The end of ‘Gestapo’ accounting: Strategy — Series 2:
Last week The Effectiveness lab concluded series 1: ‘The end of ‘gestapo’ accounting — You, the CEO’ with a promise to discuss the role of ‘You, the leader’ in steering the organisation towards the emerging accounting paradigm. A model that no longer considers the accountant as the de-facto police at the organisation or indeed the ‘Gestapo’. The accountant is not any longer, the fierce bulldog, that guards the resources of the institution.
It is not far fetched to write that the modern organisation is demanding change in the skills profile of the orthodox accountant. The organisation is no longer interested in the purity of the ‘bulldogging-accountant’. We hope that this emerging organisational development (OD) paradigm does not turn out to be a management fad like many that have come and gone.
Of course, as organisations abandon the bulldogging type of accountant, CEO’s have to be careful not to throw away the baby with the birth water. What is the alternative strategy after all? Is the strategy in itself escapist? Changing accounting paradigms is a subject that even the most quintessential of CEO’s avoid. When CEO’s choose to engage, they do tread very carefully.
Changing organisational paradigm/s may bring doom for organisations. It is therefore not surprising that CEO’s tend to grapple with the ‘rainbow effect’ of paradigms changing at organisations. The corporate implications of changing paradigms are not always apparent to the CEO’s. CEO’s may act when it is not necessary to do so, or not act when it is needed to do so. This is every CEO’s nightmare — the ‘invisible threat of the lion in the African jungle’.
Paradigm changes at organisations manifest in a three step process:
- gradual dysfunction and subsequent failure of the status-quo
- negative impact on the entities value chain, and ultimately, bottom line result
- the realisation of the need to change
The above change process is not always linear. Depending on the operating realities, organisations may quickly progress from a dysfunctional and failing status to realising the need to change. Such organisations may mitigate soon enough, the negative impact on their bottom line results.
In other cases, the pace of change is so fast that there is no time between the start of dysfunction/failure and the ultimate severe effect on the organisation’s bottom line. Such organisations may be left with no time for the change, and will ultimately collapse.
The above is typical of the so-called paradigm change at the modern organisation and its rainbow effect. Paradigm change management is no longer a black or white affair. Organisations are having to deal with multiple paradigm-change strands in their value chains, many overlapping each another. It is like the colours of the rainbow
So, should CEO’s worry about the emerging accounting paradigm-change? Should CEO’s let accountants be accountants?
You, the leader (CEO) and strategy to successfully change the accountant’s focus:
It is the CEO’s job to anticipate industry trend changes, especially those that may impact the organisation’s bottom line. It is also the CEO’s job to map the trajectory of anticipated trends and how the organisation they lead is best placed to mitigate the impact of the trends, if any.
This is not an easy job; especially because CEO’s have day jobs where they have to deal with trends that have already matured. It becomes a stretch for CEO’s to start anticipating what trends may emerge next, plus allocate already scarce time to such trending games
In general, trends do not manifest overnight. By the time an industry trend begins to manifest to the naked eye and start an industry paradigm shift process, it will have incubated for a long time. Such trends may without our knowledge, have begun to impact the organisation’s value chain and implicitly, bottom line. In effect, OD. theorists like us at the Effectiveness lab need to recognise the ‘cancer-like’ manifestation of trends and their effect on organisations.
The changing accounting paradigm:
Let us situate the changing accounting paradigm. The CEO’s of top blue chip companies are crying foul over the inability of the orthodox chief accountant to engage and create value on the strategy table. The CEO’s are looking for a new breed of accountant. What they have is not working for them. It is not sufficient!
The above is an emerging trend that will result in a paradigm shift regarding the ‘skilling’ of accountants
On the other hand, the accountant is fighting back. The accountants believe that the CEO’s are the problem and not them. Despite the multitude of stereotypes about the accountant, some accountants still think the problem is not them but the CEO’s. Remember Series 1: Stereotyping allows accountants to keep their exclusivity and retain their power — apparently; these two are critical tools in the accountants professional tool box
Below are responses to the KPMG report on ‘why the chief accountant has to do more than they are currently’. We assume that the comments were made in good faith, and those that commented will have evidence to back them. They may also have been made by non-accountants. Please read: ‘accounting profession’ and not ‘individual accountant’:
‘’Most CFO’s have a better handle on ‘operations,’ than most CEO’s do on finance. I’ve yet to meet a CEO, who completely ‘gets’ the finance/accounting function.’’ http://ww2.cfo.com/leadership/2016/01/ceos-to-cfos-we-need-more-from-you-view-from-the-top/
‘’This article is incredulous to me on a number of fronts. Why would any reputable CEO keep a CFO in place who wasn’t meeting his/her expectations? This should be a temporary problem & not systemic unless the CFO was a buddy/friend hire. The CFO role is so critical to every organisation I can’t imagine any true leader allowing someone to have this position and still remain dissatisfied for a long period of time. CEO’s need to stop the nepotism & cronyism and hire qualified people to do the work!’’
We have to ask if this is to do with the CEO and whether they understand finance or not. Indeed, the CEO hires a CFO for the simple reason that they do not understand finance and need help. It is also not about the CEO firing the chief accountant that is according to them, wanting.
We are dealing with an industry structure problem. Is this about the manner in which accountants are trained? Training not only at college but also by seniors and mentors, whenever novice accountants start their practice.
The tendency to ring fence accountants from the rest of the organisation has not helped at all. It simply reinforces the old perception of the Bulldog; after all, Bulldogs are on a leash all the time, and only let go when it is time to attack.
Even at big accounting firms that are the de-facto high-priests of the accounting profession, the legalities of ‘conflicts of interest’ have forced the firms to separate their accounting and consulting arms. If the two were one arm, perhaps the accounting seniors would benefit from some on-the-job skilling in strategic management.
The arms-length treatment of the accounting function at the modern organisation needs looking at.
Accountants embracing strategic management — The Strategy:
You, the leader has got overall responsibility for creating an accounting function that adds value to your organisation. Mind you; leaders will always face resistance in changing what accountants believe in. However, not changing the status quo, is likely to impact the organisation you lead negatively
Below is a strategy outline that we suggest you follow in addressing this imbalance:
- There are already movers and shakers when it comes to teaching accountants the ‘other’ skills — hire CFO’s and second line finance unit staff from such industry ‘islands.’
- Define an accountant values-charter for your organisation — you don’t want accountants to be the ‘Gestapo’. Indeed many accountants already hate the ‘Gestapo’ tag, but only don’t know how to remove the tag
- Situate the accounting function as an enabler and not the organisation’s police — have the CFO become the chief sponsor of such thinking
- Design an organisation structure that places accounting in a ‘facilitating’ and not ‘controlling’ role. For example, budget holding should be at the head of the unit and not CFO level; the accounting unit should provide the enabling platform for business transactions and not control
- In order not to throw the baby away with the birth water, consider having compensating controls, to fill the gap the traditional accountant has plugged till now. For example, redistributing accountability for resource use (Value for Money) to unit heads; accounting automation via Enterprise Resource programs, etc
- Continuous soft-skilling of accountants, both senior and junior
With our strategy in place, how do we ‘structure’ and ‘organise’ this new accounting paradigm? Look out for: The end of ‘Gestapo’ accounting — Structure — Series 3