Decision making vital for accountants to stay relevant

Peter Simons

A new report shows how adopting decision making skills presents a challenging opportunity for management accountants. By Tim Cooper, editor, email newsletters, CIMA.

CIMA has warned companies around the world that failing to engage finance functions to improve decision making is putting their competitive position at risk.

In a report, ‘Improving decision making in organisations’, the institute says that accountants also need to develop their skills to support this dramatic transformation of the finance function. To remain relevant in the evolving global marketplace they need to have a range of wider business skills to add to the core skills and financial disciplines of the traditional accountant.

The report is based on information from members of the CIMA Improving Decision Making in Organisations Forum. Many of these offer case study material and opinions based on their own experiences. Forum members include representatives from Kimberly Clark, The Linde Group, Rolls Royce, Tesco, Unilever and the Department for Work and Pensions.

Waking up to the opportunities

The report outlines how the quality of decision making is becoming the basis of competitive advantage. Leading companies have already woken up to the opportunities presented by developments in technology and globalisation. Now they are looking to their finance and accounting functions to work closely with the business and help improve decision making and support value creation.

CIMA chief executive Charles Tilley said: “This report is the first in a series to be produced by CIMA and demonstrates how leading businesses have already seized the opportunities presented by finance transformation to engage finance to improve decision making across the business. Management accountants play a key role in adding value to the finance function as an integral part of the business.”

A new breed of finance professional

Finance transformation as shown in the diagram above, with greater efficiency in transaction processing and more emphasis on decision support, may suggest what the future of finance will look like. But leading companies already have this competitive advantage.

According to the forum, any company not transforming its finance and accounting function in this way could be putting its competitive position at risk. This view is supported by research from major consultancies ¹².

Global markets are giving businesses access to similar resources. More competitive markets cause business processes to converge on similar standards. In this environment, according to the forum, decision making remains as a vital link in the chain leading to superior returns. This is also supported by the academic Thomas Davenport, see footnote 3.

The bad news for management accountants is that the emphasis on greater efficiency in finance transformation is threatening their traditional roles. The good news is that they can also contribute to each stage of the decision process, from framing the issue through to performance management and reporting results.

However, developing effective finance/business partners to provide decision support is a challenge. It requires a change to the management ethos, starting with a shared clear vision of the future role of the finance and accounting function.

Developing accountants as business partners is described by the forum as helping them to become ‘T shaped’, like the CIMA syllabus. This means that they should acquire a broad range of business and influencing skills to top off the core technical abilities gained through their training as management accountants.

An author of the report Peter Simons, technical specialist, CIMA, said: “Accountants need to be prepared for this new challenging role. It’s an exciting opportunity. The report shows that companies such as Unilever see it as a major project. The starting point has to be a shared vision between the CEO and CFO as to what they want the finance function to do. We hope this report helps with that.”

In next month’s Insight we will examine in detail how Unilever and others have gone about transforming their finance functions and developing accountants to partner the business.

Footnotes
1. Accenture (2004), Finance and performance management mastery and the high performing business
2. The Economist Intelligence Unit (2006), Being the best: insights from leading finance functions, KPMG LLP (UK)
3. Davenport, T.H. (2005), the coming commoditization of process, Harvard Business Review, Vol 83 Issue 6 June 05 pages 100-108

October 2007

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