Driving innovation in management accounting | February 2019
SECRE TS OF LASTING SUCCESS Study of 100-year-old organisations reveals common traits Trust, opportunity, prosperity: 100 years and beyond
Celebrating 100 years
Join us at our Centenary Ball on 6 June 2019. Book now at CIMAglobal.com/ball100
2019 is a special year as CIMA celebrates its 100th birthday. It is a great time to reflect on our heritage, but also, more importantly, to focus on the future of the profession. This year will see the introduction of some great new initiatives and insight into the future of finance. Building on 100 years of heritage, we are in an excellent position to support and enable our members and students to ‘go beyond’ in this digital future.
#CIMA100
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Longer summaries of this issue’s most in-depth articles can be found on page 64.
12 THE SECRETS OF 27 A COUNTERINTUITIVE LONG-LASTING TIP FOR GOAL SETTING ORGANISATIONS Here’s why maintaining the In this Q&A, researchers share status quo is more challenging their findings on the uncon- than setting a goal that ventional paths organisations requires a small amount of take to build sustainable progress. success. 28 BOUNCING BACK 16 UNLOCKING INSIGHTS FROM A PUBLIC WITH DATA ANALYTICS RELATIONS SETBACK Explore data analytics A marketing event goes wrong, 10 opportunities and challenges but long-term thinking by the for professional accountants in finance department helps business. mitigate the fallout. What did 5 THE VIEW FROM THE Build-a-Bear do right? PRESIDENT 18 MAKING FASTER Embracing the future requires DECISIONS WITH AI 32 NINTENDO AND THE a willingness to change, says Artificial intelligence can cut MAGIC OF NOSTALGIA CIMA President Steven through an abundance of data MARKETING Swientozielskyj, FCMA, CGMA. and show the root cause of The Japanese video game business performance. company is using nostalgia to 6 BRIDGING THE WORK- boost sales and build brand LEARNING DIVIDE 20 STRATEGIES FOR loyalty. Here are tips for The updated CGMA Compe- FINDING A GOOD incorporating nostalgia into tency Framework and MANAGER TO WORK FOR your marketing plans. professional qualification Managers are a major syllabus are designed to influence on job satisfaction. 36 SOLVE PROBLEMS 18 ensure students and members Here are tips on determining a WITH LINEAR remain employable in the manager’s characteristics PROGRAMMING digital future. before you start working for AND EXCEL them. Management accountants can 24 8 INFO ROUNDUP help their companies News, insights, and 24 STRETCHING YOUR determine how to make the intelligence. TEAM FROM most of limited resources in ENGAGEMENT TO myriad situations. This article 10 LUNAR NEW YEAR CREATIVITY shows a way. MASS MIGRATION How using these inventive The Lunar New Year brings a ways of gaining knowledge can mass of travel, as well as aid finance teams. business fluctuations, as workers and students journey 32 home for the holiday in China. 12
28 ON THE COVER: PHOTO BY NASA/REUTERS; ON THISPHOTO PAGE: BY SAURABH COUNTERCLOCKWISE DAS/AP IMAGES; FROM PHOTO TOP LEFT: BY SOPA PHOTO IMAGES/GETTY BY CHINA STRINGER NETWORK/REUTERS; IMAGES; PHOTO BY TARU HANAI/REUTERS; PHOTO BY ERIC REED/AP PHOTO IMAGES; BY JOE AMON/GETTY IMAGES
February 2019 I FM MAGAZINE I 3 52 56 60 42 THINGS ARE LOOKING 52 KEY CONSIDERATIONS 56 EQUINE STUDIES FOR UP WITH THIS EXCEL FOR CROSS-BORDER EXECUTIVES FUNCTION M&A PLANNING Jude Jennison’s work uses 62 INSTITUTE NEWS When it comes to searching Financial, legal, social, and horses to reveal the default Get updates on issues affecting for dates in a spreadsheet, political factors play particu- behaviours of executive the profession and your LOOKUP may be the best larly important roles in leaders. membership. choice. cross-border transactions. 60 HOW TO WORK WITH 66 TIPS FOR RETAINING 48 MOVING UP THE SOMEONE YOU DISLIKE NEW SKILLS LEADERSHIP MATURITY Take these steps to cope when Remember what you’ve CHAIN you have an aversion to a learned in courses, workshops, Transpersonal leaders lead co-worker. and training sessions. beyond their ego.
CIMA HONORARY OFFICERS United Kingdom The Helicon, One South Place. London EC2M 2RB Steven Swientozielskyj, FCMA, CGMA Amal Ratnayake, FCMA, CGMA Tel.: +44 (0)20 8849 2251 President, CIMA Deputy President, CIMA United States David Stanford, FCMA, CGMA Nick Jackson, FCMA, CGMA 220 Leigh Farm Road, Durham, NC 27707-8110 Immediate Past President, CIMA Vice-President, CIMA Tel.: +1 919-402-4500 www.aicpa-cima.com
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4 I FM MAGAZINE I February 2019 THE VIEW FROM THE PRESIDENT
STEVEN SWIENTOZIELSKYJ, FCMA, CGMA
here is a reason our It is a privilege to be the TInstitute has existed for Institute’s president this year 100 years: Throughout — a year when we respect our we have adapted and great heritage and embrace our continued to lead the profes- future. It is not easy to define sion amid a century of seismic that future, but we can look at economic, business, and social how we have led change over change. the past 100 years to learn how Technology may have to engage with it. changed beyond all recognition I have experience of leading since CIMA was founded, but businesses though consider- business still faces many of the able change, and I know that fundamental challenges that not all decisions are popular. were testing companies in Retired US Army Gen. Eric 1919. These were the compa- Shinseki put it pretty well: “If nies that emerged in the early you don’t like change, you’re years of mass production at the 100 years and beyond going to like irrelevance even beginning of the 20th century. less.” And that is a key message Companies like Unilever, ‘It is a privilege to be the Institute’s as we move beyond 100 years, founded by our first president, embrace the fourth industrial Lord Leverhulme, and the president this year — a year when revolution, and celebrate. Austin Motor Company, we respect our great heritage A recent London Business founded by Sir Herbert Austin, School Review article looked at one of a number of early and embrace our future.’ why companies eventually vice-presidents. fail. It described how in the Today we talk about data mid-1920s, “leading” compa- analytics, robotisation, and AI. Then, Lord Lever- nies had an average life span of 90 years; today it is a hulme, writing in The Cost Accountant, described how mere 17 years. That said, as well as CIMA, there are a “the days of ‘rule of thumb’ are gone never to return”. number of organisations that have hit the 100-year CIMA has made huge strides since 1919 and its mark — a phenomenon covered on page 12 in this first exams in 1920. Along the journey, our first issue. international office opened in South Africa in 1955, To avoid following the way of companies like we were granted a royal charter in 1975, and in 2012 Kodak requires a willingness to change. Kodak’s we introduced the CGMA designation. We’ve camera business collapsed after 124 years in 2012. It changed from a British to an international to a had failed to adapt its business model in the face of global organisation. disruptive digital technology. Our Association with the American Institute of CIMA is steadfastly committed to equipping its CPAs now means that globally we empower more than members for the next 100 years — so that they can 667,000 members and students. In contrast, the seek and take opportunities and deliver prosperity Institute of Cost and Works Accountants, CIMA’s name across the world for themselves, their organisations, in 1919, had 37 members. The first woman to take and their communities. exams and become a member was Miriam Neale in I want to thank the members and students who 1921. In 2003 Claire Ighodaro was our first female have made CIMA what it is today — and I want to president, and in 2009 Aubrey Joachim became the engage with many of you during this special year. first non-British and Irish president. Today, the future While 8 March is CIMA’s official birthday, we will be of our profession lies in the hands of almost equal celebrating during the year at events around the numbers of male and female students. world (see #CIMA100 and cimaglobal.com/cima100). PHOTOS BY ANTHONY UPTON/AP IMAGES
February 2019 I FM MAGAZINE I 5 THE VIEW FROM NOEL TAGOE, EXECUTIVE VICE-PRESIDENT–MANAGEMENT ACCOUNTING, RESEARCH AND CURRICULA THE ASSOCIATION OF INTERNATIONAL CERTIFIED PROFESSIONAL ACCOUNTANTS Bridging the work-learning divide
‘The updated syllabus is exciting and relevant to both finance professionals and employers, and it is based on our rigorous research.’
rganisations professionals to reimagine their continue to face roles in four key ways. disruptions due to a First, the finance function variety of factors, in needs to transform itself from a Oparticular digitalisa- cost centre to a value centre. If the tion. Overcoming profession is predicated on value, these challenges depends on the it is likely to grow in size and performance of their employees, influence. However, if the finance including finance professionals. function continues to be regarded This has massive implications for as a cost to be reduced, it is likely to the employability of finance shrink due to cost minimisation. professionals because they will This requires the finance need to gain the right skills to function to have both “outside in” ensure that they can perform at the and “inside out” views of the desired level and thus remain business. This is challenging attractive to employers. exam blueprints that show students what because finance people should be able to To ensure our students are fully is examinable and make learning more read their organisation’s ecosystem. These prepared for that future, we are launching effective and efficient. These are widely ecosystems are often unstable and rapidly our updated CGMA Competency Frame- used in the US and are a new innovation changing in contrast to the more stable work and syllabus of the CIMA Profes- and a benefit of working together as one environments of the past. sional Qualification. These are also Association. To create the blueprints, we Second, finance needs to use its relevant to the CGMA Finance Leadership asked finance professionals working in control systems to enable action rather Program route to gaining the CGMA business at each level of the syllabus or than to stop action. Consider here the designation in the US and address the supervising people at those levels to rate analogy of a car brake. Which car would skills needs of employers — to bridge the work tasks on both their frequency and on you drive fast? A car with excellent brakes gap between work and learning. how critical they are. Those tasks that are or a car with faulty brakes? From this we For members, we will continue to carried out most frequently and are most know that it is the brake (a control system) provide learning that keeps them up to critical will be examined more deeply. In that enables drivers to drive fast because date. CIMA members will be equipped effect, the blueprints operationalise the they know they have the means to slow with the opportunity to enhance their syllabus in teaching and exams. down or stop if necessary. learning via a new CGMA product to Recently, we worked with a large ensure they retain their value in tomor- Reimagining finance’s role organisation where a credit control row’s workplace. These changes are driven by the need for system acted as a brake that stopped For the first time we are introducing the finance function and finance rather than enabled action. A change of PHOTO BY GARY LEE/AVALON
6 I FM MAGAZINE I February 2019 mindset for the company’s leaders meant that financially robust customers ‘These changes are driven by the were given more credit. This has resulted in higher revenue and cash need for the finance function and flows for the organisation. Looking at the issue with fresh eyes led to finance professionals to reimagine increasing cash flow. Third, finance needs to develop its their roles.’ ability to “tell the story” of what is happening in the business: a past, present, and future view. Currently, that story is often told with financial data only. increasingly highly valued. For example, the story of the organisation’s perfor- Increasingly, we are seeing visual and computers are excellent at prediction but mance and how the organisation can narrative elements that can enlighten and in practice provide too many scenarios. access adequate and cheaper finance to engage stakeholders, and then combine to Human judgement is often needed to fund its strategy and operations. give impetus for change. Our updated provide wisdom, context, and perspective To highlight a few of the syllabus’s syllabus will enable finance professionals to make decisions about these scenarios. changes, at the Operational level we have to create that impetus for change in their As a further example, Reuters recently introduced a new subject, Managing organisations. reported that Amazon used artificial Finance in a Digital World, which looks at Finally, accountants need to be intelligence (AI) to sift CVs, but the the technologies, data, and structures that partners for value. As business partners machine taught itself that male candi- finance professionals use in the digital they need to be critical friends who dates were preferable. The company, age. The emerging area of digital costing is champion the cause of their principals according to the Reuters report, saw the also included to provide insights in the and at the same time challenge their gender bias and altered the program. changing nature of the structure, drivers, views and assumptions where necessary. Amazon told Reuters the tool “was never and behaviour of costs for digital assets This requires that they know the business used by Amazon recruiters to evaluate and enterprises. from end to end. Success in this area will candidates” but declined to comment At the Management level we have help them transition from navigators who further. In addition, some companies introduced business models and the use of show the way to co-pilots who jointly lead have also used AI to predict productivity data analytics tools and mindsets to the business. based on postcode for recruitment analyse and present the performance of the purposes. Humans identified flaws in this organisation. We have also given more Skills and competencies: approach — in addition to the inherent prominence to integrated reporting to An updated framework ethical problems with it. reflect the multi-stakeholder environment The updated CGMA Competency in which most organisations operate. Framework continues to be underpinned New areas in the updated syllabus At the Strategic level we have intro- by ethics, integrity, and professionalism, The updated syllabus is exciting and duced cyber risks and digital strategy. In but it moves from the existing four skills relevant to both finance professionals and addition, we have dialled up the area of categories to five categories. Added to the employers, and it is based on our rigorous valuation of intangible assets to reflect technical accounting, business, people, research. It has been put together so that it their growing importance in the business and leadership skills is a fifth category, can be studied over a reasonable period of environment. digital skills. Additionally, some digital time. For employers, the result will be skills are also now embedded within the It is an evolution from the previous business success based on CGMA four traditional areas. 2015 syllabus with three types of changes designation holders who are fully Technical skills preserve the skills of — some new topics have been added, equipped for a digital future. The outcome financial reporting, costing, budgeting, some topics have been taken out, and for CGMA designation holders is that they capital investments, and managing cash. some existing topics have been moved will be better placed to be effective in the However, we now need people who can within the syllabus. workplace, add value to their organisa- understand digital costings and can use It includes new areas of digital costing, tion, and enjoy successful careers. that to influence decisions and perfor- digital strategy, cybersecurity, valuation of mance in their organisations. intangibles, business models, and Noel Tagoe, FCMA, CGMA, Ph.D., leads the We also recognise, despite increasing ecosystems. Association’s Future of Finance project automation, that certain human skills are There is no change to the previous (cgma.org/future-of-finance). ■ three-pillar structure. The Enterprise pillar helps students craft strategy and prepare to influence and implement strategy. The Performance pillar ensures that the strategy is realistic, monitors its implementation, and examines the risks that the strategy might not be imple- mented properly. The Financial pillar tells
February 2019 I FM MAGAZINE I 7 LEFT: IMAGE BY OLIVIER LE MOAL/ISTOCK; RIGHT: IMAGE BY METAMORWORKS/ISTOCK 8 91% ratings asmostcritical: the largestpercentage of attributes belowreceived organisations. The to thefutureoftheir important thefollowingare from 79countrieshow business andHRleaders PwC asked morethan1,200 organisations for capabilities Top 10future 76% 82% 87% Human skillssuchas Source: PwC’s 76% 76% Innov 77% 78% 79% 80% P Tomorrow’s Workforce, Today. I FM MAGAZINE I
We aretrustedby Re-skilling and ation isnurtured. We offertransparency Healthy work/life Policies foster Work environments are erformance Initiatives foster and developed. curiosity arerewarded le employees. society, customers, and are valued. continuous learning structured. about howpay is workers. balance helpsattract adaptability andagility. collaborative. on outputnothours. management focuses workers. wellbeing amongst adership and Preparing for February 2019 The labourforce of 2022 Report 2018: explored intheWEF’s TheFuture ofJobs labour markets worldwide. Theyare some key driversofthechangesaffecting across differentindustriesunderscores representing 15millionemployees CEOs atleading globalemployers of chiefhumanresources officers and A W ● ● INFO ●● ●● ROUNDUP chain technology. learning, and45%expectedtoadopt block- analytics, 73%expectedtoadopt machine ed expandingtheiradoptionof big data By 2022,85%ofrespondentsanticipat- Adoption oftechnologywillaccelerate. 2022. reduction intheirfull-timeworkforceby expect thatautomationwillleadtosome Nearly 50%oforganisationssurveyed ciency, andsupportnewbusinessmodels. net, willpromoteautomation,boosteffi- and ubiquitoushigh-speedmobileinter- intelligence, robotics,machinelearning, Technological advances,suchasartificial orld EconomicForum survey (WEF) in theUK. ShilpaPai— By Mizar, afreelance writer based enterprises. trends areexpected insmallandmedium emerge inlargecompanies. Complementary while 133millionadditionalnewrolescould million jobswillbedisplaced byautomation, ●●● ●●● Skills requiredtoperformajobwillshift over thenextfouryears. half expectedtomodifywheretheyoperate and distributetheirproducts,nearly to significantlymodifyhowtheyproduce than half(59%)ofrespondentsexpected and leadership. problem-solving, emotionalintelligence, creativity, criticalthinking,complex demand, aswillhumanskillssuch in newtechnologieswillbeincreased require newskillsby2022.Proficiency employees representedinthesurveywill significantly. Morethanhalf(54%)of tion, andvaluechainswillchange.More The geographyofproduction,distribu- The report highlights an estimate that 75 The reporthighlightsanestimatethat75
Frankfurt leapt into thetenthspotin is anotherrisingfinance powerhouse. prominent finance centres, andGermany have solidifiedtheirpositionas Middle East,andEasternEurope. emerging finance centres inAsia,the tracked hasincreased to100,with centres. Since then,thenumberofhubs technology. such asartificialintelligence andcloud economy andtechnologicaladvances competitiveness isfuelledbyChina’s Shanghai, globalfinance centres whose top spotareHongKong, Singapore, and two-point lead overLondon. September 2018,NewYork Citytooka the ChinaDevelopmentInstitute. In twice ayear byLondon-basedZ/Yen and (GFCI) launchedin2007andisreleased Europe, andintheMiddleEast. are emergingacrossAsia,inEastern in, andtomorrow’s finance powerhouses up-and-coming hubsinChinaareclosing research bytwothinktankssuggests. But most powerfulglobalfinance centres, New York andLondonarestillthetwo are rising powerhouses finance tomorrow’s Where Intelligence, onNintendo’s financial volume ofpeople playing it.Ithelps electronics analyst for Bloomberg decades ofnostalgia basedonthe Hong Kong, Singapore, andShanghai The firstGFCI ranked 46finance Close ontheirheelsandvyingforthe The GlobalFinancialCentres Index success from rereleasing classic — Jitendra Waral, aconsumer ‘It’s agreat way ofmonetising the brand; it’s like ahomage.’ The power of The power of nostalgia gaming consoles. Full story, page32 senior editor. — By to threeyears. become moresignificantinthe next two which financial centres theythinkwill asked aseriesofquestionsincluding respondents. Surveyrespondentsare global surveyinvolves nearly 2,500 reputation, andinfrastructure, andthe factors suchasbusinessenvironment, also rising. andSaoPaulofortunes ofBermuda are Doha, andCapeTown inSouth Africa.The United Arab Emirates, Qatar’s capital coming areDubaiandAbu Dhabiinthe cities’ competitiveness. Alsoup-and- sector developmentsareboostingthe Infrastructure investments andfinancial (Estonia’s capital)andSeoul. and Stockholmfellintherankings. Dublin, Munich,Hamburg,Copenhagen, Amsterdam andVienna. InEurope, Other Brexit beneficiariesinclude according tothethinktanks’research. uncertainty thatcostLondonitstopspot, and Frankfurt benefitedfromtheBrexit March. Zurich,whichmovedintoninth, September 2018GFCI, upfrom20thin 500,000 GFCI rankings aredeterminedby Promising hubsincludeTallinn Workshop’s ‘Pay Your AgeDay’ in July 2018, overwhelming some of July 2018,overwhelming someof customers who turned out in the customers whoturnedoutinthe Sabine Vollmer, an FM US and UK for Build-A-Bear US andUKfor Build-A-Bear The estimated number of The estimated numberof the retailer’s locations. Full story, page28 magazine centres finance global Top 10 Source: Global FinancialCentres Index, September 2018. ‘The All Blacks [New Zealand’s national ‘The AllBlacks [New Zealand’s national The Centre for HighPerformance anda 9 8 7 6 5 4 3 2 1 — Alex Hill,co-founder anddirector of 10 big win.They’re worried complacency biggest changes to their team after a biggest changesto theirteam after a rugby team] often make someofthe February 2019 professor atKingston University. Zurich (16th) (11th) Beijing Sydney (9th) Tokyo (5th) Shanghai (6th) Singapore (4th) Hong Kong (3rd) London (1st) New York (2nd inMarch2018) Frankfurt (20th) Long-lived and Long-lived and Full story, page12 thriving will setin.’ I FM MAGAZINE I
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MIDDLE: PHOTO BY MONGKOLCHUEWONG/ISTOCK; BOTTOM: PHOTO BY ANDREY KRAV/ISTOCK Lunar New Year mass migration
very year, a great migration of workers and students from megalopolises to smaller cities and towns announces the beginning of the Lunar New Year in China. This year, the travel rush begins one to two weeks before 5 February and lasts for about 40 days. Last year, 732 million trips were made by road, rail, air, and Ewater in the lead-up to the new year, according to Xinhua, the Chinese govern- ment’s news agency. It’s the most important event on China’s calendar. In this period, a highly prized possession is a ticket that will ensure its holder passage home. Small shops shutter for at least a month, and factories empty as most workers head home to celebrate the holiday. However, a minority remain in cities, lured by the double or triple salaries offered to keep services running. Manufacturers plan ahead by fulfilling orders before the holiday to avoid disruption in the global supply chain. — By Alexis See Tho, an FM magazine associate editor. Lunar New Year in2018. workers, andstudents travel for the in northeastern Chinaasfamilies, railway station inLiaoningprovince Luggage sits intheShenyang North
PHOTO BY CHINA STRINGER NETWORK/REUTERS The secrets of
In this Q&A, researchers explain their findings about the unconventional ways ‘Centennial’ organisations have sustained success for more than 100 years.
By Neil Amato
hen Jules Goddard, Alex Hill, and Liz Mellon began to study organi- W sations with a long history of success, they were surprised by some of the behaviours the organisations shared. Part of their ability to thrive can be attributed to going against conventional business norms. For example, they are not focused on getting bigger, and they don’t fret over what their competitors are doing. They have achieved success for more than 100 years, which is why these researchers named the group the Centennials. The seven organisations they studied and wrote about for Harvard Business Review are: The All Blacks, New Zealand’s national rugby team; British Cycling; Eton College; the US National Aeronautics and Space Administration (NASA), which through a predecessor organisation dates to 1915; the Royal Academy of Music; the Royal College of Art; and the Royal Shakespeare Company. The knowledge they gained was shared with the researchers’ contacts in the business world — at companies such as Apple, BMW, Cirque du Soleil, and Dyson — to see what the companies could learn from the Centennials. What follows is a Q&A with the researchers, edited for length and clarity. Hill was the lead researcher and therefore took the lead in answering most of the questions.
What were the reasons you wanted to focus on long-running, successful organisations? Alex Hill: Studies started to show a trend: Each year, businesses are actually
12 I FM MAGAZINE I February 2019 long-lasting
This article is one of a series throughout 2019 commemorating organisations CIMA’s centenary.
dying earlier and earlier in the US and the UK. The conclusion that we started to come to was that maybe too much of the current management thinking has come from business. That’s great if you want to perform well for a short period. But if you want to perform well for a very long period, maybe we should be looking at other types of organisations, not busi- nesses, and learning from them.
How did you select the organisations you ended up studying? Hill: We had been doing work with the funding body for the UK Olympics teams to understand how they had transformed their performance from the 1996 Games in Atlanta to the 2012 Games in London. They talked us through the journey, and we said, “What keeps you awake at night?” Their worry: Is it sustainable? We said, “Who do you think you could learn from?” They said: “The arts. They’ve been doing this for hundreds of years.”
So you contacted the Royal Academy of Music, the Royal College of Art, and the Royal Shakespeare Company first. Did you consider for-profit businesses? Hill: We kept trying to think of a business to add. The challenge was struggling to find a business that hadn’t
Members of the All Blacks, New Zealand’s national rugby team, sign autographs for young fans. Researcher Alex Hill attributes the club’s long-term success, in part, to making “some of the biggest changes
to their team after a big win”. HANAI/REUTERS TORU BY PHOTO
February 2019 I FM MAGAZINE I 13 ‘The whole point about learning from success and failure is that it creates a learning organisation.’ An exhibit by the Royal College of Art. Alex Hill said he and his Liz Mellon, Ph.D., one of the researchers on fellow researchers found that the Centennials study such organisations “had a stable core but a disruptive edge”.
had its activities change over that period and changing, or conservative and What about the notion of cost efficiency? of 100 years and was admired. We found radical, or slow and fast — even the Hill: The organisations that do sustain some that were that old and some that attitudes like confident and humble success for a long period aren’t the were admired, but they had changed what are something I think businesses cost-focused ones. This isn’t an efficiency they did or they survived by buying and struggle with. Businesses tend to game. This isn’t about milking every last selling companies rather than necessarily articulate values at one extreme rather drop out of the ideas and practices you running one. than the other and are less comfortable currently have. This is about designing recognising that every value is your organisation so that you find new What were some of the similarities inconsistent with every other value. ideas and practices and you’ve got that that started to emerge about the way Liz Mellon: Managers with companies moving force. these organisations were run? that move leaders around every 18 months Hill: They had a stable core but a never live with the consequences of their Do companies, especially listed ones, disruptive edge. One of the things that management decisions. have the ability to be “better without struck us right at the beginning when Hill: Too often in strategy we’re told being bigger”, which was one of the working with the Centennials was, “Isn’t it you need to be A or B, whereas actually we Centennials’ traits? crazy that they have leaders in roles for found with these organisations that Mellon: One of the big debates we had ten, 15, 20 years, but then all their experts they’re A and B. You need disruption from in writing the [Harvard Business Review] are part time?” It’s that ability to think in your expertise because that’s where the article was this particular question. It’s very those opposite ways. new ideas come from. But you need difficult for such companies. One way to Jules Goddard: The path of success stability in leadership so you keep make it work is to follow the example of somehow relies upon reconciliation of learning and pass knowledge on. The Virgin. They get bigger, but they keep these seemingly opposite values, the stability keeps you on track, and the chunking the business up into small units virtues of being old and new, or stable disruption keeps you moving forward. so it doesn’t feel like a big place to work. Hill: [Oxford University evolutionary psychology professor Robin] Dunbar’s About the researchers findings come into play. If you’re in an organisation of more than 150 people, Alex Hill, Ph.D., is co-founder and director of The Centre for High Performance and then it becomes hard to know everybody a professor at Kingston University. and have proper, candid conversations where you can debate and discuss things. Jules Goddard , Ph.D., is a fellow of London Business School. If you can create mini-businesses, the Liz Mellon, Ph.D., is founder and chair of the editorial board for the Duke Corporate leaders basically have P&L responsibility Education journal Dialogue and previously was the global executive director and and are far more engaged and make better co-founder of Duke Corporate Education’s first overseas office in London. decisions. You can get the benefits of scale PHOTO BY PETER NICHOLLS/REUTERS NICHOLLS/REUTERS PETER BY PHOTO
14 I FM MAGAZINE I February 2019 but also the benefits of intimacy and big win. They’re worried complacency yours, and then you will actually be smallness if you structure your business will set in. The national team’s coach once successful because you’re building the right way. said, “Success can be a lousy teacher.” something great. Goddard: I think management itself What is the importance of Centennials’ What are some ways organisations can can be the problem. We need far, far less focus on youth? Can the business world begin to think more long term? management and much more self-man- apply any of those practices? Mellon: There’s so much turbulence in agement. For instance, I’d love to see a Hill: The great ones are building the world for business today that what I’ve four-day workweek. I’d love to see some academies and are engaged in schools. You observed is that strategic horizons have major organisation rebalance the week can argue that a lot of Apple’s success has shrunk. People say, “I can’t really plan for between the working week and the been in the work it’s done in schools and more than 18 months,” so the five- to weekend, and I think we’d find that in the way it has always had an education ten-year strategy has gone out the window. four days we get more done than we focus as well as a business focus. With the It’s hard enough to get senior executives to currently do in five. We’d recover a sense Centennials, in some ways, the [appeal to think strategically anyway at the best of of balance in our lives. We have seen the youth] is exacerbated because these organi- times, and with a lot of turbulence in the perils of managerialism and the perils of sations are working with people from a world — political, economic, you name it, the wrong balance between living and younger age. But it’s this kind of work that it’s all going on — it’s even more chal- working. the organisations say keeps them alive. lenging. So I’d encourage them to keep Mellon: It’s also retaining the talent thinking long term. To comment on this article or to suggest an once you’ve got it. The whole point about Another piece is the idea of long idea for another article, contact Neil Amato, learning from success and failure is that it handoffs between leaders (for example, an FM magazine senior editor, at Neil. creates a learning organisation. People feel our research found that successors for [email protected]. ■ that they are developing and growing in the leadership roles are typically appointed organisation because they’re not expected more than four years before moving into to just do business as usual every day. the position). The reason that long Resources There is scope for them to expand and handoffs work is that everyone is putting Article spread their wings and learn and try new the organisation first. It’s not my career, things. I think that’s incredibly important, how much I’m paid, what do I look like in “How Winning Organizations Last 100 Harvard Business Review particularly for younger generations, who the press. Instead, it’s “Will this organisa- Years”, , 27 will quickly move on if not stretched. tion survive? What can we do to make it September 2018, tinyurl.com/y7x7cvgz even better? How can I hand over, in a way Research Is there a certain way the Centennials that ensures not my legacy, but the legacy More on the research of the celebrate their success or a way they of this organisation that’s done such Centennials’ focus on having a respond after success? fantastic work, and ensuring that work stable core and a disruptive edge, Hill: The All Blacks often make some will continue?” It’s almost altruistic. Don’t radicallytraditional.org of the biggest changes to their team after a put the organisation and its success above
US National Aeronautics and Space Administration (NASA) astronaut Tim Kopra performs a spacewalk outside the International Space Station in December 2015. NASA’s predecessor agency, the National Advisory Committee for Aeronautics (NACA), was created in 1915. The space agency was one of seven organisations whose longevity was studied in recent research. PHOTO BY NASA/REUTERS BY PHOTO
February 2019 I FM MAGAZINE I 15 Unlocking insights with data analytics
Editor’s note: The following is an excerpt from the November 2018 report Perspectives on the Finance Function Journey from the International Federation of Accountants’ Professional Accountants in Business Committee (PAIB). The committee is chaired by Charles Tilley, OBE, FCMA, CGMA, who is also executive chairman of the CGMA Research Foundation. Tilley is the former CEO of CIMA.
ata analytics is a sional accounting skillset to ensure the internal audit function more broad term encom- data governance and to help build efficient and effective. Up to 75% of passing many diverse the foundation for data analytics that internal audit activity now relies on techniques and will drive decision-making. In an data analytics, which involves auto- processes that deliver SME where there may only be a CFO mated day-to-day testing. insights from and a few accounting staff, it is often ●●● The audit committee and manage- financial and not possible to employ experts such ment have experienced greater value nonfinancial data to as data scientists. This makes man- from internal audit, as have other improve decision- aging financial and nonfinancial data operations that benefit from the in- making on matters that are critical to an across the organisation an opportu- sights delivered. Use cases include: Dorganisation’s success. Data analytics has nity to create additional value for the • Financial planning and analysis become omnipresent in the way organisa- CFO and finance team. (FP&A) — ensuring a business unit’s tions manage their businesses. ●●● Need to consider what data are al- FP&A is consistent with inde- Accountants working in either the ready available about the organisation pendent analysis and allowing the finance function or internal audit are and its operations and what would be identification of unexpected using data analytics to help organisations useful and collectable and would pro- anomalies and variances. uncover valuable insights within their vide insights into business problems • Software to monitor communica- financial reporting processes and to better to help identify opportunities. tions by employees to identify manage risk, as well as to more broadly ●●● Need to invest in a system to store potential prohibited sales. improve strategic and operational and generate robust and reliable • Reviewing financial transaction decisions for revenue growth and cost data. Without a solid foundation, it is information based on a full reduction. difficult to apply business intelli- population of data combined with As it becomes increasingly ubiquitous, gence tools to exploit the data. Un- data-visualisation tools is a accountants need to identify how they derlying data sets need to be reliable powerful way to show trends and can develop their roles to contribute to and credible, otherwise investment underlying areas of risk. data analytics activities that involve data in analytical tools is ineffective. • Developing a data analytics “IQ” to enhance business decisions and ●●● A focus on data governance and among all internal audit staff has improve risk management and internal controls is key, and the finance team been a priority. This involves control. can develop the necessary policies, ensuring staff are connected to the procedures, and data taxonomies to wider analytics community to Reflections from the PAIB ensure confidence in data. acquire new knowledge and Committee on their experiences of experience. Internal audit has data analytics in different settings Data analytics in an internal audit function become a resource centre in data Data analytics for finance teams in small of a large financial organisation analytics. The data analytics and medium-sized enterprises (SMEs) ●●● The automation of large parts of the knowledge from IA is being ●●● It is important to apply the profes- audit plan using analytics has made transferred to the business, and IMAGES BY MANOP PHIMSIT/GETTY IMAGES PHIMSIT/GETTY MANOP BY IMAGES
16 I FM MAGAZINE I February 2019 Opportunities and threats arising from data analytics Opportunities Threats ●●● Efficient and real-time information allows more time ●●● At the transactional level, the accountant can become for action and value-added activities. marginalised and less relevant, or even obsolete. ●●● Greater job satisfaction and contribution to business ●●● Data security and privacy need to be carefully man- strategy, risk management, and value creation for aged within the organisation as well as with the finance staff. external auditor. IT and cyber risk is an increasingly ●●● Better co-operation with external auditors and more important topic for discussion between audit firms and efficient audits ultimately lead to enhanced audit their clients, and one that carries significant reputa- quality. tional risk. Audit firms process large volumes of client ●●● Enhancing professional scepticism improves the data and are therefore vulnerable to data breaches or ability to ask the right questions and build on existing external cyberattacks. analytical ability. ●●● Resistance to training and upskilling has to be over- ●●● Better prioritisation, more targeted in approach to come. The finance function needs to achieve real support the organisation. impact from analytics initiatives. To do so requires ap- ●●● Greater transparency and accountability. plying finance and accounting skillsets and knowledge ●●● Greater insights into the business and the potential to of the business to help the organisations identify and enhance decisions and insights. prioritise their problems, based on which will create the highest value when solved. ●●● Resource constraints to implementing necessary processes, systems, and tools particularly in an SME context. ●●● Risk of error in underlying data that can lead to mislead- ing results. Poor quality data in other parts of the organi- sation can also be a challenge to the usability of data. ●●● There is a need to work effectively in collaboration with other experts such as data engineers, data ar- chitects, and data-visualisation experts to ensure the finance function is relevant and not marginalised in data analytics.
representatives from internal audit and reporting across thousands of on the natural skillset of the finance serve as data analytics champions. data points that form the basis of function. Ensuring appropriate data • Internal audit provides a data P&L reporting. ownership and policies and providing analytics programme framework ●●● Data analytics has improved collab- the necessary structure to ensure data that enhances data governance to oration with external auditors using robustness. Data analytics capabili- drive consistent data analytics their software and tools to detect ty is gradually being built in-house methods, processes, documenta- patterns and trends. The relationship within the finance function. tion standards, quality control, and and dialogue between the finance ●●● Supporting the business analytics talent management. function and external auditors have process beyond the finance function. significantly improved, leading to This is also being done in conjunc- Using data analytics in the finance function better outcomes. tion with other technology projects ●●● Together with automation, analytics ●●● Providing leadership to the organi- such as using blockchain to enhance, enables better risk understanding sation in data governance, building for example, commodity trading. n
Resource The Perspectives on the Finance Function Journey report can be found at www.ifac.org/publications-resources/perspectives-finance-function-journey.
February 2019 I FM MAGAZINE I 17 Making faster decisions with AI
Artificial intelligence can cut through an abundance of data and show the root cause of business performance.
By Richard N. Williams
ike many midsize, privately A data-driven, analytical approach to owned businesses, Apex Parks finance management relies on AI and Group, which owns 16 machine learning to answer three key amusement and water parks questions: How is the company and family entertainment performing? Why is it performing the way centres across the US, gener- it is? And what should be done to make it Lates an abundance of financial and perform better? operational data that readily tell how the “Reports and spreadsheets may tell you company is doing. What’s more difficult the first, how are we performing, but it’s to figure out is why the company is analytics that help you understand the performing the way it is. why, the root cause of what’s going on in Data are generated by each park but your company,” Fox said. also outside the business; for example, by Knowing the “why” allows you to social media. When all the data are decide quickly and effectively on how to showed why actual revenue was below combined and visualised in a user- improve performance, he added. The plan: Customers shifted to brands with a friendly way and when artificial intelli- “why” gets you to the root cause of what is lower selling price, which generated less gence (AI) such as machine learning and driving performance. revenue. predictive analytics is leveraged to Analysing customer data with AI and Once it works properly, Fox said, “it’s provide insights that are forward-looking, machine-learning tools connects embedding machine learning underneath Apex Parks senior management can make operational drivers with financial metrics the hood that then delivers the result in better decisions faster. to help the company target its marketing a dashboard for improved decision- Along the way, however, Apex Parks to a one-on-one level, fine-tune products making”. faces common challenges: Financial and and services, or pursue innovation. For Senior leadership and the board of operational data are kept in different this to work, however, it’s important that directors can use the dashboards to plan systems. Operational drivers aren’t the data are modelled and enhanced different scenarios, model them, and mapped to financial metrics. Many correctly, Fox said. make smart bets on how to improve processes must be performed manually, In a hypothetical example, he visual- company performance. and data are kept in silos. ised the results of a business that sells Some companies go a step further, Fox To be able to identify what drives several brands with higher and lower said. Amazon sells books, shoes, and performance more effectively and more selling prices in multiple markets. Status sweaters. Netflix is a video streaming quickly and improve forecasting reliability, and variance analyses comparing the service. And Airbnb offers holiday rentals. Richard Fox, CPA, Apex Parks’ vice-president different brands by selling price and These companies have grown not only of data science and analytics, is working on revenue showed which brands dominated because of their products and services but an AI pilot project with AlignAlytics, an in which market. Applying a machine- also because they’ve made analytics their international data analytics consultancy. learning algorithm went a step further. It strategy, Fox said.
18 I FM MAGAZINE I February 2019 Richard Fox, CPA, the vice-president of data science and analytics for Apex Parks Group, says analytics can help an organisation get to the root cause of what is driving performance.
“They are changing prices in real 4 objectives of financial as financial budgeting and planning, time, based on activity on their management analytics than on reporting. website,” he said. “How many people AI and machine learning can be used as ●●● Deepen and broaden your line of are looking at a product? How many tools in financial management analytics sight. Combine internal and external people put it in their cart and didn’t to interpret more and more data, make marketing, sales, and operation- purchase it? How many were data analytics repeatable, and provide al data to determine what drives purchased in the last 24 hours or the insights that help address strategic profitability, revenue, expenses, and last seven days? Those algorithms are questions. balance sheet performance. running in real time and adjusting the To stay on track, Fox and Roland ●●● Drive value creation. Make sure prices.” Mosimann, president of AlignAlytics, the business is running efficiently. As more data become available, from suggested following these objectives: Develop future business through a social media, the internet of things, and ●●● Design the data analytics and growth and innovation portfolio. other sources, decision-making will interpretation to understand why Establish and manage resources and speed up further and increasingly rely the organisation performs the way capabilities that are most critical for on real-time, streaming data, he added. it does. Monitor high-level key sustained high performance. “We finally have enough data to be performance indicators. Analyse able to use algorithms like neural leading, not lagging, indicators, Richard N. Williams is a freelance writer networks, and the processing power in and drill to detail. Use machine based in the UK. To comment on this article the cloud is making it much easier to learning to look at the root causes or to suggest an idea for another article, run these algorithms on large data sets,” of performance. contact Sabine Vollmer, an FM magazine Fox said. “That’s why AI is now the new ●●● Focus more on strategic questions senior editor, at Sabine.Vollmer@ buzzword.” and performance management, such aicpa-cima.com. ■ PHOTO BY ERIC REED/AP IMAGES REED/AP ERIC BY PHOTO
February 2019 I FM MAGAZINE I 19 hen looking for a new study of 7,272 U.S. adults that found 50% of employees job or transfer, left their job “to get away from their manager to employees have several improve their overall life at some point in their career”. variables to consider, Significant research has been conducted to get to including salary, the bottom of what makes a good manager, but the promotion potential, traits of a good manager are not so different from the W and job responsibilities. traits of an empathetic person. But if they hope to “What employees are looking for in a manager is thrive in a new workplace, they should make sure the the same anyone would be looking for in a good job comes with a good manager. human being,” said Bernard Marr, an author and Research has backed up the claim that people leave consultant based in Milton Keynes, England. “People managers, not companies, including a 2015 Gallup want fairness, respect, and recognition; they want
20 I FM MAGAZINE I February 2019 Strategies for finding a good manager to work for
Job satisfaction depends largely on the quality of your manager, so doing homework on potential supervisors is vital.
By Hannah Pitstick
someone who listens and is a good and little due diligence on your part can boost determine if someone will be a good consistent communicator; someone who your chances of career fulfilment. Don’t be manager to work for: supports, sets a clear vision and expecta- afraid to tap your network and online tions, challenges and inspires people, and resources such as LinkedIn, Indeed, and Forms genuine relationships with creates a no-blame culture.” others to help answer the question: Will employees Because management is such a crucial this manager help make me a happier, The best managers will connect with their variable in job satisfaction, it is wise to more empowered employee? Once you’ve employees and demonstrate genuine care research and vet the managers at compa- done that, use the interview process to see and respect. nies you’re hoping to work for, just as they if your values align with a potential That sort of connection isn’t formed vet their prospective employees. It may manager’s values. through a one-on-one held once a week take a few phone calls and some internet Here are a few traits to look for and tips where you go through a tick-box exercise, sleuthing to find the right sources, but a on how to spot them when trying to but rather by asking what’s going on in IMAGE BY PHOTOTECHNO/ISTOCK BY IMAGE
February 2019 I FM MAGAZINE I 21 their lives and being aware when an Talk to current and past employees of on, there’s something wrong here,’ and employee might need some extra support. the company about their career trajecto- that’s where a lot of managers lose that “It’s more the informal, sit down with a ries. If you find stagnated employees stuck credibility,” Kruger said. cup of coffee, and discuss where you are at in long-term positions without gaining The best way to figure out whether a and where you would like to grow,” said new responsibilities or skills, it could be a potential boss is consistent is by speaking Teresa Kruger, Ph.D., senior manager, sign management is not empowering with past and current employees, if People and Business Solutions for BDO them. possible. During the interview process you South Africa, based in Johannesburg, South could ask your potential boss about Africa. “I think that has a lot more value Fosters honesty and vulnerability company policies that are important to than any formal structures.” Managers can create a healthy, trusting you. Then you could verify those answers During the job interview process, you environment by letting employees know with past or present employees to see if the might get a hint of how your potential boss that everyone can be vulnerable. How a responses match up with the reality of how views the employee-manager relationship potential manager reacts to your answers the boss handles various situations. by taking note of whether they seem about your shortcomings and areas you curious about you as a person. Do they ask want to grow in can be a gauge of whether Promotes clear communication you anything other than directly work- your potential boss practises and encour- Saving perhaps the most obvious for last, related questions? If you ask about their life ages vulnerability and honesty. good managers need to maintain clear and or background, do they get uncomfortable “Being vulnerable doesn’t mean they’re effective communication. or annoyed? Depending on the type of boss weak, but it does mean they can be open “A good manager is someone who is you prefer, it may be a red flag if they show about their shortcomings and they’re not clear, who listens, and they’re not just little interest in you other than your going to be attacked for it — they’re going always telling, but understanding what it is potential work output. to be supported in them,” said Drew their people need,” said Bob Hewes, Ph.D., Dudley, founder of Day One Leadership, a senior partner at Camden Consulting Toronto-based leadership coaching Group based in Boston. “When a super- organisation. visor becomes a thought partner with you, “A manager makes that clear by you can get the job done more effectively, demonstrating it, by being open about the not just efficiently.” things they’re not good at or the things they A potential manager’s communication need help with, and it gives permission to skills can at least partially be revealed the employees to do the same thing. Then during the interview process. Do they what happens is people aren’t spending maintain eye contact? Do they seem their energy covering up the things they’re genuinely curious about what you’re afraid of or bad at. They’re spending their saying? Are they asking questions about energy doing their best work.” areas that are important to you? And do If it seems appropriate, ask about ways a they comprehend and enthusiastically Recognises strengths and empowers potential manager is planning to improve answer any questions you have for them? employees to use them the company or employee morale to see Beyond being an effective listener, good A good manager will keep you engaged, how they discuss weaknesses or areas that managers make an effort to look past and less likely to leave a company, by could use improvement. It’s a good sign if behaviour to the underlying cause and providing growth opportunities and they look at vulnerabilities as a starting address problems with empathy. encouraging you to learn from projects you point for potentially exciting growth rather “People leave because of managers, that’s have ownership in. than blemishes that need to be covered up. what the data says, but I always point out to If the potential for growth is important managers that at the foundation of any to you, ask during the interview about what Maintains consistency and fairness individual or organisational dysfunction, opportunities employees have for skill Dudley maintains that along with there is a fear,” Dudley said. “People are building at the company and how often vulnerability, consistency is necessary to afraid that they’re going to have something they are allowed to work on a project with create an environment of trust. taken away (money, a job, influence, respect) minimal oversight. “Consistency means the employees or they’re afraid they’re going to have “I think micromanagement was out of know that the manager has a set of clear something given to them they don’t want the window long ago,” Kruger said. “It’s criteria for decision-making, which means (more work, a task they’re not equipped for), definitely more about a coaching and no matter what the decision, they’re going and when you deal with issues at the level of mentoring type of relationship between to make it using the same criteria every the fear that generates them, rather than the employee and manager and allowing the time,” Dudley said. behaviour that emerges, you’re always going scope and opportunity to grow.” Consistency is essential when it comes to be better off.” Employees want to be utilised in a to how managers deal with delivering manner that highlights all their strengths, criticism and discipline. Hannah Pitstick is a freelance writer based in she added, and managers can facilitate that “If I come late, I’m going to be dealt with the US. To comment on this article or to by figuring out what those skills are and in a certain way, but if someone else comes suggest an idea for another article, contact thoughtfully placing employees on late and they don’t get the same treatment, Drew Adamek, an FM magazine senior editor, projects they are best suited for. obviously I’m going to start thinking, ‘Hang at [email protected]. ■
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23566-344 COSO ERM Certificate Marketing Campaign_Update.indd 2 4/24/18 10:27 AM PHOTO BY SURAUBH DAS/AP IMAGES By Andrew Kenney in organisations. can helpfinanceteamsdrive value Inventive ways ofgainingknowledge to creativity engagement team from Stretching your customers andthebusiness. sales calls sothey understand team atCvent to sitinon asks new hires onhisFP&A Ashish Arora, ACMA, CGMA, eing an accountant eventually need the same level of demands a flexible and business knowledge, but he decided to creative mindset, and this is look for a few crucial skills at first. especially true for financial “Financial planning and analysis is planning and analysis both art and science,” Arora said. “[We] (FP&A) team members. need to provide forward-looking FP&A is asked to collaborate information to the business so that they B across the organisation and can make decisions.” answer the questions at the The key element for new hires is core of the business. problem-solving, he said. “If I leave you in It’s a job that demands both fine-tuned the middle of chaos, would you be able to mathematical knowledge and the get your way out of it, or not, by solving meta-skills to adapt to countless situa- these problems?” Arora said. He also looks tions — but FP&A’s success also has much for candidates with strong communica- to do with who’s on the team and how the tion skills who can tell a story with the team is managed. FP&A leaders have numbers. learned to unleash innovation and Arora measures those skills with creativity, providing lessons that can aptitude tests, including for Excel, as well apply across the organisation. as up to five interviews with himself and “What business isn’t in an environ- his direct reports. It is only after the new ment where things are constantly hire has begun working that Arora worries changing both from a technology about the worker’s direct knowledge of perspective, regulatory, marketing, the business. business landscape, competitors in the “When we are hiring them,” he said, playing field?” said Nevine White, an “we assure that they’re good at prob- expert in FP&A and the executive in lem-solving, they’re good at Excel, they’re residence at Live Future Ready, where she good at communication — and then we helps companies prepare for disruption. layer in the business knowledge on top of “There are so many things that are it.” constantly changing. Not being innova- Once they’re in the door, his new hires tive, even as a back-office function, does spend months shadowing other analysts you a huge disservice.” and managers. Just as important, they immerse themselves in the sales function, Organisational IQ sitting in on calls, and watching as the One key component of innovation is sales team courts customers. knowledge because a team can’t drive “They listen in on the questions that value until it truly understands a customers ask,” Arora said. “They company. understand the business faster, and “Innovative FP&A functions,” White they’re able to relate to it.” said, “are deeply, deeply knowledgeable of That learning is crucial in a high- the business that they’re in.” growth, sales-oriented company, he said. But that doesn’t mean that every new “‘How does Cvent make money?’ That recruit should be a subject-matter expert. is the biggest question that I ask,” Arora For example, observe the leadership style said. “Unless you know that, you can’t of Ashish Arora, ACMA, CGMA, based in make any kind of financial analysis.” New Delhi. He leads the financial Over the long run, Arora has built an planning and analysis team at Cvent, an inner circle of loyal and dependable international events-management employees. “Those pillars are the ones software company. His unit has grown that already know your business,” he said. from a single person — himself — to 25 “It’s not something that gets built in a day people across India and the US. or two.” Arora was one of the company’s first hires, so he had the benefit of years of How budget line items become real experience when he took on his current That’s a philosophy that White has role in 2012. He was tasked with building embraced, too. In her job at a publicly held his team because he had full knowledge of telecom, she made a point of taking her the business. He knew his team would team on periodic visits of company
February 2019 I FM MAGAZINE I 25 facilities and customer sites. Suddenly, with colouring outside of the lines,” White budget line items were transformed into said. And the best way to do that is to take Resources real equipment and operations. them outside the narrow context of the “10 Ways to Generate and Deliver “Finance people are visual learners. business function. Great Insights,” FM magazine, April Analytic thinkers are visual learners,” So, at one recent job, she started a book 2018, tinyurl.com/yccewgzj she said during a recent conference club. “We were in an FP&A department, presentation. “… The more they visualise but we didn’t read a single finance book,” “Why Curiosity Is Key in FP&A,” FM what this is, the easier it is for them to she said. “We read books in all different magazine video, 3 May 2017, gut-check the numbers and ask areas about business, about skills, about tinyurl.com/FPAcuriosity themselves, ‘Does this make sense?’” life, about innovation.” “How FP&A Teams Are Linked to Like Arora, White built up her analysts’ One of the most successful titles was the Business,” FM magazine video, knowledge by embedding them in the Michael Lewis’s Moneyball, a fascinating 3 January 2017, tinyurl.com/y8gsnb4y day-to-day operations of frontline units, nonfiction look at how a baseball team having them work “shoulder to shoulder”. transformed itself with statistics. By “They went on customer calls, they diving into adjacent topics, White was went on trouble calls,” she said. “They able to lower the stakes — no one felt that would walk the network with the they had to prove their finance skills in a White describes her approach as technicians. They understood what it discussion — while encouraging the team business partnering — “taking that deep meant to be in that customer-facing to think about and discuss higher ideas. knowledge of the business and providing position.” “It level-sets the organisation in the reliable and useful information to the As her team got more comfortable sense that it doesn’t matter if you’re the leaders that you’re supporting”. in the field, they were able to make entry-level analyst or the VP,” she said. Building leadership’s trust and connections and introduce new ideas. That kind of communication, she said, understanding, she said, is crucial to For example, when a maintenance gives rise to incredible conversations and innovating in the FP&A function. White crew found itself paying out too much allows for ideas to flow across groups continued: “It’s really hard for people to overtime and struggling to hit its outside of the company hierarchy. show that emotional courage to try metrics, it was one of White’s team something completely different and members who suggested adding a The end game figure out a much more innovative way to third technician shift. Ultimately, the goal of FP&A should be to approach the planning aspect of that Her team continued to grow its own provide value through partnerships with business.” curiosity, networking with leaders across other business units, according to Rob To take on that challenge — to really the business, including a skip-level Teis, CPA, CGMA, who previously held an encourage and enable innovation — FP&A meeting with the CEO, growing knowl- FP&A role at Walmart. In a recent survey has to stay firmly grounded in the facts of edge and building relationships. by Genpact, 87% of finance respondents the business while creating a clear-eyed said that FP&A is meant to enable agility vision of a better future. Outside the lines and adaptability. Once they’ve learned the nitty-gritty “There’s no cash registers in FP&A,” Andrew Kenney is a freelance writer based in details of the business, FP&A leaders can Teis said. “You can’t go out and sell more the US. To comment on this article or to push their team members from engage- FP&A services to help the company or suggest an idea for another article, ment to innovation. anything like that. You have to provide contact Neil Amato, an FM magazine senior “You have to make people comfortable your value to internal customers.” editor, at [email protected]. n
‘What business isn’t in an environment where things are constantly changing ... ?’ Nevine White is executive in residence at Live Future Ready, where she helps companies prepare for disruption. PHOTO COURTESY OF NEVINE WHITE NEVINE OF COURTESY PHOTO
26 I FM MAGAZINE I February 2019 A counterintuitive tip for goal setting
Research shows that it’s easier to achieve small gains than to maintain the status quo.
By Alexis See Tho
ffective goal setting is key to running a successful thinking what might prevent us from saving the same $100 business. It’s also an inherently tricky endeavour from every month in 2019, whether it’s due to an upcoming wedding a psychological standpoint — especially if your we must travel to, a child’s big birthday party, or an anticipated Eorganisation is facing financial headwinds. financial need in the family, reflecting a tendency to focus on Ideally, you’re able to set — and meet — ambitious negative outcomes. This causes us to perceive maintenance targets. But what about in an organisation where the coming goals as difficult. year is uncertain and repeating last year’s results might be a “What happens is that [when] the mind doesn’t have the cause for celebration? Should you just maintain the status quo difference to grab on to, it starts looking at context to see what when setting goals? A recent study argues that setting modest could go wrong,” said Amitava Chattopadhyay, co-author of the goals is actually easier than holding steady. paper and professor of marketing at INSEAD’s Asia campus in Owing to a quirk in the way our brains perceive goals, the Singapore. “It’s the way the mind processes goals. When you study concluded that people find it easier to achieve a small have a difference between the current state and future state, incremental goal than to maintain the status quo, when both your mind focuses on that difference; in its absence it shifts to goals are assessed separately. The study was conducted by what could potentially go wrong.” marketing professors from INSEAD, a global graduate business This finding contradicts the commonly held belief that no school; IE Business School in Spain; and Virginia Tech’s business change is easier than any change. “Logic dictates … when that school in the US. difference is zero … it should be the easiest. What we hypothe- The paper found that when evaluating the difficulty of a goal, sised and empirically show is that isn’t the case,” Chattopadhyay our brains go through a two-step process. First, we consider the said. difference between our current state and the desired state. The Chattopadhyay said that when the gap between our current bigger the gap, the more difficult the goal. state and our desired state is small, people tend to consider it an Take, for example, the goal to increase savings. Setting aside easy goal. “Every time we encounter something [easy] we don’t $100 a month compared to $10 a month will be considered spend too much time thinking about it. We say, ‘Yes, [I] can do more difficult because the discrepancy is larger. that,’ then we move on.” Second, after evaluating the gap between our current state This may explain why even though a modest goal is objec- and desired state, we assess the context to see if the goal is tively more difficult, people nevertheless perceived it as being achievable. For example, we might calculate our annual easier than a maintenance goal. This finding can have wide- household income and monthly expenses and consider the ranging implications for personal goal setting, a manager setting extra expenses needed for gifts and travel. team targets, and marketing efforts to encourage desired However, when we are told to maintain a goal where the gap consumer behaviours. And it is especially useful during times is zero, say setting aside $100 a month for the whole of 2019 where even a slight step forward in last year’s goal seems after doing the same in 2018, our brains go straight to the second unattainable, or in times of economic uncertainty. step to assess the context. Researchers found that in mainte- nance goals, more of participants’ thoughts are related to the Alexis See Tho is an FM magazine associate editor. To comment on goal’s context — and the thoughts are mostly unfavourable. this article or to suggest an idea for another article, contact her at Using the same example of saving money, we might start [email protected]. IMAGE BY AHMAD ZUHRIADI/GETTY IMAGES ZUHRIADI/GETTY AHMAD BY IMAGE
February 2019 I FM MAGAZINE I 27 Bouncing back from a public relations setback
Build-A-Bear’s experiential marketing event went wrong. Strong leadership from the finance team helped mitigate the damage.
By Drew Adamek
he optics couldn’t have began shutting down the events. While been worse. Long lines, none of the stores had run out of supplies, many snaking for officials said the crowds were becoming a blocks, of upset children safety hazard. and their frustrated Police were called at several locations parents being turned to deal with the large crowds of angry Taway empty-handed parents. from some Build-A-Bear The BBC reported parents who were Workshop stores after waiting for hours to saying they were “disgusted” and their participate in the company’s 12 July 2018 children “heartbroken”. The headlines “Pay Your Age Day”. were equally brutal on Build-A-Bear, The promotion offered customers a featuring words like “chaos”, “disastrous”, special, birthday-themed teddy bear for and “day of mayhem”. On both sides of the the same price as the child’s age and was Atlantic, the shopping centre scenes were intended as a single-day launch event of a a top story on the evening news. new campaign tied to birthdays, called Throughout the day and the next “Count Your Candles”. However, it quickly morning, Build-A-Bear executives issued appeared to turn into a public relations several mea culpas and admitted that they nightmare. had not expected the massive turnout. The company estimates 500,000 Anyone following the story likely people showed up for the event at stores assumed that the Pay Your Age Day in North America and the UK, and queues event was an unmitigated disaster for started forming as early as 5.30am. Twitter Build-A-Bear, a marketing stunt gone users began posting six-hour wait times wrong that would damage the bottom in some locations and complained of a line. lack of communication from Build-A-Bear But, despite the brutal news cycle, staff. something unexpected happened. The Videos of chaos at stores began company “experienced a seismic shift in appearing — and going viral — on social [our] sales trend … spurred by our media. At shopping centres in both the US mid-July Pay Your Age Day event”, and the UK, fire and security authorities Build-A-Bear CEO Sharon Price John
28 I FM MAGAZINE I February 2019 announced in the company’s 2018 second quarter earnings call. ‘The long lifetime value of these guests is “The surge of interest from the promotion helped to drive profitable going to more than pay for the discount double-digit sales increases throughout the balance of the quarter and, we believe, will that we are giving on that day.’ have far-reaching implications across a Voin Todorovic, Build-A-Bear’s CFO number of fronts and relationships,” Price John added in the 30 August 2018 call. In fact, the strong sales in the four weeks after the Pay Your Age Day event reversed the downward sales cycle of the position the St. Louis, Missouri-based help fuel growth and stabilise business. previous nine weeks of the quarter, company to achieve more meaningful By enticing large numbers of guests to although the quarter still ended on a loss. long-term goals. come in for their birthdays, Build-A-Bear Even less obvious, the Pay Your Age To participate, guests had to join the is able to spread sales activity out over the Day, and the long-term promotion it was company’s loyalty club programme, the year, reducing its dependence on the launching, Count Your Candles, may Bonus Club, a rich source of data that may Christmas rush.
Eager customers line up to take advantage of Build-A-Bear Workshop’s “Pay Your Age Day” in Colorado on 12 July 2018. PHOTOS BY JOE AMON/GETTY IMAGES AMON/GETTY JOE BY PHOTOS By that measure, Pay Your Age Day was Those challenges are showing up in “One-third of our business is related to an unbridled success: Bonus Club Build-A-Bear’s financials. Although the birthdays,” said Todorovic. “That really membership increased by 1 million, company has shown a profit over the last gave us insight into how to market and growing from 5 million to 6 million in the four years, growth has declined in six of the engage with customers.” weeks leading up to the event. last eight years. Revenue fell from $392 That relationship gave Build-A-Bear an That Build-A-Bear weathered the Pay million in 2014 to $357 million in 2017. opportunity to become an experiential Your Age Day public relations fiasco on a It’s a challenge that Voin Todorovic, part of its customers’ identity and may positive note can be attributed to a number Build-A-Bear’s CFO, has been addressing help buffer any ill will left over from Pay of strategic decisions a wide range of teams for four years. Todorovic and Price John, Your Age Day, according to Americus Reed within the company made before, and who took the helm as chief executive in II, professor of marketing at the Wharton after, the event: insightful use of data 2013, were brought in to turn Build-A-Bear School at the University of Pennsylvania, analytics, long-term cultivation of brand around. Prior to their arrival, the company and co-founder and partner of branding identity loyalty from customers, and the had seen eight years of stagnant sales and company Persona Partners, in Philadel- deployment of a rapid crisis response. unprofitability and had lost $49 million in phia. “Strategically they understand how In short, while Pay Your Age Day may 2012. to continually identify critical identi- have been a short-term tactical setback for Because of the long period of unprofit- ty-relevant moments like birthdays,” he Build-A-Bear, the event seems poised to be ability, infrastructure investments, said. For consumers, especially children, a long-term strategic success. particularly in IT, were delayed and those moments of joy and happiness limited the company’s growth, according spent at a Build-A-Bear become “flashbulb Retail challenges to Todorovic. However, Todorovic and memories that become burned into who The Pay Your Age Day event and the Count Price John focused on increasing the you are as a person”, said Reed. That also Your Candles campaign were explicitly company’s margins and did so by 600–700 makes a birthday trip to Build-A-Bear part designed to capitalise on the company’s basis points, Todorovic said. of an annual ritual for children, strength- competitive strengths, build customer “Those funds helped us to continue to ening the identity bond consumers have loyalty, and expand the pool of repeat make investments in rebuilding infra- with the brand, according to Reed. customers. That strategic approach, a structure,” Todorovic said. “We were able When Build-A-Bear, or any company, is collaboration of several departments and to invest in customer forward-facing successful at inserting itself into forma- based on data analytics, may help insulate technology and data analytics.” tive experiences, then brands stand to the company from long-term fallout of develop consumers who will be much the bad press of Pay Your Age Day. Data and the death of a competitor more forgiving of mishaps, according to But beyond a few headlines in July, These investments fit with Todorovic’s Reed. Build-A-Bear needed a new strategy to philosophy that the finance function Another seemingly unrelated data address even more fundamental chal- should “integrate with the rest of the point, gleaned from public sources, also lenges. business to drive growth and to enhance helped drive the Count Your Candles The numbers tell a vivid story: Prudent the consumer experience and really campaign and may mitigate the long-term financial management has produced elevate all functions of the organisation, effects of the event. profit, but Build-A-Bear needs more through extensive analysis and support, When Toys “R” Us closed operations in customers buying more stuffed bears. The to make the best business data-driven June 2018, it opened a large competitive question then becomes, how do you get decisions”. opportunity for Build-A-Bear, Todorovic people to show up in the shopping centre, The Pay Your Age Day one-day event said. Build-A-Bear found that 70% of Toys where Build-A-Bear stores are located, and the ongoing Count Your Candles “R” Us’s business was driven by special when they have largely stopped shopping marketing campaign demonstrate that events, like birthdays and holidays, there? philosophy in action, born of data the according to publicly available data Build-A-Bear, like many retailers, is company had been collecting for years at released by market research firm The NPD operating in a tough business environ- the stores as parents and children checked Group. Build-A-Bear conducted a ment, both from falling physical store out their final purchases. Among the main geographic comparison of shuttered Toys traffic and price competition from online data points were children’s birthdays, and “R” Us locations and its own retail stores retail giants like Amazon.com. The stores what the company discovered shifted its and found a correlation between the are largely based in shopping centres, marketing plans. proximity of the two and performance in which have seen significant drops in foot traffic and sales. Build-A-Bear timed Pay traffic over the last two decades. The Your Age Day to closely follow the closure problem is accelerating: In the US, of Toys “R” Us, to capitalise on consumers’ shopping centre foot traffic has declined search for a retail replacement for special every month except one since January occasion toys. 2014, with an average monthly decline of “That helped formulate some of these 5.3% year over year, according to a 2017 programmes,” said Todorovic. “Especially report by financial advisory firm Cowen from the launch perspective. That’s why and Company. In 2017, investment bank the Pay Your Age event was on a random Credit Suisse predicted that 25% of US Thursday in July, typically one of the malls would close within five years. slowest retail months.”
30 I FM MAGAZINE I February 2019 Along with drawing in customers with Uber Eats, Uber’s food delivery service, a birthday tie-in, and flagging former Toys weathered the fallout when its Krispy “R” Us customers, Build-A-Bear also Kreme doughnut giveaway promotion in wanted to bolster membership in its London crashed its app and angered customer loyalty programme, Bonus Club. thousands. “Definitely the long lifetime value of “Unless the company is doing these guests is going to more than pay for something vehemently egregious, and the discount that we are giving on that they’re doing things to keep it in the news, day,” said Todorovic. “We are hoping that that story is going to be forgotten,” said if we can get that guest to come in just one Reed. more time in their lifetime, it’s going to be a really creative opportunity for us.” The way forward As the imagery of the Pay Your Age Day The real question for Build-A-Bear is event fades from consumer memories, whether the uptick in sales seen after Pay Build-A-Bear will still have a powerful Your Age Day is temporary or a lasting new tool to drive sales as a result. change in the company’s fortunes. At the “The public sees this thing go wrong the Today show, a national broadcast in time of this writing, the company had and thinks, ‘Oh, they blew it,’” Reed said. the US, the morning after Pay Your Age only reported four weeks of sales since the “But on the other hand, they increased Day and explained to viewers, “I know that event, and it is clear that some of those their loyalty club membership by 20%.” the most disappointing moment is when sales were driven by customers a kid is super excited and something redeeming the coupons. And while those Out in front doesn’t happen. There was no ill intent. sales came at a discount to customers, it The Pay Your Age Day event unfolded in Our objective at Build-A-Bear is to make didn’t negatively impact the bottom line, real time, largely on social media. The BBC kids happy.” according to Todorovic. reported live from the scene in several The response was effective. The story “The redemption of vouchers naturally locations. While only a small percentage largely disappeared from the headlines by lowered our dollars-per-transaction metric of stores were actually closed or turned the weekend. More importantly, the during this period, but more transactions away customers that day, in the media problem was never inventory, and all generated an increase in total revenue,” he there was an overwhelming sense of stores were open and serving guests the said in the August earnings call. disaster at all Build-A-Bear locations. That following day. So while parents and Although Build-A-Bear doesn’t seem to made it tough for Build-A-Bear to respond children may have walked away empty- have suffered much long-term reputa- at first, but many teams within the handed on 12 July, eventually they got a tional damage because of the bad press of company helped mitigate the fallout and stuffed animal. And sales began ticking Pay Your Age Day, and may have even manage consumer response. upwards from that day forward. gained a strategic benefit, it is still facing “It was an interesting time for people the same difficult retail landscape. The in the office. We had to make some Short-term memory event helped double sales, but the quarter real-time decisions to really think about While counterintuitive, it shouldn’t be a still ended on a loss. Can it leverage the our guests and associates,” Todorovic said. surprise that the bad press of the Pay Your 1 million new loyalty club members to However, how a company responds to Age Day event doesn’t seem to have stem the losses? a public relations crisis is a significant inflicted long-term damage to Build-A- It is hard to predict how future sales factor in how much damage it will do to a Bear’s reputation or revenue streams. will unfold for Build-A-Bear. Consumer company, according to Reed. Companies Marketing failures by successful compa- audiences continue to fragment and should take a “three-pronged approach”, nies abound, and it is extremely rare that become harder to reach effectively. Online he said. they do permanent damage. Fortunately, retailers are becoming more and more of a “Number one, validate concerns; say, ‘I for most companies that suffer a threat to traditional retailers. hear you,’ without necessarily apologising. marketing setback, the public’s attention The company is trying numerous Number two, you show action,” he said. span is short and easily distracted. strategies — real estate diversification, “And number three, control the narrative.” “In the data I see, there is almost never new location types, new promotional ties, Build-A-Bear followed that model to a long-term effect that hurts the brand,” expanded franchising, improved online the letter. On 12 July, the day of the Pay Reed said. commerce — to continue moving in the Your Age Day event, the company issued a That seems to hold true for recent right direction, but the challenges persist. press release to acknowledge that the marketing disasters. French super- “We continue to see some strong event resulted in “long lines, extensive market chain Intermarché recovered numbers, but we’re trying to change faster waits, and disappointed guests”. The after a promotional Nutella sales event than the world is changing around us,” company took action by offering turned violent at stores across the Todorovic said. customers who weren’t able to obtain a country; Germany’s Jägermeister didn’t bear, a voucher worth $15 in the US and suffer long-term consequences after Drew Adamek is an FM magazine senior £12 in the UK, good for six weeks. releasing a toxic substance at a promo- editor. To comment on this article or to And to put its stamp on the narrative, tional pool party in Mexico that left suggest an idea for another article, contact Build-A-Bear CEO Price John appeared on several guests unconscious; US-based him at [email protected]. ■
February 2019 I FM MAGAZINE I 31 PHOTO BY SOPA IMAGES/GETTY IMAGES
nostalgia marketing
and the magic of
Nintendo was in partameans toanend.“We also edged thatthererelease ofthosesystems then thecompany’s president,acknowl- corporate briefing, Tatsumi Kimishima, comment forthisarticle, ina 2017 consoles. WhileNintendodeclinedto been simplytosellmany oftheretro for ashort-termsalesboost. simply cashinginoncustomers’nostalgia spend moremoneyforgameson. a budgetitemthatconsumerscouldnot software sales, thecompany was offering big-ticket platformthatwoulddrive hardware andsoftware sales. Instead ofa of whatNintendoneededtodoboost price of$80,appeared tobetheopposite NES, with21gamesbuiltinataretail and thesubsequentrerelease ofthe Super loaded with30classicgamesforonly$60, statements. according tothecompany’s earning measures ofthebusinessdownward, revenue stream —alsofell,drivingall sales ofNintendo’s games—asignificant Without ahithardware platform,software revenue. Itwas asymbioticrelationship: company neededahittoboostsalesand Wii, was declininginpopularity, andthe disclosures. according tothecompany’s financial and operating lossesfrom2012to2014, years ofmalaise, includingfallingrevenue returned toprofitabilityin2015after considered. Thecompany hadjustbarely seemed like anoddstrategy whenfirst (NES) andtheSuperNESgamingsystems, J But Nintendo’s maingoalmay nothave It almostlooked asifNintendowas The rerelease oftheNESconsole, The company’s flagshipconsole, the Looking backward turns out to be a good strategy Looking backwardturnsouttobeagoodstrategy Entertainment System Entertainment System 1990s classicsNintendo including 1980sand vintage gamingsystems, mini versionsofits decision torerelease giant Nintendo’s 2016 apanese videogame for movingforward. By AmandaAbrams customer’s feelingsaboutthepast,itis But morethanjustappealing toa of topgamingmanufacturers. in previousyears returntothepantheon company thathadlostsomemarket share VGchartz.com. leader PlayStation 4,according to than rival Xbox Onebutlessthanindustry the platformsold19.6millionunits, more first quarterof2017through August 2018, doing verywell.From itsrelease inthe platform —retailingfor$300–$400is bottom line, theNintendoSwitch according toaBloomberganalysis. total salesinthelasteightquarters, contributing atleast 4%ofthecompany’s million retrounitssince relaunch, market. Nintendosoldmorethan10 commanded highprices ontheresale rereleased productsquicklysoldout and in the1980sand1990s—bothof consoles soldmorethan100millionunits first released —combined,theoriginal in multipleways. Wildly popularwhen reissued consolesappear tobeahugehit system, NintendoSwitch.” consumers’ attentiontoourlatestgame products asanopportunitytodraw see thenostalgicinterestinthese February 2019 Yes, nostalgiaisback,inaverybigway. In theprocess, helpeda they’ve More importantlyforNintendo’s The strategy worked. For Nintendo, the I FM MAGAZINE I 33
IMAGE BY NICESCENE/ISTOCK helping companies like Nintendo boost users were children and young adults. looked and felt much like the original the bottom line. And because of the earlier decline in the 1980s product. home gaming market, many had never In its marketing for the product, Nintendo and the appeal owned video games before. As a result, the Nintendo didn’t shy away from obvious of childhood products had a huge impact on young attempts to capitalise on the past. “Many Originally released in 1983, the NES players. “A lot of people loved that of us have fond and wonderful memories helped turn around what had been a character [Mario], loved the experience on of the original NES,” said Doug Bowser, major decline in home video game sales, that platform at that time,” said Jitendra Nintendo’s US head of sales and particularly in North America. With iconic Waral, a consumer electronics analyst for marketing, in a press release accompa- characters like Mario and his brother, Bloomberg Intelligence. “It had a massive nying the product release. “We want to Luigi, and games featuring narrative following.” replicate the nostalgic feelings of sitting adventures, the console was a huge hit, Nintendo is no stranger to nostalgia down and playing the NES with your eventually selling 62 million units, marketing; over the decades, the company family for the first time.” according to Nintendo’s historical sales has reinvigorated the Mario franchise in Many consumers apparently had the data. Eight years later, the Super NES came new games multiple times. But the same urge. After all, someone who first out; featuring new games and characters, November 2016 relaunch of the NES, experienced the NES as an adolescent in the system sold 41 million units, dubbed the NES Classic, was something the mid-1980s would be in their 40s in according to Nintendo. different. The company released a limited 2016, perhaps with kids in tow — just the In both cases, a large proportion of the number of consoles that, though small, right age, according to Luan Wise, a PHOTO BY TORU HANAI/REUTERS TORU BY PHOTO People queue up to purchase the Nintendo Switch game console outside an electronics store in Tokyo in March 2017.
34 I FM MAGAZINE I February 2019 UK-based marketing consultant and author, to rediscover the toys of their ‘We want to replicate the nostalgic youth and (ostensibly) introduce them to their children. The first NES Classic feelings of sitting down and playing the rerelease was a giant success, and the product, a limited edition, quickly sold NES with your family for the first time.’ 1.5 million units and was soon unavail- able, according to a Bloomberg analysis. Doug Bowser, Nintendo’s US head of sales and marketing Nintendo learned from that experi- ence. In June 2017, it released the Super NES Classic, and this past summer, the NES Classic became widely available. Both feeling nostalgic and are therefore more And this era — with its complicated did extremely well: As of March 2018, the likely to buy or consider buying some- political environment, dire threats of Super NES Classic had sold over 5 million thing. climate change, and ubiquitous presence units, and the NES Classic — which within In a 2013 study, NBCUniversal of fast-moving technology — might be days was outselling the most popular Integrated Media noted that brands that particularly nostalgia-prone, said Ann video game platforms — reportedly had connected their products to the past — like Handley, the chief content officer sold 1.26 million consoles a month after Jack Daniel’s, Old Navy, and Sony — were at of MarketingProfs. “The impulse to recall its rerelease, according to Bloomberg. the top of its Brand Power Index. simpler, quieter, pre-digital times is “It’s a great way of monetising decades But does nostalgia marketing work on stronger than ever,” she said. of nostalgia based on the volume of everyone, everywhere, at all times? The people playing it,” Waral said. “It helps the answer is yes, kind of. Studies have shown So what works best? brand; it’s like a homage.” that people of all ages and from all over The most effective nostalgia marketing the world can be affected by similar levels balances old and new. That might mean Why nostalgia? of nostalgia. referencing an old product or commer- There’s a reason that marketers try to But there are variations. Obviously, cial, but giving it a modern twist. connect their products to the past. Simply nostalgia marketing isn’t going to work on The British chocolate company put, nostalgia sells. “People are human, children or teenagers, who are still in the Cadbury did just that in bringing back its and everybody wants to reminisce about a midst of their prime memory-forming iconic advertisements for Milk Tray (a box product or feeling from their years years and don’t have much to look back of mixed chocolates). The adverts, which growing up,” said Matt Thorpe, an internet on. “It works best for those a generation were popular in the 1970s, ’80s, and ’90s, marketing consultant in London. “It on,” Wise said. featured a man braving danger to bring a doesn’t always matter what the product is; That is, the ideal audience is about one woman a box of chocolates. In 2015, it’s the feeling that it creates. Emotion gets generation removed from the era they’re Cadbury announced a search to find a people to act because they want to hold on being reminded of. “For example, adults new “Milk Tray Man”; shortly after, it to that feeling as long as possible.” will become nostalgic about childhood launched a rebooted commercial Marketers have always known that toys when they have children of their featuring the new hero. appealing to consumers’ emotions, rather own,” she said. The only hard-and-fast rule is to avoid than simply their intellect, can be a the hard sell or anything that’s too heavy- powerful way to connect with them. And Effective nostalgia marketing handed. “Forget hard marketing messages nostalgia is a fundamental human Nintendo’s situation isn’t necessarily or manipulation,” Thorpe said. “Focus on emotion, according to researchers. typical: Not many firms have products the emotion, and not the product.” Constantine Sedikides and Tim Wild- that were beloved decades ago and can be Many companies have harnessed the schut, both professors of social and successfully revived. But many can power of nostalgia to great success. But personality psychology at the University benefit from savvy marketing efforts that the fact that nostalgia works so well might of Southampton in the UK, have exten- make use of nostalgia. just lead to its eventual demise. These sively studied nostalgia and have found days, products and advertising evoking that it frequently leads to warm, positive nostalgia are everywhere. There may feelings that can counteract loneliness come a time when consumers are tired of and boredom. being reminded of the past, when the Anything that stimulates good feelings reference no longer draws fond feelings can be effectively harnessed by those but rather a sense of cynicism. And when trying to convince others of something. that happens, it’ll be time for a new But nostalgia seems to have a particu- approach. larly strong effect when used in adver- tising. In 2014, Sedikides, together with Amanda Abrams is a freelance writer based in Jannine Lasaleta of the Grenoble School of the US. To comment on this article or to Management in France and Kathleen Vohs suggest an idea for another article, contact of the University of Minnesota, found that Drew Adamek, an FM magazine senior editor, consumers value money less when they’re at [email protected]. n IMAGE BY CZGUR/ISTOCK BY IMAGE
February 2019 I FM MAGAZINE I 35 Solve problems with linear programming and Excel
Management accountants tasked with figuring out the way to make the most of limited resources can employ a form of mathematical optimisation to determine the best approach.
By Clarence Goh, Ph.D.
36 I FM MAGAZINE I February 2019 management accountant’s The first step knowledge of relevant revenues in linear and costs is important for many programming is A decisions, among them capital to develop a budgeting, outsourcing, special orders, product mix, and the adding or dropping of specific product lines. Many of these mathematical decisions require management account- ants to determine or recommend specific representation of courses of action that would lead to an optimal outcome (such as maximising the business profits or minimising costs) given a limited set of resources (such as produc- problem and to tion inputs). It is therefore important that they apply appropriate analytical model it on a techniques in approaching such deci- sions. Linear programming is one spreadsheet. technique that accountants can often readily apply to determine the best outcome in these situations. This article provides a description of linear programming, demonstrates how it can be performed using Microsoft Excel’s free Solver add-in, and illustrates its use of each specific model of washing through an example from management machines to produce). The goal, accounting. then, is to determine those values that maximise or minimise the ob- Linear programming jective function. Linear programming is a form of mathe- ●●● Objective function: This is a math- matical optimisation that seeks to ematical function that incorporates determine the best way of using limited decision variables to express a resources to achieve a given objective. The manager’s goals. A manager’s goal is key elements of a linear programming to either maximise or minimise the problem include: objective function. ●●● Decision variables: Decision ●●● Constraints: These are mathemati- variables are often unknown when cal functions that incorporate deci- initially approaching the problem. sion variables to express boundaries These variables usually represent on possible solutions. identifiable “things” or inputs that a ●●● Variable bounds: Decision variables manager can control (ie, how many are rarely allowed to take on any IMAGE BY DEEPBLUE4YOU/ISTOCK BY IMAGE
February 2019 I FM MAGAZINE I 37 Summary of production of washing machines
Arkel Kallex Total available
Labour hours 18 hours per unit 12 hours per unit 3,132 hours
Rubber hosing 6 feet per unit 8 feet per unit 1,440 feet
Drums 1 per unit 1 per unit 200 drums
Profits $350 per unit $300 per unit
value (from minus infinity to plus technique can be used in many other Production of Washing Machines”. infinity). Instead, they usually have accounting and business settings to help Based on these facts and the assump- bounds (eg, ≥ 0). decision-makers determine optimal tion that 100% of production will be sold, It should also be noted that while all outcomes given limited resources. Beacon must decide how many units of the mathematical expressions for the each washing machine to produce in the objective function and constraints in An example from management coming production run to maximise linear programming are necessarily linear accounting profits. in nature (hence the name; see the sidebar Beacon Co. is a manufacturer of washing “Limitations of Linear Programming”), the machines. It currently sells two models of Doing linear programming in Excel technique remains one of the most widely washing machines: the Arkel and the The first step in linear programming is to used methods of optimisation, and the Kallex. At the start of every production develop a mathematical representation of largest and most complex linear program- cycle, Beacon must decide how many the business problem and to model it on a ming problems have millions of decision units of each washing machine to spreadsheet. Mathematically, the problem variables and hundreds of thousands of produce, given its available resources. In in the example can be represented as constraints. the coming production cycle, Beacon shown in the chart “Mathematical Before we continue, it’s important faces key resource constraints. In Representation of Beacon’s Business to note that this article is not intended particular, it has only 3,132 hours of Problem”, where X1 and X2 represent the to be an exhaustive course in linear labour, 1,440 feet of rubber hosing, and decision variables, that is, the number of programming. It’s instead an introduc- 200 drums available. Arkel and Kallex units produced, tion to the topic and how the Excel Selling each Arkel unit earns the respectively. Solver add-in can be used to help with company a profit of $350 while selling Next, we implement the mathematical this type of complex problem. each Kallex unit earns the company a model in an Excel spreadsheet. See the The example below demonstrates how profit of $300. At the same time, table “Spreadsheet Model” for the a management accountant could use the manufacturing each Arkel unit requires spreadsheet model used, and the table Solver tool to perform linear program- 18 hours of labour, 6 feet of rubber “Excel Formulas” for details of the ming to determine an optimal product hosing, and 1 drum, while manufac- formulas used in the model. You can also mix that maximises profits given a turing each Kallex unit requires 12 hours download an Excel file with the Spread- limited set of resources. This example of labour, 8 feet of rubber hosing, and 1 sheet Model with the online version of this provides one setting where linear drum. Details of the relevant facts are article at fm-magazine.com/linear. X1 and programming can be applied. The summarised in the table “Summary of X2 are represented in cells C3 and D3. The
Mathematical representation of Beacon’s business problem
Maximise profits: 350X1 + 300X2 } Objective function
Subject to: X1 + X2 ≤ 200 } Drum constraint
18X1 + 12X2 ≤ 3,132 } Labour constraint
6X1 + 8X2 ≤ 1,440 } Hosing constraint
X1 ≥ 0 } Variable lower bound
X2 ≥ 0 } Variable lower bound
38 I FM MAGAZINE I February 2019 Spreadsheet model Excel formulas
Cell Formula
C4 =350
D4 =300
E4 =(C4*C3)+(D4*D3)
C7; D7 =1
E7 =(C7*C3)+(D7*D3)
F7 =200
Solver parameters C8 =18
D8 =12
E8 =(C8*C3)+(D8*D3)
F8 =3132
C9 =6
D9 =8
E9 =(C9*C3)+(D9*D3)
F9 =1440
values of these decision variables are unknown at the start of the problem. The unit profits expected from the sale of each unit of Arkel and Kallex are entered in cells C4 and D4. Cell E4 represents the objective function (which is to maximise profits) and calculates the total profit that Beacon can expect in this production cycle based on the corresponding production quantity and unit profit information in cells C3:D4. Cells C7:C9 contain the amount of each production input required in the Spreadsheet model — with Solver solution production of each unit of Arkel, while cells D7:D9 contain the amount of each production input required in the production of each unit of Kallex. Cells E7:E9 calculate the total amounts of each production input that will be used in the production cycle based on the corresponding number of units of Arkel and Kallex that are produced. Cells F7:F9 contain the total amount of each production input available to Beacon in this production cycle. Together, cells E7:E9 and F7:F9 represent the drum,
February 2019 I FM MAGAZINE I 39 the solving method in Solver. A management accountant Once these input parameters have been defined, click “Solve” to instruct could use the Solver tool to Solver to solve for an optimal allocation of production between Arkel and Kallex that maximises profits. perform linear programming to The table “Spreadsheet Model — With Solver Solution” presents the Solver determine an optimal product solution to our example. Solver automat- ically solves for the number of units of Arkel and Kallex washing machines that mix that maximises profits Beacon should produce to meet the stated objective of maximising profits. given a limited set of resources. Our spreadsheet indicates that Beacon should produce 122 units of Arkel and 78 units of Kallex washing machines (cells C3 and D3), leading to an optimised profit of $66,100 (cell E4).
labour, and rubber hosing constraint our spreadsheet model. First, we need to Proving its value functions stated in our original mathe- define an objective cell (and whether its Linear programming, as demonstrated by matical model. Specifically, cells E7:E9 value should be maximised or mini- applying Excel’s Solver feature, is a viable represent the left-hand side of the mised). This cell should correspond to and cost-effective tool for analysing constraint functions while cells F7:F9 the cell in the spreadsheet that repre- multi-variable financial and operational represent the right-hand side of the sents the objective function in the problems. constraint functions. mathematical model. Second, we need to In the example, it was unclear at the Having implemented the mathemat- define variable cells. These cells should outset what the optimal production ical model in the spreadsheet, we can correspond to cells in the spreadsheet quantity of each washing machine was then use Solver to find the optimal that represent decision variables in the given the stated objective of profit solution to the problem. Solver, as mathematical model. Third, we need to maximisation. An intuitive response mentioned earlier in the article, is a free define constraints. These cells should might have been to focus all production Excel add-in that must be installed correspond to cells in the spreadsheet on the washing machine that provides before it can be launched (see tinyurl. that represent the various constraint the greater profits per unit (ie, Arkel). com/ydehj42m for instructions). Once functions in the mathematical model. However, because of the resource the add-in is installed in Excel, go to Further, indicating that unconstrained constraints in our example, following Data Analysis Solver. variables should be non-negative sets the such an intuition would not have led to a
The Solver parameter inputs used in decision variable bound where both X1 situation where profits are maximised.
our example are shown in the screen- and X2 are greater than or equal to 0. Instead, relying on linear programming shot “Solver Parameters”. In Solver, we Given that we are executing linear to analyse the business problem leads to need to define three key components of programming, we select Simplex LP as a production mix that definitively maximises profits. While this example is simple, it is reflective of many more complex real-life scenarios in which accountants face situations that require Limitations of linear programming them to fulfil a variety of business objectives while contending with Linear programming is one of several optimisation techniques that can be practical constraints. Where required, employed to determine the most efficient way to use resources. While it is a the modelling can be scaled up to deal powerful technique that can be applied to many business situations, it should with more complicated business only be used to solve optimisation problems that involve a single linear objective problems. function and linear constraints that cannot be violated. There may be situations where linear programming may not be the most Clarence Goh, CA (Singapore), Ph.D., is an appropriate optimisation technique to employ. For example, where optimisation assistant professor of accounting (practice) problems involve multiple objectives, nonlinear objective functions and/or and director of professional development for constraints, or soft constraints (that can be violated) rather than hard the School of Accountancy at Singapore constraints (that cannot be violated), other more appropriate optimisation Management University. To comment on this techniques such as multiple objective linear programming, goal programming, article or to suggest an idea for another article, or nonlinear programming should be identified and employed instead. contact Jeff Drew, anFM magazine senior editor, at [email protected]. ■
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23090-344 CPD Collection Ad.indd 1 9/11/17 9:04 AM Things are looking up with this Excel function
When it comes to searching for dates or other data in a spreadsheet, LOOKUP may be the best choice.
By Liam Bastick, FCMA, CGMA IMAGE BY NKTWENTYTHREE/ISTOCK BY IMAGE
42 I FM MAGAZINE I February 2019 he October article “How Arrays and vectors Not to Make a Mess With VLOOKUP”, available at tinyurl. com/ybyuct26, identified potential pitfalls in two lookup functions, VLOOKUP and HLOOKUP. Conspicuous by its absence in that article, TLOOKUP may seem a less versatile function upon first glance, but it is quite useful for modelling. Let’s take a closer look. LOOKUP requires the data to be “looked up” to be in ascending order, but More columns than rows it doesn’t have to be strict ascending order. For example, the sequence 1, 2, 3, 3, 3, 4, 77, 77, 78 would be fine. It then hunts out the largest value less than or equal to what it is looking for. So with duplicates, this means the final occurrence of the value, which can be really useful when grouping periods in modelling. In fact, LOOKUP is often the optimal function to use when you are looking up dates in a time series, as they are always in ascending order. LOOKUP has two syntax forms: an array form and a vector form. Let me explain the jargon: ●●● An array is a collection of cells consisting of at least two rows and at least two columns, as illustrated by the yellow box in the diagram “Arrays Equal number of rows and columns and Vectors”. ●●● A vector is a collection of cells across just one row (row vector) or down just one column (column vector), as illustrated by the green boxes in the same diagram. The array form of LOOKUP looks in the first row or column of an array for the specified value and returns a value from the same position in the last row or column of the same array:
LOOKUP(lookup_value,array)
Where: ●●● lookup_value is the value that LOOKUP searches for in an array. The lookup_value argument can be similar to the HLOOKUP and VLOOKUP rows), LOOKUP searches for the value of a number, text, a logical value, or a functions. The difference is that lookup_value in the first row and returns name or reference that refers to a HLOOKUP searches for the value of the result from the last row. Otherwise, value. lookup_value in the first row,VLOOKUP LOOKUP searches for the value of ●●● array is the range of cells that con- searches in the first column, andLOOKUP lookup_value in the first column and tains text, numbers, or logical values searches according to the dimensions of returns the result from the last column that you want to compare with the array. instead. lookup_value. If the array covers an area that is wider For an example, see the screenshot The array form of LOOKUP is very than it is tall (ie, it has more columns than “More Columns Than Rows”.
February 2019 I FM MAGAZINE I 43 LOOKUP will seek the “5” in the first Selecting custom number formatting row and return the corresponding value (“220”, highlighted) in the bottom row. However, as soon as there are at least as many rows as columns, LOOKUP will “flip” and seek the “5” in the first column and return the corresponding value (with “230” highlighted) in the final column (as shown in the screenshot “Equal Number of Rows and Columns” on the previous page). You should not be held hostage to an end user inserting rows and/or columns and messing up your formulas, so the array form is not recommended generally. The alternative form is the vector form:
LOOKUP(lookup_value,lookup_ vector,[result_vector])
The LOOKUP function vector form syntax has the following arguments: ● ●● lookup_value is the value that LOOKUP searches for in the first vector. ●●● lookup_vector is the range that con- tains only one row or one column. ●●● [result_vector] is optional — if ig- nored, lookup_vector is used — this To explain why I think LOOKUP is so numbers. But there’s more to it than that: is where the result will come from useful with dates, look no further than It allows modellers to create inputs that and must contain the same number referencing model inputs. You may have a do not need to be specified for all periods of cells as the lookup_vector. model that forecasts for 20 years annually modelled. That makes models smaller, As mentioned above, like the default or 10 years monthly, etc. That’s a lot of more efficient, and easier to follow. versions of HLOOKUP and VLOOKUP, inputs to enter. Isn’t there a better way to Let me demonstrate with the example lookup_value must be located in a range of do it, where the end user doesn’t have to in the screenshot “LOOKUP Example” (the ascending values, ie, where each value is put in inputs in every period but can just full set of examples may be found in the greater than or equal to the one before. If assume they are the same as the last Excel file attached to the online version of this rule is followed, LOOKUP will return period after a while? This is where this article at fm-magazine.com/lookup): the value occurring to the final occurrence LOOKUP comes into its own. Imagine you have an annual model of the lookup_value (whereas MATCH Yes, LOOKUP is simpler to use and forecasting for many years into the future. would return the first occurrence). doesn’t rely on row or index column Creating inputs can be time-consuming if
LOOKUP example
44 I FM MAGAZINE I February 2019 Using the vector form for assumptions and results
Assumptions and results in a time series
data have to be entered on a period-by- value less than or equal to the value LOOKUP(G$19,$G$12:$K$12,$G$13:$K$ period basis. But there is a shortcut. sought. Therefore, we don’t need to have 13), contains one more argument, the Consider the data table in cells F12:K13 lengthy data tables — once we assume formula is more stable. Further, the in the “LOOKUP Example” screenshot. The inputs will be constant thereafter, we can lookup_vector and the result_vector do value in the final cell of the first row is just curtail the input section. not need to be in the same worksheet or actually the numerical value “2020” not the As mentioned earlier, using the array even the same workbook. In fact, as long text value “2020+”. It appears that way due form of LOOKUP is dangerous, though. as the same number of elements is in to custom number formatting (Ctrl+1). What if someone inserts rows? The each, one can be a row vector and the The syntax “0+” adds a plus sign to the lookup will “flip” to look at the first and other a column vector. number, although Excel still reads the last columns instead, which is not what is LOOKUP is very useful when the value as 2020 (see the screenshot required. Using the vector form is safer, as lookup_vector contains data in ascending “Selecting Custom Number Formatting” shown in the screenshot “Using the Vector order. Where do we find this? Dates in on the previous page). Form for Assumptions and Results”. time series. LOOKUP is very useful for The formula in the first example, Whilst the formula shown above, financial modelling/forecasting. Just be LOOKUP(G$19,$G$12:$K$13), uses the careful, though. Consider the scenario array version of LOOKUP, looking up the where the Assumptions start with the year year in the first row of the data table and 2016 but we still want Results for the years returning the corresponding value from 2013–2015 (let’s assume that we know the the final row. When a year is selected that Assumptions for years before 2016 were is greater than 2020, the 2020 value is also 3%) (see the screenshot “Assumptions used as LOOKUP seeks out the largest and Results in a Time Series”).
February 2019 I FM MAGAZINE I 45 Here, the same formula generates an shot, “Monthly Financial Data for Sales intended) of megaformulas that Tolstoy #N/A error. This is because the date is and Net Assets”. would have been proud of. We don’t wish smaller than the smallest value in the data Here, I have monthly financial data for to sum the Net Assets amounts for all the range. LOOKUP is not quite clever enough Sales (from the income statement) and for months included in the quarter — we just to use the first value unprompted, but a Net Assets (from the balance sheet). To want the final balance. This is something simple tweak of the formula will suffice, summarise the data quarterly, row 22 uses LOOKUP was born to do. The function in as shown in the screenshot “Adjustment a SUMIF function to sum the sales data if cell H24 is a very simple alternative to the to Formula for Assumptions and Results”: they are in that particular quarter. nightmare calculations performed Here, the formula has been modified to: Modellers perform similar calculations regularly elsewhere: day in and day out: =IF(G$19<$G$12,$G$13,LOOKUP =LOOKUP(H$20,$H$11:$Y$11,$H$15: (G$19,$G$12:$K$12,$G$13:$K$13)) =SUMIF($H$11:$Y$11,H$20,$H$1 $Y$15) 3:$Y$13) The added IF statement checks to see if Liam Bastick, FCMA, CGMA, FCA, is director the year is smaller than the first year in However, row 24 shows the closing of SumProduct, a global consultancy the data table and, if so, returns the first balance for Net Assets in each quarter. specialising in Excel training. He is also an result. Simple! Here, I regularly see a vast array (pun Excel MVP (as appointed by Microsoft) and It is with this final modification — in its author of the book Introduction to vector form — that I usually use LOOKUP Financial Modelling. Send ideas for future to return values for certain time periods Excel-related articles to him at liam.bastick@ where I do not want to have an input for sumproduct.com. To comment on this article each period modelled. Very useful! or to suggest an idea for another article, In case you aren’t convinced, let’s contact Jeff Drew, an FM magazine senior finish with the example in the screen- editor, at [email protected]. ■
Adjustment to formula for assumptions and results
Monthly financial data for sales and net assets
46 I FM MAGAZINE I February 2019
Moving up the leadership maturity chain
‘Transpersonal’ leaders prioritise decisions based on what’s best for the organisation. Learn how to grow as a leader.
By John Knights aintaining an ethical culture is Leaders who are not only ethical but about much more than also emotionally intelligent and caring are changing rules and processes “transpersonal” leaders. Such leaders after an organisation’s behave in a way that encourages people to misdeeds. It’s more than a be their very best, motivating them to put compliance exercise to ensure in that extra, discretionary effort. They are the organisation remains also radical in how they approach within the law. It is about challenges as well as authentic, while leadership. always continuing their personal Ethical leadership can be defined as development as a leader. And perhaps the process of influencing people to act most importantly, they lead beyond their through principles, values, and beliefs ego — prioritising the decision that’s right (characterised by honesty, fairness, and for the organisation, rather than for equity) and by respecting the dignity, themselves. diversity, and rights of individuals and This combination of leadership groups of people. competencies can create and maintain LeaderShape Global, a UK leadership cultures that are both performance- and training organisation of which I am enhancing and sustainable in this chairman, has worked with hundreds of fast-changing world where younger senior leaders over the past 20 years, generations have different demands and including more than 100 CEOs who have expectations. been through our development This involves the development of three programme. Based on that experience and types of intelligence: rational, emotional, other research, we suggest that the and spiritual (this is values based — not to journey of leadership development begins be confused with religion). with raising awareness of self and others Distrust in leadership is becoming and learning to manage emotions. more common than ever, according to the Understanding which leadership style to annual Edelman Trust Barometer. As a use in which circumstance can help to result, many business leaders consider develop the right culture for the leader’s establishing a reputation for probity as a
organisation. source of competitive advantage. This still IMAGES WATERS/IKON GARY BY IMAGE
February 2019 I FM MAGAZINE I 49 sounds like self-interest (albeit at a higher The right leadership behaviours The lesson must be that if potential level), but it may just be the start of top One obstacle to developing ethical leaders leaders do not have the right values and leaders looking to develop themselves in lies in the traditional route to CEO. As well behaviours (or are not genuinely new ways. as considering experience and qualifica- committed to improving behaviours), tions, selection in most organisations is they should never be allowed on the usually based on more traditional ladder to higher office. That protocol leadership characteristics, such as could provide the opportunity for many self-confidence, assertiveness, influence, excellent candidates currently sidelined and achievement. These attributes can because they are not willing to get to the regress to high ego, aggression, manipula- top at any cost to become our top leaders tion, ruthlessness, and an obsession with of the future. control unless accompanied by positive So how can someone become a values and behaviours to temper them. transpersonal leader?
50 I FM MAGAZINE I February 2019 It might feel like a tall order to develop all of the characteristics in the “REAL This combination of leadership Transpersonal Leadership Development Journey to Excellence” diagram, but the competencies can create and maintain model is based on LeaderShape’s research and experience with leaders over the past cultures that are both performance- 20 years.
Like driving a car enhancing and sustainable in this Most of the issues that leaders have are about people. While participants in fast-changing world. LeaderShape’s CEO development programme were good at helping each other find solutions to these issues, the approach addressed only symptoms rather than the cause. Developing new behaviours to build and improve gence, including understanding other critical to leading ethically. As a leader, relationships is a more fruitful approach. people and managing relationships our core responsibility is making the right The great thing about learning new effectively. This is increasingly important decisions for the organisation rather than behaviours is that it is no different from as technological automation is shifting for ourselves. To do that we must resist many other learning processes; for the skills requirement of the finance the pressure of the main drivers of our example, learning to drive a car. It feels professional towards these human skills. own ego: power, prestige, recognition, and very complicated to start, but with regular Empathy is the greatest development reward. A good first step to becoming a practice and focus it becomes automatic. need for many leaders. The challenge to transpersonal leader is to ask ourselves, The plasticity of the brain allows us to become more empathetic can seem “To which of these drivers am I most rewire and connect new circuits. overwhelming, but if we break it down susceptible?”, and learn to manage that Improving the CEOs’ emotional intelli- into the following components, it seems desire so that it never compromises our gence had a positive impact on their much more manageable: organisational responsibility. leadership and the performance of their ●●● Listen attentively to what people say. organisations. ●●● Demonstrate an awareness of how John Knights is chairman of LeaderShape While this was a major step forward for others are feeling. Global and lead author of Leading Beyond the leaders in our programme, taking ●●● Accurately identify the underlying the Ego: How to Become a Transpersonal them to the “intermediate” level in the causes of the other person’s perspec- Leader. To comment on this article or to diagram, it did not address ethics and tive. suggest an idea for another article, contact values. For those who are unethical, ●●● Express an understanding of the Neil Amato, an FM magazine senior editor, emotional intelligence can be used in a other person’s perspective. at [email protected]. ■ manipulative way. My experience working with many The advanced stage of the develop- leaders shows that becoming more ment journey is fundamentally about empathetic is the key portal to becoming bringing our values to full consciousness, more comfortable with some of the softer improving our decision-making and values such as humility, vulnerability, Resources judgement, leading beyond the ego, forgiveness, and patience, which all have Report developing a purpose, and constructing a an important role in transpersonal touchstone that guides us in our deci- leadership. A summary of the Transpersonal sion-making. And all these lead, in turn, to effec- Leadership Model was first published tively managing our own ego, which is in the The Invisible Elephant and the A solid foundation for leadership Pyramid Treasure report sponsored by Management accountants have the CIMA, available at tinyurl.com/ foundation to become transpersonal y8wmol2u (member login required to leaders, with strong analytical brains download). (rational intelligence) and core values White paper (spiritual intelligence) of integrity, honesty, and trustworthiness. In addition, How to Develop Ethical Leaders, their profession is bound by codes of download at tinyurl.com/yam75mm3 ethics, such as the CGMA Code of Ethics Article (tinyurl.com/ybp9d7zo). In my experience, management “Seven Steps to ‘Transpersonal’ accountants are hardworking and diligent Leadership,” FM magazine, 27 June and therefore have the right attitude to 2012, tinyurl.com/7stepstoTPL develop in the area of emotional intelli-
February 2019 I FM MAGAZINE I 51 Key considerations for cross-border M&A planning
Financial, legal, social, and political factors play particularly important roles in cross-border transactions.
By Scott Whitaker and Andrew Scola very merger and acquisition is different, and the integration of each deal faces different challenges. E Financial, legal, social, and political factors need to be considered in all deals but may be more important in a cross-border transaction. Together these factors provide the context for deals, the complexity surrounding deals, and some of the implications for integration (see the diagram, “Interdependencies in Cross-Border M&A”). IMAGE BY PHILIPPE INTRALIGI/IKON IMAGES INTRALIGI/IKON PHILIPPE BY IMAGE employment. The objectives of a cross- Your leadership posture during an border deal need to be transparently presented to stakeholders, and if there are M&A event should be carefully difficult decisions that impact local communities around the acquired planned and co-ordinated. business or the wider public, these should be well considered, well prepared, and well justified. It is probably difficult to draw too much quantitatively about the impact of social factors on M&A, but the Well-prepared companies will place is key. Many basic legal and effect on integration is huge. Social understand how these factors relate to regulatory aspects need to be considered. concerns permeate the workstreams of potential deals within target jurisdictions, The focus will usually be on deal structure leadership, human resources, communi- plan accordingly, and be prepared to adapt and legal entities, competition, and cations, culture, operations, and research the deal structure, deal objectives, or sector-specific regulation. and development. integration plans as necessary. Companies In cross-border deals, acquisitions can need to understand local factors, too, and be structured in different ways according Political interdependencies extra attention is needed when acquiring to the acquirer’s commercial objectives. Like social factors, political interdepend- or operating for the first time or expanding Business deals can be structured as asset encies can be hard to predict. Generally, a business in a foreign jurisdiction. deals, where specific assets and liabilities politicians and influence groups such as Case studies on failed cross-border are purchased, or as stock deals, where the unions, campaign groups, and other M&As are littered with examples of owners’ shares of the legal entity are nongovernmental organisations will be companies that overlooked some of the traded. Most acquisitions are stock deals, interested in a cross-border M&A if the factors above or based decisions on bad and the ratio increases with the size and integration causes significant changes to assumptions in a rush to get the deal complexity of the deal. causes they are interested in, which will signed. What may appear in retrospect to Rules about foreign ownership may tend to be the legal, financial, or social be a simple oversight can cause risks and require an alternative structure or factors listed earlier. issues during integration, erode or destroy approach. Many countries now have laws The most common cause of political deal synergies, or, at worst, materially restricting foreign ownership and control intervention is job losses. A foreign harm the reputation of the new combined in business entities of strategic impor- acquirer whose rationale entails cost company. tance to national defence and national synergies by making job cuts in the target security, or in strategic industries. market is a political and economic threat to Tax and legal If a full legal subsidiary already exists, the local country with little upside. While Tax, for example, is a local jurisdiction then the legal, tax, and finance work- some back-office consolidation is matter; therefore, the implications of streams normally plan an appropriate understood and accepted politically, tax differences between tax jurisdic- integration path for these entities. wholesale closure of offices or operating tions are among the key determinants However, if the acquisition is a geograph- locations and movement of jobs offshore of deal structures and optimal legal ical expansion with the acquirer having will be fiercely resisted unless it is obvious entity structures. The implications of just a branch office or no legal entity at all, that no other options are available, and taxation go well beyond deal structure, then the target can become the legal those jobs would otherwise be under threat and thorough tax integration planning subsidiary in that market relatively simply. anyhow. prior to close can still often be over- Awareness of local labour laws is looked by the buyer in the rush to get likewise fundamental. Leadership during cross-border M&A the deal done. Also, each country is governed by its For many companies, an M&A event is Tax is one of the most important own regulator whose explicit aim is to one of the most intense and seemingly factors in acquisition synergy models protect the rights and interests of local chaotic periods they will ever experience. because of the variations in corporate tax consumers by identifying potentially In addition to the areas already outlined, levels and rules across different countries. monopolistic behaviours and to put in consider all the things that can be “in Tax efficiencies not only make or break place rules, regulations, and measures play” when planning an integration: synergy targets — with the global trend for necessary to prevent these. Authorities ●●● The company’s strategic direction corporate tax rates becoming more follow laws, regulations, and merger and business focus; competitive recently — they also can be guidelines that cover different types of ●●● Corporate leadership and governance the sole rationale for M&A transactions. integrations. structures; Beyond levels of corporation tax, related ●●● Individual roles and responsibilities; factors such as stamp taxes, value-added Social factors ●●● Policies, processes, and business tax (VAT), incentives for new investment, Social factors can touch upon public practices; subsidies and tax relief, and trans- interest and public policy, environment ●●● Corporate office and facility locations; fer-pricing mechanisms need to be factors, pro bono and social contribu- ●●● Financial performance; considered. tions, local investment in infrastructure, ●●● Reprioritisation of business invest- Getting the right legal structures in and often most acutely upon local ment and capital allocations;
54 I FM MAGAZINE I February 2019 Interdependencies in cross-border M&A
This diagram provides a snapshot of the web of key legal, financial, political, and social interdependencies related to cross-border integration.
Legal Political Anti-corruption Political impact and Information influence, including security and interest groups and privacy nongovernmental Corporate Strategic organisations law national Legal entity interests structure Sector-specific regulation
Deal Competition structure authorities Environmental impact
Local investment Public awareness and media interest Government incentives Taxation
Local Corporate social Statutory responsibility reporting employment
Financial Social
Source: Global PMI Partners.
●●● Product and service portfolios; ●●● Establish goals and success factors; and deal success. Give the process of ●●● IT and operating infrastructures; and ●●● Support proactive communications; mutual cultural adjustment some time ●●● Suppliers and customer mix. ●●● Manage the timing and inclusion of and move a little bit out of your comfort Leadership “voids” during M&A events target personnel into pre-planning zone — the effort is worth it on a business can negatively impact momentum or efforts; and and a personal level. destroy and permanently hobble a ●●● Ensure proper integration resourcing Finally, there is no substitute for strong transaction right out of the gate. Your and budgeting. leadership during any M&A event, leadership posture during an M&A Integration planning for cross-border particularly a cross-border transaction. event should be carefully planned and deals needs to start during due diligence, Without strong leadership, the anxiety co-ordinated to avoid unexpected results with integration risk management taking caused by M&A activities can overwhelm and issues. a holistic view of the legal, financial, both the acquiring and target companies, Everyone, from the CEO to those social, and political implications of the and erode productivity and employee chosen to help lead the integration, integration. Companies acquiring in engagement. should: countries where they do not have existing ●●● Reinforce the importance of integra- business teams, operations, stakeholder Scott Whitaker and Andrew Scola are tion as a corporate priority; relationships, or local knowledge are partners at Global PMI Partners, an M&A ●●● Clarify the integration planning obviously exposed to greater risks than integration consulting firm, in the US and scope, guidance, and assumptions; those performing vertical or horizontal the UK, respectively. To comment on this ●●● Provide overall integration oversight acquisitions to build out their existing article or to suggest an idea for another and governance; markets. article, contact Sabine Vollmer, an ●●● Solidify organisational design and Effectively managing cultural FM magazine senior editor, at structure early; differences will enhance understanding [email protected]. ■●
February 2019 I FM MAGAZINE I 55 Equine studies for executives
This programme brings together business leaders and horses. Here’s why.
By Oliver Rowe
ude Jennison works with The work involves no riding, which anxious and you’re honest about it, they leaders — and horses. makes for a partnership of equals. “If [the will engage with you because you’re Five of them. Kalle, Opus, horses] don’t want to go with you, they honest and you’re transparent.” Tiffin, Mr Blue, and Gio. just plant their feet and refuse to move,” Jennison started to coach business Horses, like humans, she explained. leaders eight years ago, and early on had a Jennison said, are Horses respond to humans’ nonverbal lightbulb moment. “I was challenging a looking for “transpar- communication and, according to group of directors that I was working with ency, authenticity, Jennison, “cut through all the masks of to be more courageous in their leadership, congruence in your who you think you should be or who you and I asked them to overcome their fear of behaviour”. They also want someone to like to think you are. … So if somebody is something to understand what happens Jkeep them safe, “which, of course, is what anxious but is pretending to be confident, when you come out the other side of people want, too. We just don’t always talk the horses will not engage with them overcoming your fear.” about wanting to be safe.” because it’s a mixed message. If you’re “I thought, ‘What am I frightened of?
56 I FM MAGAZINE I February 2019 Jude Jennison stands with Mr Blue, left, and Gio, two of the horses she uses in her Leadership With Horses course that helps executives develop their leadership skills.
— horses.’ So I decided to go and essential qualities, and horses can help With Horses course is about bringing out overcome my fear of horses. And found here, too. “Horses also require clarity. … So strengths and using them to overcome myself face to face with a horse. In five they show you very quickly what are your people’s vulnerabilities. There are also minutes, I overcame my fear. And in two default patterns of behaviour. So how common themes: self-confidence, hours, I learned so much about my quickly do you build trust? How quickly presence, clarity, teamwork, and align- leadership.” Recognising the potential do you build mutual respect?” Jennison ment. (See the sidebar, “Heightening benefit for others, she trained formally in said. Awareness of Strengths”, for an HR equine guided leadership and bought her One of her clients working in financial professional’s assessment of the benefi- first horse. services said, “All my default patterns of cial effects of Jennison’s techniques on behaviour have shown up, all my one company’s high-potential senior Default behaviour strengths, and all the places where I derail leaders.) For business leaders, being clear and my career.” The solution is not a cognitive one. “It’s confident and engendering trust are The work in Jennison’s Leadership something else that’s much more complex PHOTO BY JOHN JAMES/AP IMAGES JAMES/AP JOHN BY PHOTO
February 2019 I FM MAGAZINE I 57 and more subtle. Because, of course, leadership behaviour is … massively ‘If somebody is anxious but is complex and, yet, very simple,” she said. Before launching her own business, Jennison worked for IBM in Warwick in pretending to be confident, the the UK’s Midlands for 16 years. “I tended to be given jobs where somebody would horses will not engage with them.’ say, ‘This is not defined. We don’t really Jude Jennison, whose Leadership With Horses course is part of her programme for coaching know what we need to do, but we need to business leaders do something,’” she explained. “And I would go in and I would work out what we needed to do, put in the management system, the governance, work out how to do it, define the strategy, and then hand it over to somebody else to deliver.” In addition to geopolitical shifts, are left feeling “anxious, stressed, This ability to lead through uncertainty change has been driven by digital polarised because they are unsure how to is increasingly becoming part of today’s disruption of traditional businesses. “It’s lead through it”. executives’ skillset, and the Brexit challenging for them to certainly change Solutions she offers could be flatter referendum decision in June 2016 was a the way they operate when they’ve got management systems and more collective pivotal moment in this trend in the UK. legacy systems, old ways of doing things, leadership styles. “People are used to “At that point, everybody started to talk and hundreds of thousands of employees collaborating using technology. So people about uncertainty and be more comfort- to leverage and manoeuvre in a different are used to operating in a more systemic able with the concept [of] uncertainty … direction,” she said. way, and they’re wanting to be engaged and to recognise that, actually, we’ve These changes, she suggested, require and inspired. And people no longer expect always lived through uncertainty,” a different style of leadership, for which to have a job for life. So they vote with Jennison explained. people aren’t necessarily equipped and their feet if they’re not engaged and they’re not inspired, and they leave.” CEOs have a particular role in creating certainty from uncertainty. Certainty could take the form of guidelines for how Heightening awareness of strengths employees operate together as a team, company values, or a specific goal or Kristy Rowlett is talent, leadership, and development manager at insurance objectives that are the must-dos. and financial services provider Wesleyan Assurance Society, based in Jennison’s diagnosis of what middle Birmingham in the UK Midlands. In October 2017, as part of the company’s managers are feeling is not a positive one “WeLead” talent development programme, she took a group of high-potential — she said there is much fear and senior leaders on a Jude Jennison Leadership With Horses course. Rowlett uncertainty in organisations, which shared her thoughts on the key lessons from the course and the benefits she creates stress. “If you’re repeatedly pushed has already noticed: out of your comfort zone, eventually you get more and more stressed until you hit What were you and your team required to do? overwhelm and burnout.” Rowlett: We participated in individual and team activities, leading horses to Part of her solution, which she details achieve a specific goal, which replicates how we typically lead people to achieve in her book Leading Through Uncertainty, results in the workplace. is to “slow down to speed up”. This is essential to increase two things: collabo- What problem or issue were you trying to solve? ration and creativity. “To truly collaborate, Rowlett: I wanted to heighten our leaders’ awareness of their leadership we have to slow down enough to be able strengths to boost their poise and gravitas, as well as raising awareness of any to listen.” behaviours that may be “getting in the way” of leading others effectively. As She added: “So, creativity doesn’t occur strange as it may sound, the horses are astounding at giving behavioural in moments where we’re going at 300 feedback — and because it’s a visceral experience, the learning really sinks in miles an hour. Creativity happens when and sticks with you. we’re in the shower, when we’re out for a run, when we’re playing squash, or doing What was the outcome? something where we’re actually just being Rowlett: All of our leaders came away with clear actions to enhance their and slowing down.” leadership impact and put these into practice. After three months, the group fed back that they were experiencing less conflict, found it easier to influence, Oliver Rowe is an FM magazine senior and were seeing more engagement and development within their teams. A editor. To comment on this article or to number of the group were also promoted into more senior leadership roles. suggest an idea for another article, contact him at [email protected]. ■
58 I FM MAGAZINE I February 2019 DATA ANALYTICS AND BEYOND
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1812-5053 Data Analytics Campaign - FM ad.indd 2 12/11/18 10:11 AM How to work with someone you dislike
It’s impossible for us to get along with olleagues are a bit like your family. You don’t get to choose them, but you have to spend a lot of everyone. Here are 9 steps to make the time with them. So what do you do about a co-worker you really don’t like? Can you change best of tense work relationships. the relationship or find ways of coping? How do By Rhymer Rigby Cyou make the best of the situation?
60 I FM MAGAZINE I February 2019 Jeff, but I really struggle with the smell of tuna sandwiches. Is there any chance you could eat them in the cafeteria or the break-out space? You’d really be doing me a huge favour.” In the first situation, you accuse Jeff of being the problem. In the second, it’s about how you feel. In the first, you embarrass Jeff in front of other people. In the second, you are discreet. In the first, you give Jeff an order. In the second, you appeal to him for help and offer a solution.
Learn from others’ coping strategies. Perhaps Michael, who sits next to you, has found a way of dealing with Pam 5 that enables him to accept her behaviour and actually get on with her. Whenever you bring up the subject of a difficult colleague, you should be careful. The person you are talking to may be good friends with the individual you dislike. So again, make it about you: “I’m struggling to deal with Pam’s requests and was wondering if you had any advice.”
Differentiate between the person and the behaviour. This will help you not to fixate on hating the person. You 6 may even get to a stage where you think, “Jim is very loud You need to deal with the problem. If you don’t, it will on the phone because he has adopted a big, outgoing persona to only get worse and may build up until it becomes a far hide his insecurities.” Do this well, and you could even find 1 bigger issue than it should be. But here’s the good part: yourself feeling empathy for him. Dealing with the problem might involve nothing more than saying to yourself, “Claire annoys me and she’s difficult, but I’ve looked at the options, and the best choice is simply to let it wash If all else fails, minimise your exposure. Make your over me.” This may seem the same as ignoring it, but it’s not. You interactions as transactional as possible. Deal with them in have taken control and made a conscious decision. 7 a work sense and not a personal sense. Do a good job, be polite, and leave it at that. Communicate by email where possible, but keep it professional, not passive-aggressive. Ask Tell yourself that it’s not that bad. We are never going to your boss not to put you on tasks together if at all possible. get on with everyone, nor should we expect to. Claire, in 2 this example, will never be a good friend, but she needn’t be a mortal enemy. Worrying about her behaviour is really rather Make sure the conflict doesn’t affect work. This advice ridiculous — and there are far worse things. Perhaps you can assumes that you have only a personality conflict with the make a game of it and turn making her tolerable into a personal 8 individual or minor objections to behaviours. If someone challenge. The last suggestion may sound childish, but it can be is damaging your work or reputation or undermining you, then surprisingly effective and satisfying. it is a very different matter and you may need to document the behaviour and involve your boss or HR.
Sometimes all you need to do is talk to the person. You should go in gently here — because the individual may not And if they ruin your every working day? In this case, 3 realise that their behaviour has a negative impact on you. you will have to move, either to a new department or a new Indeed, in many situations, even if the other person is oblivious, 9 organisation. Obviously, this is not ideal. But it is prefer- a quiet word is all it takes. able to hating every minute of work. Moreover, if one person can make you that miserable in your job, chances are there are other things wrong, too, so moving on may be a good idea. Don’t embarrass the person. You can get your message across without letting the entire office know. The bad way 4 to bring up someone’s faults is to say in front of several Rhymer Rigby is an FM magazine contributor and author other people, “Jeff, the tuna sandwiches you eat at your desk of The Careerist: Over 100 Ways to Get Ahead at Work. To make the whole office stink and make me feel sick. You need to comment on this article or to suggest an idea for another stop doing it now.” Instead, you might ask Jeff for a chat when article, contact Neil Amato, an FM magazine senior editor, at nobody else is around. You would then say, “I hate to do this, [email protected]. ■ IMAGE BY PAITOONPATI/ISTOCK BY IMAGE
February 2019 I FM MAGAZINE I 61 INSTITUTE NEWS
A new CIMA Code of Ethics
IMA is undertaking a full review and safeguards, professional judgement, and written by the Code of Ethics. The Code Crewriting of its Code of Ethics with a professional scepticism. provides an ethical framework around all view to replacing the current 2015 Code CIMA intends to consult on the new management accounting decisions, in early 2020. The review was prompted Code in early 2019. It is intended that the which helps ensure the integrity and by the changes to the International new Code be formally agreed at the CIMA soundness of the advice offered by our Ethics Standards Board for Accountants Council meeting in June this year and will members worldwide. Given the pace of (IESBA) Code of Ethics for Professional come into force in early 2020. change, particularly technological change Accountants. Peter Steel, vice-president–Profes- in finance and industry, it is vital that our The CIMA Code of Ethics underpins sional Standards and Ethics at the Code of Ethics keeps up to date and is fit the professionalism of CIMA members Association of International Certified to deal with current ethical challenges. and CGMA designation holders with its Professional Accountants, said: “The We are pleased to be presenting the new five core principles of integrity, objec- guarantee of professionalism that the Code during CIMA’s centenary year.” tivity, professional competence and due CGMA designation gives to businesses Bob Beedham, FCMA, CGMA, chair of care, confidentiality, and professional and members of the public is under- CIMA’s Professional Standards behaviour. The rewritten Code will adopt Committee, said: “For management a new structure. While it will retain a accountants to be considered as trusted principles-based approach, it will advisers, there is a need to hold ourselves emphasise overarching requirements in out as a profession that can be trusted and addition to specific requirements, with respected as well as being technically supporting material on how they should competent. be applied. “It is appropriate that CIMA should The new Code will have an enhanced continue to drive the acceptance of good conceptual framework and will introduce ethical standards and be a world leader in new and strengthened provisions on this area.” IMAGE BY ELEN11/ISTOCK BY IMAGE
62 I FM MAGAZINE I February 2019 Ethical guidance for members
IMA’s Ethics team maintains a number of resources aimed at Chelping members and students who may find themselves in need of ethical guidance during their working life. As well as maintaining the Code of Ethics, which provides the framework for ethical decision-making in management accounting, the team also promotes the Ethics Checklist, available at tinyurl.com/y92ad2j4, which aims to help members adopt a reasoned approach to solving ethical dilemmas. The team also provides the CIMA ethics helpline, which is available at tinyurl.com/yadrfk6w. This free confidential helpline offers ethical guidance and assistance to all CIMA members and students when applying the Code of Ethics. Team members answer the ethical queries they receive on a confiden- tial and anonymous basis. They point members and students to the relevant parts of the Code and assist them in working through the problem and their next steps. Where necessary, they refer callers to other resources (such as CIMA’s legal advice line) or other agencies. Increasingly, queries are received by email. The team works hard to answer these often complicated problems as soon as encourages members to arrive at decisions that are right for possible — usually taking no more than 48 hours, but generally them in accordance with the fundamental principles of integrity, responding sooner. The type of query can range from the objectivity, professional competence and due care, confidenti- discovery of a fraud at work to strained relationships with a ality, and professional behaviour. manager or a colleague to when it is necessary to dissociate from A range of CIMA ethical dilemma videos, webcasts, a client. The team emphasises the Code of Ethics as the best and responsible business videos are also available at guide to the appropriate response in any such situation and tinyurl.com/y9veovkq.
Malaysia conference: ‘Riding the digital wave’ oel Tagoe, FCMA, CGMA, Ph.D., Nexecutive vice-president–Manage- ment Accounting, Research and Curricula, spoke on the future of finance at Malaysia’s largest annual accounting conference in Kuala Lumpur in mid- October 2018. Also speaking was Malaysia’s deputy finance minister, Datuk Amiruddin Hamzah. The conference, organised by the Malaysian Institute of Accountants, attracted about 3,000 delegates from across the public and private sectors. Themed “Riding the Digital Wave, Leading Transformation”, it focused on the impact of the digital era on busi- nesses, the role of finance, and business risk. For the past four years the event has Radio presenter David Chew, left, moderated a panel featuring Nurmazilah Dato’ been CGMA-sponsored. Mahzan, Ph.D., CEO of the Malaysian Institute of Accountants, Toh Beng Siew, CFO, IBM Malaysia, and Noel Tagoe, Ph.D., of the Association of International Certified Professional Accountants. TOP: IMAGE BY HLEHNERER/ISTOCK; BOTTOM: PHOTO COURTESY OF THE MALAYSIAN INSTITUTE OF ACCOUNTANTS OF INSTITUTE MALAYSIAN THE OF COURTESY PHOTO BOTTOM: HLEHNERER/ISTOCK; BY IMAGE TOP:
February 2019 I FM MAGAZINE I 63 EXECUTIVE SUMMARIES
The secrets of long-lasting organisations By Neil Amato Page 12 Three researchers studied long-lasting organisations and found shared but somewhat surprising threads that enabled the entities to build sustainable success. Several of the organisations focus on the arts, including the Royal Academy of Music and the Royal College of Art in the UK. Part of their ability to thrive can be linked to going against conventional business norms. For instance, the researchers found that the entities are not focused on growth and they don’t fret over what their competitors are doing.
Unlocking insights with data analytics Page 16 This excerpt from the November 2018 report Perspectives on the Finance Function Journey from the International Federation of Accountants’ Professional Accountants in Business Committee (PAIB) focuses on the power of data analytics and the importance for accountants of identifying how they can develop their roles to contribute to data analytics activities that enhance business decisions and improve risk management and internal control. The excerpt includes threats and opportunities arising from data analytics that could help start a SWOT analysis for your organisation’s finance function.
Stretching your team from engagement to creativity By Andrew Kenney Page 24 Financial planning and analysis (FP&A) teams are increasingly asked to partner with numerous parts of an organisation to help drive value. An FP&A team’s success has to do with the skills and knowledge of team members, as well as the manager leading the team. But not everyone can become a subject-matter expert overnight. Hiring for the right skills, such as problem-solving, plays a role. Team development — stretching a group to be more curious and innovative — is also critical. Building up a team’s organisational IQ and providing opportunities for innovative thinking and idea sharing can help an FP&A team be better engaged to drive business growth. FROM TOP: PHOTO BY TORU HANAI/REUTERS; IMAGEPHOTO BY BY SURAUBH MANOP PHIMSIT/GETTY DAS/AP IMAGES IMAGES;
64 I FM MAGAZINE I February 2019 Bouncing back from a public relations setback By Drew Adamek Page 28 Stuffed toy retailer Build-a-Bear Workshop suffered a highly visible public relations fiasco when a one-day experiential marketing event went wrong in July 2018. On both sides of the Atlantic, news reports highlighted crying children and angry parents after security officials shut some stores because of long lines and overcrowding. Despite the bad press, something unexpected happened after the event: The company’s sales took off, and it increased membership in its loyalty programme by 20%. Careful planning and use of data analytics by the finance function helped the company achieve its strategic goals and may position the company for long-term success.
Nintendo and the magic of nostalgia marketing By Amanda Abrams Page 32 While companies the world over are tapping into consumers’ positive feelings about the past to boost sales, few are as successful at marketing nostalgia as Nintendo. Within the last two years, the Japanese video game giant has created products and marketing campaigns around its historically best-selling consoles and game titles, including a reissued version of the wildly popular 1980s NES hardware system. It’s a strategy that seems to be working, boosting sales and interest in the company’s new flagship console, Switch. But nostalgia isn’t right for every company, and finance executives need to carefully consider before investing in the past.
Solve problems with linear programming and Excel By Clarence Goh, Ph.D. Page 36 Management accountants encounter many situations in which they are asked to make the best use of their company’s limited resources. For example, a maker of washing machines may want to determine how many units of each model it should make to maximise profits given a certain amount of available labour hours and components, while also considering the profit margin and production demands of each model. How do you solve such a problem? A form of mathematical optimisation called linear programming and a free Excel add-in called Solver may help. IMAGE BY DEEPBLUE4YOU/ISTOCK BY IMAGE FROM TOP: PHOTO BY JOE AMON/GETTY IMAGES; PHOTO BY SOPA IMAGES/GETTY IMAGES; IMAGES/GETTY SOPA BY PHOTO FROM IMAGES; AMON/GETTY JOE BY TOP: PHOTO
February 2019 I FM MAGAZINE I 65 Tips for retaining new skills
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Be in the moment Refresh regularly During training, leave your phone and other When Lonnen teaches a course, she follows devices alone, said Andi Lonnen, founder up with email refreshers for four weeks. and CEO of Finance Training Academy Ltd. “This helps them remember the key points in Leeds in the UK. Avoid other distractions and start using the principles,” she said. If as well, such as radio or television, added this isn’t an option from the course Bertram Opitz, professor in neuroimaging organiser, take it upon yourself to refresh and cognitive neuroscience at the Univer- your mind regularly after receiving training. sity of Surrey in the UK. “Any distraction causes interference between the to-be- learned information and irrelevant information,” he said.
2 5
Take steps to prepare your mind Work with a friend Make sure your body and your mind are Find a colleague who attended the training ready to learn and retain information. “A with you, or has been through the same sleep deficit would reduce your ability to pay training, and hold each other accountable attention and consequently will impair your for putting the learning into practice, ability to memorise new information,” Opitz Lonnen said. This will ensure you continue said. “But sleep is also an active process that to use the skills you’ve learned. in itself is beneficial for learning.” He said memory is consolidated, relevant informa- tion is extracted, and you are helped to form long-lasting memories during the hours that you sleep.
3 6 Implement immediately Test yourself Identify some “quick wins” from training Opitz said testing yourself on the — one or more activities that can be information you’ve learned leads to implemented immediately, Lonnen said. In better retention than restudying the the cases where information not used information. “It has been shown that immediately may be lost, implementing trying to retrieve the information you the things you’ve learned right away builds have learned once produces better confidence and momentum to implement memory than restudying the same further, she said. material a couple of times,” he said.
— By Lea Hart, a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at [email protected]. IMAGES BY CNYTHZL/GETTY IMAGES CNYTHZL/GETTY BY IMAGES
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