To mark the launch of the new CGMA designation, the AICPA and CIMA have published a new report based on research by Oxford Economics, exploring the current challenges confronting CEOs, CFOs and other senior leaders. Gillian Lees, CIMA’s head of corporate governance and one of the report’s authors, explains more.
‘Rebooting business: valuing the human dimension’ is based on a survey of nearly 300 CEOs from over 21 countries across the world, aiming to understand how they viewed current global challenges and what they saw as the priorities in leading their way through them.
We supplemented this research with insights from in-depth interviews with 17 CEOs, chairmen and other business leaders who, between them are responsible for over 2.1 million jobs and market capitalisation of USD1 trillion; expert opinions of high value.
There’s no doubt that businesses are facing many challenges brought about by globalisation, innovation and the continuing fallout from the global financial crisis. As Douglas Flint, group chairman of HSBC, told us, ‘I don’t think we’ve ever been in a period, in our lifetimes at least, where things have been more uncertain’.
Yet the overriding message from our research bears out that the human dimension – relationships with customers, employees, partners and communities – will be key to getting things moving again and sustaining success over the long run. To explain what this means in practice, the report is organised around four core themes.
The first challenge for companies is to understand and unlock value in the human dimension.
Our CEOs were in no doubt that people’s ideas, skills, knowledge and relationships represent the unique value of their companies. As a result, there is a clear need for companies to put more emphasis on demonstrating how these human factors contribute value, given that the current reporting system does not reflect such intangible assets fully.
75% of our respondents indicated that they needed to put more emphasis on measuring and demonstrating the non-financial value of the business while 76% agreed that the current reporting system promotes excessive focus on financials. As Jim Singh, CFO of Nestlé emphasised, ‘We must understand where the business is creating value, where it is destroying value and recommend value added options to improve’.
However, there is some way to go. While 63% agree that it is important or very important to improve expertise in measuring non-financial value, only 51% said that they did this well or very well. However, there are some significant obstacles such as pressure from financial markets and investor focus on short term goals together with a lack of suitable tools and deficiencies in information.
We then probed the issue of short-term focus versus long term sustainable success and discovered that investor demands for short-term results are inconsistent with growing a sustainable business and are making it difficult to plan for the future.
Better tools that measure and promote the value of the human dimension will help, but there is another crucial element – grasping the power of transparency.
For most companies, transparency is an opportunity and provides a number of benefits such as improved reputation and decision making. However, finding the right balance between openness and protecting commercially sensitive information is difficult. And as Lord Adonis, former director of the Institute for Government in the UK, pointed out, ‘Simply throwing out loads of data doesn’t help people if they are not capable of making sense of it’.
And to draw all these threads together, our CEOs advocate a new approach that requires working in collaboration to connect the dots.
What they want are people with core strengths in their own area of expertise, combined with a multidisciplinary expertise to enable them to work effectively with their colleagues. They must understand how the different parts of the business need to come together to create value, and have the communication and influencing skills to make all this happen.
There’s no doubt that CGMAs have the breadth and depth that these businesses need. 80% of our CEOs said that a candidate with the designation would be more appealing than those without it and 76% said that they would want their existing finance employees to obtain it. It looks like there has never been a better time to be a management accountant.
This new report is one of nine thought leadership reports being launched on the new CGMA website, along with other resources including practical tools, videos and an online community.
Links
New CGMA website
Your additional designation: the CGMA explained
CGMA launch: the human dimension is the future of the business world
Providing global job opportunities: the value of the CGMA