the time on an MBA ­programme. “To be part of a team you have
to trust the other members of that team. This is what the accounting function
needs to learn more of and it is closely related to personal development,
learning to work and play with others. This is something we focus on closely,”
he says.

On the positive side, he argues that the stakes are enormous for management
accountants who grasp the nettle here. “A competent, commercially aware
accountant is a huge asset to a corporation and their rise to the board is often
meteoric. In 20 years, having communications and ­business skills will be table
stakes for accountants and those who don’t have this will be out of the game.
Right now, having these skills is a real ­differentiator and a massive plus,” he

Investing in people

Steven Culp, head of Accenture’s finance and performance management practice in
the UK, says that FDs around the world are under huge pressure when it comes to
funding their own departments. They are competing for every pound with R&D,
marketing and so on. So it is all about investing in people development so that
you can steer financial information in a manner that helps the business to
execute, and this, as he says, “is very different from what CFOs have been doing

“There is no doubt that the lack of finance skills is seen by global
businesses as a barrier to growth. It is all about the pressure to see that the
projects you are launching and the investments you are making are sound and will
generate shareholder value. It’s all about the principle of stewardship,” he
says. Management accountants have a great opportunity to step up and show that
they – with the help of training in communications and business skills – can
provide this line of ­business support at the strategic ­decision-making stage.

“The drivers for this are becoming plain. We saw, in the dotcom crash,
companies taking ­significant bets around ­business models that proved to be
­unsustainable. CFOs are seen as bringing ­sobriety and discipline to the
decision making process,” he says.

In this context, the business partner role is not about the accountant being
a nay-sayer, it is about the value of financial prudence and being able to
deliver solid advice in fraught ­circumstances where there are very tight
­windows of opportunity that businesses are ­trying to evaluate.

Imagine the following conversation going on in a UK bank on, say, 8 August
this year:
Commercial director: Is now the right time for our bank to take a solid position
in the US sub-prime sector?

Accountant/business partner: No, Clyde, there never was and never will be a
right time for that. It’s sub-prime, you see, allow me to explain…

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