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Key Conclusions 1. Debates about management accountants and organizational change have tended to focus on ‘institutional’ or strategic change. This restricts the types of change considered relevant. Current change management and leadership thinking emphasizes that employees at all levels and in all functions co‐create multi‐dimensional change. All the management accountants in our research report involvement in change processes, demonstrating that their activities differ according to role and position. 2. Differentiating management accountants by their position in the overall structure of an enterprise, lays the groundwork for understanding their experiences with change. We found appropriate four broad categories of positions: (1) those at or near the strategic apex, (2) those senior or middle within a specialist technical unit, (3) those devoted to or embedded in a particular operating business or project and (4) accountancy‐related support staff. 3. In order to benefit from management accountants as change agents, organizations must recognize the importance of including financial perspectives as change competence, and daily accounting tasks must be organized efficiently to release accountants for participating and making positive inputs to change projects. 4. While an old fashioned ‘save the day’ heroic leadership may on occasion be possible, the norm is less dramatic. From the secure base of their specialist competence, management accountants’ essential added value comes from being able to share leadership with non‐financial colleagues, working across hierarchical and functional boundaries. 5. A management accountant’s ability to find a useful place in a particular change situation requires awareness of different interest groups and an understanding of how to influence in a political context. They report needing to learn how to assert their opinions despite difficult group dynamics operating in emotionally charged situations. Courage comes to successful management accountants who can keep the organization as a whole in mind rather than just the financial figures. This includes working with culture and practices that block or slow change. 6. Our findings indicate that understanding organizational, political and emotional dynamics emerges as a priority for management accountants involved in change. This contrasts with an occupational bias towards tools and techniques. Instead, their experiences highlight a necessity for effective development in shaping and influencing change processes. Experiential learning is central to such professional development. 2
Abstract Increasingly, management accountants are encouraged to become involved in shaping and leading change ‐ an aspiration many find challenging. New roles emerging for management accountants place them in the midst of change dynamics, requiring more than just technical advice. This research explores how management accountants currently experience change‐related work, linked to a typology of different roles they hold. Using this typology expands the picture of how and with what types of change the profession engages. Importantly, the 30 practicing management accountants in this exploratory study were less preoccupied with change tools and project management, than with describing the emotional and political dynamics of organizational life. Management accountants are well positioned to cooperate and engage in shared leadership practices ‐ rather than a stereotypic heroic leadership style. Acknowledgments This project was sponsored by CIMA General Charitable Trust. Introduction A professional drive to encourage management accountants to become more involved with shaping and leading change (see for example CGMA, 2012) comes with an imperative: management accountants should move beyond providing historical financial information to proactive engagement as partners with other business managers. The CGMA statement of ‘what accountants do’, combined with the CIMA professional qualification syllabus, clearly express these expectations (CGMA and AICPA, 2011). But, to what extent can management accountants be understood as being ‘change agents’? Work of a Change Agent The term ‘change agent’ is shorthand for a person who acts in order to make something different happen. Change leaders, change managers and change consultants are also familiar expressions. As a broader term, change agent signifies exerting power or applying procedures to alter or modify an element of a social, technical or economic system. It relates to any person actively participating in shaping organizational change. Agents of change depart from routine and current practice, creating ways of working and innovating. Change is about making adaptations to shifting contexts and new challenges. Change agency takes place at many different organizational positions and levels, not just at the top. One of the first things to strike us as we reviewed literature and spoke with experts was a contradiction between change as unrealized aspiration and change as normal. On the one hand, there is an imperative in the literature towards management accountants being involved with change. Progress is very mixed, however, with a shift towards change at best evolutionary rather than revolutionary: take up of change roles probably is quite patchy (Cooper and Dart, 2009). 3
On the other hand, some experts do not recognize the need to shift perspective. One informant who is both a CIMA member and academic said, ‘managing change is the management accountant’s day job!’ From his perspective, such financial roles have always been about change: understanding the business both historically and looking forward through scenario planning, helping managers to see implications of their decisions. Other expert informants state that accounting roles clearly have changed. They now must ask, ‘what does management need to help them run the business and not what can I provide?’ An academic expert who researches management accounting practice said, ’Maybe management accountants have been struggling for 50 years with the same issue, ‘how do we provide business support [for change]?’ Tensions Engendered in Supporting Organizational Change What are the sources of this struggle to provide business support for change? Professionally trained to offer sound, data driven professional advice, how can management accountants also act as change agents? Perhaps some assumptions about leading change can be questioned. Examples included: people will be persuaded to change by sound arguments; change happens if you have the right processes; change equates to good project management; disseminating full and accurate information will keep people on board. Instead, those leading change often have to deal with a host of tensions they may not have expected. These typically include: suspicion, anxiety, even hostility; factions and disagreements about how to proceed; people agreeing to changes but producing little progress. Of course, enthusiastic and hopeful commitment appears as well. Even so, management accountants report feeling unprepared for the emotions and politics, given that they see their role as mainly about offering considered professional advice. Management accountants clearly have to balance competing challenges. Researchers point out an issue for finance professionals in being both a ‘policeman’ and a participant in decision‐making – how do you police something that you have been party to deciding? By definition, management accountants hold both support and control responsibilities; with change work, they now have hybrids to configure into their occupational identities. Two key tensions from their data (Graham, Davey‐Evens and Toxon, 2012): between strategic and operational, and between being part of the management team and an impartial controller. Similarly, Arroyo (2012) argues that management accountant roles result from a negotiated process within organizations, between their multiple stakeholders. One of our expert informants echoed this theme of dilemmas in shaping roles: ‘I might support the manufacturing manager but my line manager is the CFO’. Accountants are agents of change on behalf of the Board. Thus, they have to ‘sell’ Board decisions to functional managers—explaining how benefits of change outweigh the costs, communicating to managers who don’t get a chance to discuss this at Board level. 4
Opportunities for Engaging with Change One explanation for challenges that management accountants experience in being proactive in change is that they lack the business and personal skills. An alternative view is that it may not be the individual who is at fault. Management accountants may find themselves in organizations that do not support them in becoming more proactive in change. However, the potential contribution by management accountants can be realized when the nature of contemporary accounting is understood. Accountants make a significant positive impact on the effective implementation of new change projects (see for example, Chenhall and Langfield‐Smith, 1998). Thus, involvement in change may not simply be personal inclination; but, organization assumptions intricately connect to an atmosphere surrounding management accountants as they adopt roles in change projects. Organizational Change Situations Facing Management Accountants Significantly, we need to question what is meant by being involved, leading or shaping change. Indeed, what is ‘change’? Debates within the current professional management accountants’ literature primarily treat only major change as relevant. This boils down to a binary exaggeration: to be considered ‘change’ it has to be ‘institutional’ or labelled ‘strategic change’; therefore, replacing accountancy software or redesigning accountancy systems is described as ‘not change’. Drawing on a well‐respected approach to varieties of organizational changes, this research incorporates the dimensions of extensiveness (strategic and incremental changes) and of motivation (reactive and anticipatory changes). Incremental changes improve efficiency or effectiveness within the basic model of organization already in place, affecting only some elements of the enterprise. Strategic organizational changes impact the whole system while redefining the basic strategy, structure, people and processes. Making incremental changes as a direct response to an external event can be understood as adaptation, while doing so in anticipation of the future tends to be fine‐
tuning. Similarly, strategic change that anticipates challenges strives for a reorientation to keep the business competitive. Whereas, reactive strategic change attempts re‐constructive in order to catch up (Nadler and Tushman, 1989, p. 100‐103). Our research explicitly asserts this more nuanced notion of change. Our findings show that tensions inherent in management accountants’ work defy a purely strategic versus operational slant. Failing to frame their many professional interventions as change ignores the realities of practicing management accountants. By acknowledging change agency in a range of roles, future developments and promotions may boost confidence of accountants and their bosses. Aims of this Study •
•
•
•
To identify and differentiate how management accountants in various roles are involved in change To develop a typology of change‐related work that management accountants experience today, both finance specific and finance inter‐related with other change To summarize what management accountants experience as helpful and as difficult in effecting change successfully, both from their perspective and from how those from other specialities relate to them To generalize approaches to learning and development that can be customized for management accountants, both from within the workplace and in higher education 5
The framework for this research is shown in Figure 1. What Do the
Literature &
Experts Say?
Management
Accountants’
Roles
Change
Demands &
Opportunities
Helps &
Hinders in
Change
Needed Support
& Experienced
Development
What Do
Practicing
Management
Accountants
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What Do We
Researchers
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Figure 1: Framework for Management Accountants as Change Agents (Created by Turnbull James and Neumann, 2012 for this CIMA Research) Methodology This research uses evidence taken from three key sources: practitioner and academic literatures on finance professionals, including management accounting; interviews with experts on the management accounting profession and reported experiences from practicing management accountants. Our 30 informants come from three sources: • Interviews with eight informants drawn from university faculty, CIMA and other recommended experts. • Focus groups involving 12 practicing management accountants: they came together for six hours to explore the research questions collectively, allowing for narratives and examples, building on ideas and generating insights. • Cases studies in two organizations in which a specific change initiative was scrutinized. In addition to four accountants, the site visits allowed us to speak extensively with six non‐
financial colleagues as to how they saw management accountants’ contributions to change (a priority that emerged from the focus groups). We digitally recorded and professionally transcribed all the empirical data (with participants’ permission). Two researchers used qualitative analysis methodology to go through the evidence in fine detail. This rigorous interrogation demonstrated the usefulness of the framework, supported by direct quotes. 6
Main FFindings aand Impliccations forr Practice Roles o
of Managem
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ons (Mintzbeerg, 1979), aadjusting the language too give four brroad categorries – strateggic apex, specialist unit, bussiness partneer and suppo
ort staff. Theese are illusttrated in Figu
ure 2. Figure 2: Role Typology for Managemeent Accountaants’ Work w
with Organizaational Chan
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ategic apex rrole Manageement accountants in a sttrategic apexx role probably work at o
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Experiencing change from a specialist unit role Management accountants in specialist unit roles might work in a central finance department, or similar, responsible broadly for financial processes and procedures applied widely. Recognized finance professionals, people in these roles typically shape or otherwise lead changes that are directly perceived to be within accountancy areas. But this doesn’t mean isolation as such leadership may well be shared with peers in other departments or units. One study participant said, ‘We also encourage our management accountants to be involved in tender exercises. So not just looking at it from a financial perspective, but obviously if you're doing a big one for [a specific] contract it's actually about being involved in going out to their factory and having a look at what they're producing, go to see other sites and actually be part of the tender team.’ Experiencing change from a business partner role Management accountants in business partner roles sit or are otherwise assigned within the operating core of a product or service unit. They participate in thinking through and implementing changes to finance processes and procedures both with the leaders of that unit and, often, with their financial colleagues located within a specialist unit department. They provide advice or otherwise help operational leaders shape reports, project proposals, contracts, etc. Another study participant explained just how embedded business partners need to be: ‘Our test of how well our business partnering works is whether you’re on the Christmas dinner. If you’re around the table for the Christmas dinner with the operational team, and if you’re part of that team socially, you’re in there and you’re working well as a business partner.’ Experiencing change from a support staff role Management accountants in support staff roles may be out‐sourced to a central service centre or sit below the middle‐level within specialist units. Mostly they handle tasks related to accountancy reporting, and may be invited to attend lower hierarchical level change information meetings. In small to medium enterprises, accountancy may be one aspect of an office manager or senior administration function. In larger enterprises, support staff may be clustered within a finance function with or without accountancy qualifications. A senior management accountant reported: ‘We have groups of accountants doing the number crunching... but we need to get those individuals working on the business case inputs to be able to be part, much more a part of the options appraisal. Rather than just say here are the options, go and give us a model against those options’. Change Demands and Opportunities To be involved in change requires a proactive stance, as one senior management accountant explained: ‘Finance team members would just generate those reports, give it to the people concerned. But now, the directive from myself and my financial controller to the team is that if someone asks for a report you need to understand why they’re asking for it, what will they do with the report, rather than it just sitting on their desks for weeks and months and not having to do anything with it’. 8
Opportunities to engage in change from strategic apex role In order to be appointed to apex roles, management accountants need to be well qualified and experienced finance professionals. Once in role however, they feel pressure to demonstrate value by combining business and finance knowledge. One CEO expected all directors to think from whichever function was being discussed at the time; the management accountant learned to do this, as well as to bring a financial perspective to such conversations. Changing opportunities and demands were explained by one of our interviewees: ‘I am Head of Finance for Transformation and Strategy. I’ve been here for three months after coming from a big PLC background where management accountants were everywhere, very important in the company and not much got done if finance was not there. [This company] has a history of a more passive finance function. There is a new Finance Director and me coming in to shake things up, to make finance a more influential function. No one thought about how to do this until I came.’ Opportunities to engage in change in the specialist unit Management accountants working in specialist units report having experienced suspicion and power struggles between finance professionals and business leaders. They now aim for inclusive, respectful relationships. They are learning that they need to share leadership across hierarchy and functions to create an atmosphere for change. A participant explained how their specialist unit was bringing about attitude change: ‘Sometimes they do not understand that there’s a problem in the first place, so they do not buy the solutions if finance is proposing something...So our philosophy has been to sell the problem first from the finance team to the business...That’s how we have introduced a new system recently which was very, very difficult to implement because people did not embrace it but then....making them understand, appreciate how it is going to benefit their decision‐making.’ Opportunities to engage in change in business partner roles These management accountants have typically had previous experience of highly centralized finance functions. Through daily action, they are now creating financial roles integrated more closely with operations. They speak of sitting side‐by‐side with business managers as they consider finances, educating them about alternative ways to use reports, and enabling a balance between statutory concerns and operational needs. An interviewee said: ‘I am embedded out, so my role is basically at an operational level... My main job is to provide an overview with the Programme Managers who work with those doing the line entry items and project managing... Through finances I try to understand a particular project with the various tools we use: process improvements, variance analysis, over term management....’ Opportunities to engage in change in support staff roles We noticed that support staff roles did not figure in conversations about management accountants as change agents. Indeed, stories emphasized contributions to change through conscientious work: a personal touch in tracking down missing information, the relevance of context when explaining invoices. Focus group members spoke to the importance of support staff understanding what 9
people would do with information, or what use the finance team would have for information. They agreed that this type of interchange could lead to small but significant changes in processes that could add up to a useful business impact. One participant emphasized this point: ‘I guess it's making them realize that small things are sort of change, in some ways. And that when you talk about them doing change you're not talking about a whole big, big thing, it can be a small thing.’ Based on the above data and analysis, we hypothesize that both strategic and incremental changes need to be addressed by management accountants in business, probably differentiated by roles or positions. Furthermore, it could be that fine‐tuning and adaptive changes by management accountants have repercussions to a degree larger than often perceived. Conversely, ignoring such incremental change could be to the detriment of reactive and anticipatory strategic changes. What Helps and What Hinders in Change? An interviewee explained the balance management accountants need to achieve as ‘institutional paradox’. ‘Accountants who are fully embedded in the situation cannot get enough leverage to make changes. What can they do to get that distance? Sometimes it helps if they are a part of a broader function, a little outside and be in a good position to challenge; a close ally but still outside it... The negative side is to be too closely involved locally, less likely to challenge. The positive side is that closer into the local group, the greater the trust.’ Engaging with change also requires a different kind of time management. One of our expert informants closely involved with CIMA CPD proposed three reasons for management accountants to have difficulty engaging with change opportunities. ‘These are: no mandate (not expected to move through those areas); no capability (don’t have the skills they need); and don’t have the capacity (not enough people).’ This was certainly echoed by another expert informant who said, ‘Many accountants can see what can be done but don’t have time. ..to become involved more in shaping change they would have to have space to step back from driven, cyclical requirements’ characteristic of the accounting function. Our findings indicate that management accountants need to address two important dilemmas in order to help with, rather than hinder, their engagement with change:
• Change involvements take place in the context of shared change leadership with people in other functions, while still having complicated reporting relationships within both the finance functions (e.g. CFO) and with heads of business. • The opportunity for change activity may depend on the type of role the management accountant is in as well as finding space for wider business engagement. Helps and hinders for management accountants at the strategic apex Management accountants in strategic apex roles often feel they have to find a change role in the face of stereotypes. They concentrate on building trust and demonstrating relevance within decision‐making and problem‐solving processes, both cross‐functionally and hierarchically. Two particular emotional challenges they mentioned: expressing confidence to argue against bad decisions, particularly those supported or sponsored by their CEO; and proposing solutions 10
historically considered outside the remit of finance. The experience and confidence needed in these roles should not be underestimated. One participant told their story of being at the apex for the first time: ‘I wasn't as experienced or had the confidence or gravitas to really put my point over. But we had an aggressive growth strategy and it meant that we were just chasing [new businesses] down. It didn't feel right; it was off‐pitch I said this just isn't going to work. So there were four of us directors. Three were in favour and I was the only one against. I was new; I was new to the board, and it was all a disaster, and the knock‐on effect of this one bad decision was horrendous...and it all stems back to, in my mind, for me not being involved enough in the process and, actually, not having the confidence in putting my foot down firmly enough to say financially this doesn't make sense.’ Helps and hinders for management accountants in specialist units Several people spoke about gaining a reputation for helping others within the business sort out difficult problems. It can be within their remit, as well, to structure the work of management accountants in order to make time for being involved ‘with the good stuff’, as one informant described a decision to concentrate reports into a shorter monthly cycle. Both types of actions can result in being invited onto wider change groups or working much more closely than they might do with other professional tasks. One participant told their story: ‘An environment change meant that we needed to introduce new systems and processes, so we brought in a new time‐recording and billing system, which to the annoyance of the fee earners did not go down very well. But the accountants were at the forefront and we had the finest team, holding their hand and explaining to them why we are doing it, and how they will benefit from it. I found that quite, quite effective ‐that if you bring in a system change, then accountants have got to play a very important role. They were educating people, for example, in terms of profitability, their charge out rates, deploying resources to particular jobs and how best to optimise the return for the business changes.’ In encouraging each other in being involved in organizational change, management accountants in specialist unit roles feel that they have to discover and share successful ways cooperate in cross‐
disciplinary change groups. They find it necessary to educate, support and somehow influence both financial and non‐financial colleagues. Thus, good conversational skills and valuing effective interpersonal relationships have been important. Helps and hinders for management accountants in business partner roles More than the other roles we researched, management accountants as business partners felt most challenged by balancing the contradictions and paradoxes of a ‘both‐and’ quality in their roles. They both work closely with business managers and represent finance; they are both strategic messenger from the Board and a local buddy and colleague; both police and co‐decision maker. One person spoke of being welcomed onto a committee for continuous, fine tuning improvements and developing proposals for local adaptive changes. Yet, he felt there was insufficient recognition of the tensions inherent in participating in change these ways – others too spoke of being left to sort out contradictions and paradoxes on their own. 11
One interviewee explained that his job was to understand the decisions that influence the numbers (not the other way round). ‘So you are looking forward and saying to managers if you do this then that will happen in six months –whereas some accountants see themselves as just accounting historically for what has happened over the last accounting period. The key thing is that you get to understand the business holistically –talk to people at every level, blend in and be chameleon like, have empathy with people, understand their point of view –otherwise you cannot act as business counsel for the future.‘ Another suggested that what hinders is that accountants may ‘look at too much, or only detail and in focusing on detail, miss the whole point; they look through the wrong end of the telescope but in fact really need to see wider picture and implications –they need a business and systems view’. Noticing those unintended consequences of change (or knock‐on impacts from proposals in one area for other areas issues) requires business understanding of the whole picture. Not all accountants moved into business partner roles have this capability. Helps and hinders for management accountants in support staff roles These support staff need to recognize the potential for the changes they can bring about. They especially need information technology know‐how, which enables them to work in new ways and recognize the importance of what they can achieve. Knowing that interacting with clients and customers is essential to the job helps make the link to change. One person explained: ‘I was doing a reporting pack and I’d set my emails up so I used to get bounce backs to say when somebody’s opened it and from one of the directors a bounce back came back, deleted without opening. So I went and spoke to him..... I was quite junior, and said ‘so could you just tell me why you deleted it without looking at it’, and he was a bit taken aback but he said well the last number of months nothing in there is relevant to me’. So I said, what do you want to see and then that actually meant that the report pack got changed.’ Research Findings in Four Different Formats This executive report provides a narrative of this research on ‘management accountants as change agents’. Table 1 provides a table that, on one sheet of paper, summarizes our findings across the four elements of the framework: management accountant roles, change demands and opportunities, helps and hinders in change and experienced development and needed support. A shorter summary than this executive report was also published in two parts through CIMA in their ‘Insight’ web magazine and can be accessed from their website. 12
Table 1: Executive Summary of Framework for Management Accountants as Change Agents (Selected from Cranfield School of Management Web‐Brochure, October 2013) Management Accountant Roles Strategic Apex Role •
•
•
Specialist •
Unit •
Role •
Business Partner Role Support Staff Role •
•
•
•
•
•
Positioned about director level. Experienced explicit change leader roles, usually directly relevant to business strategy in some way. Targeted change in expensive, cross‐boundary processes. Positioned in a finance unit of substance. Recognized as qualified professionals, responsible broadly for finance processes. Shaped or otherwise lead significant changes with finance implications. Assigned to operating core of a product or service unit. Provided advice & help to operational leaders. Participated in thinking through & implementing changes to finance processes. Out‐sourced to a service centre or within specialist units, with or without accountancy qualifications. Handled tasks related to accountancy reporting. Attended change information meetings. Change Demands & Opportunities •
•
•
•
•
•
•
•
•
•
•
•
Felt pressured to demonstrate strategic value, including & beyond finance. Needed to be well qualified & very experienced in occupation. Learned how to bring finance perspective into all conversations. Shared leadership in creating atmosphere for strategic change. Lived through suspicion & power struggles between finance & business leaders. Needed to build more inclusive, respectful relationships. Implemented incremental or fine‐
tuning change by balancing statutory concerns & operational needs. Created finance roles more closely aligned with operations. Sat beside business, considering issues from all angles. Contributed to incremental or fine‐
tuning change by conscientious work. Tracked down missing information, explained context, & grounded information in reality. Interacted as essential to job. Helps & Hinders in Change •
•
•
•
•
•
•
•
•
•
•
•
Discovered a change role in the face of stereotypes. Built trust & demonstrated relevance. Thought cross‐functionally & hierarchically, proposing decisions outside of finance remit. Gained a reputation for sorting out difficult business problems. Structured management accountancy work to make time for change. Participated in wider change group, working closely with others. Balanced contradictions & paradoxes of the both‐and quality of central finance & business units. Discovered possible unintended consequences of plans. Contained being both local buddy & strategic messenger. Experienced Development & Needed Support •
•
•
•
•
•
•
•
•
Recognized their potential for •
helping with incremental changes. Developed more technical IT know‐
•
how. Learned how to work in new ways & •
recognize the importance of what to do. Intervened in the executive team, requiring courage, ability to influence & to collaborate. Helped by understanding group dynamics. Built confidence by arguing against a poor decision. Used power of expertise to empower others, including seeing management accounting function as value added. Encouraged alternatives to classical accounting models. Noticed & took seriously underlying thoughts & feelings. Became a part of the team with non‐financial people. Articulated legal & statutory consequences of decisions in a non‐
alarming way. Demonstrated insight & awareness of the culture of a team. Considered what is meant by change. Connected their work to larger change initiatives & encouraged their mentors to do the same. Got out of the office to gain perspective and experience. 12
Implications for Professional Development Sometimes in the professional literature, change is discussed in way that gives the impression a management accountant only needs to initiate and lead large change projects, which perhaps might ‘save the day’. While such heroic leadership may be possible from time to time, a finer grained understanding suggests that management accountants play a much more pragmatic change agent role. Indeed, such pragmatism is effective because it builds collaborative practices in which management accountants learn to work with other business leaders and collectively create solutions to organizational challenges. Heroic action has its attractions but sounds quite daunting! This research shows that the reality in fact requires different capabilities than just ‘leading from the front’. Perhaps management accountants are better placed than they think to proactively engage with change. Their training and early experience teaches them to understand the politics of change however, apparently, small. One of our interviewees gave an example: ‘A change to how we do things might mean that different data needs collecting so that means different systems are needed to get it... and so must be engaged throughout the process and through the whole organizational system. There are winners and losers and it is very political—all sorts of dynamics are in play’. This idea of the political and indeed emotional dynamics of change is very helpful in understanding what management accountants need to learn in the different role types identified in this research. Management accountants may often see themselves as the quiet, rational voice in organizational change for which they need to develop an influential presence. But they also need to learn to recognize and speak about the difficult emotional dynamics involved in change and work with complex processes that create desired outcomes ‐and not just focus on the outcomes. At the strategic apex: Learning to intervene in an executive team, in which an accountant may be the only dissenting voice among powerful colleagues, requires more than courage. It means learning about power, collaborative leadership and forming alliances and networks of support. It requires an understanding of the dynamics of groups and how to intervene skilfully to avert a poor decision. As our informants show, these skills are not usually in place from day one but the director who does not quickly acquire such skill may find they do not last many more days in post! In the specialist unit: A key challenge is how to use the power of one’s expertise in a skilful way to empower business managers and help them see that you can help with their agenda. This means understanding their agenda and priorities, their anxieties and aspirations in such a way that specialist professional help ‘lands well’ and is seen as supportive. Both specialist roles and business partners need to understand business, just as much as understanding finance and cope with the frustrations of colleagues and operational managers who are uncomfortable with them operating outside of ‘classical accounting’. For example, one of our participants recommends all accountants have a business mentor rather than just a financial mentor from early in their career. As a business partner: Becoming part of the team, helping managers to look at the consequences of their proposals from a financial perspective and dealing with being challenged can be demanding. Balancing this with a reporting structure that often has a direct line with a senior finance manager and a dotted line with the business manager is paradox. Being seen as supportive and positive 14
whilst at the same time pointing out problems and legalities with proposals is a long way from producing a ‘rear mirror view on what happened in the last six months’. This requires insight and awareness of the culture, the organizational processes and constraints on change so that the business partner can help operational managers navigate successfully. From a staff role: It seems that insufficient attention is being paid to involvement with change for those who have yet to qualify or who might be seen as content to stay in their comfort zone. However, the myriad ways senior management accounts told stories about what they achieved when they were at this entry level themselves suggests some re‐thinking. Mentors and champions who advise people in staff roles to connect with the business and encourage them to walk around and get out and about will be an important part of their developmental experience–important grounding for those who later take on strategic, more senior specialist and business partner roles. Case Studies of Management Accountants Working with Complex Change Dynamics The two cases studies undertaken as part of this research show vividly how management accountants are engaged in complex change dynamics: The short cases tell the story of the changes and show the roles management accountants took in supporting the change and the ways in which their engagement across the organization systems contributed to successful change. In the first, Brompton Bicycles Ltd., management accountants actively supported a growth strategy which involved changing culture, practices and flexibility. The company wanted to stay true to its commitment to innovation and customization of its products. At the heart of the change was the remuneration system and management accountants were involved in every step of the planning, negotiation and ultimately successful implementation of a potentially controversial strategy for change. In the second, undertaken at a Complex Technology Facility, ‘transformational change’ was required. Executives decided to ‘move from classic directorate silos to programmes owning the work, with functions acting as resources to the programmes’. In the resulting matrix, the money stays with projects and programmes which now draw on pools of people from functions in order to manage tasks. Management accountants are involved extensively in changing how things are done between functions and projects, as well as in improving the finance function itself. These case studies can be found in full in appendices 1 and 2. Conclusions: From Personal Competences to Shared Leadership The kinds of developmental support and educational experiences that are needed, based on our professional experience, are not about change tools or project skills. These are good bases already described elsewhere in the professional accounting literature. But tools and techniques cannot address the complexity of the organizational changes with which management accountants must now deal. 15
Instead we propose a mindset shift which might help the profession move forward from some of the somewhat circular debates about management accountants’ roles in change which were rehearsed frequently in this research. We refer to the contradiction in the professional literature at the beginning of this report: management accountants’ involvement in as an unrealized aspiration versus change as a long‐established and normal part of the job. This research indicates that a mindset of ‘management accountants as change agents’ requires a move from thinking about individual competence to a shared leadership perspective (Fitzsimons, Turnbull James and Denyer, 2011) and a focus on organizational dynamics (Neumann, 1999). Future development needs to help management accountants integrate enabling change competence with financial competence. These change capabilities include being able to: • understand what is going on in groups, teams or the organization as a whole • change organizational barriers such as culture or practices that prevent desirable change • work across professional boundaries in collaboration with people in other functions • bring about change through creating artful interventions that shift the status quo • understand the divergent perspectives and how they seek to influence outcomes ‐ organization politics • understand how emotions can drive change behaviour in organizations as a whole system, as well as individual reaction to change This type of development is best achieved when a degree of experiential learning and reflecting on experience in the workplace is a key part of the development experience (James, Jarrett and Neumann, 1998). Such change‐oriented experiential learning is widely available within training and development providers, university‐based customized courses, professional associations and several well‐known registered charities that specialize in social sciences applied to organizational change. A list of these types of providers can be found on the e‐brochure from this research project [insert hyperlink here]. Summary This research shows that all management accountants are involved with organizational change somehow, although this depends on whether they work at the strategic apex, within a specialist unit, as a business partner or from a support staff position. The extent of change may vary in terms of strategic or incremental, and the motivation may be reactive or anticipatory. Regardless, the four types of change activities – adaptive, reconstructive, reorientation and fine‐taking all show up in stories from practicing management accountants. In taking up change roles, there are some developmental challenges. While heroism might require courage, the more nuanced role of today’s shared change leadership requires capabilities just as demanding. These include understanding the personal and organizational emotional challenges associated with change: anxieties about the future, about professional competitiveness and territorial space in the organization and the resultant challenges of collaborative working. 16
References Arroyo, P. (2012), Management accounting change and sustainability: an institutional approach, Journal of Accounting & Organizational Change, 8(3), pp. 286‐309. CGMA (2012), New Skills, Existing Talents: The new mandate for finance professionals in supporting long‐term business success, CIMA. Chenhall, R. and Langfield‐Smith, K. (1998), Factors influencing the role of management accounting in the development of performance measures within organizational change programs, Management Accounting Research, 9, pp. 361‐386. Cooper, P. and Dart, E. (2009), Change in the Management Accountant’s Role: Drivers and Diversity, School of Management, University of Bath, Working Paper. Fitzsimons, D., Turnbull James, K. and Denyer, D. (2011), Alternative approaches for studying shared and distributed leadership, International Journal of Management Reviews, 13(3), pp. 313‐
328. Graham, A., Davey‐Evans, S. and Toxon, I. (2012), The developing role of the financial controller: evidence from the UK, Journal of Applied Accounting, 13(1), pp. 71‐78. James, K., Jarrett, M. and Neumann, J. (1998), Group Dynamics and Unconscious Organisational Behaviour: Educating MBA Students in Non‐Rational Aspects of Change, In Educational Innovation in Economics and Business 111; Innovative Practices in Business Education, R.G. Milter, J.E. Strinson and W.H. Gijselaers (Eds.), Kluwer Academic, Dortrecht, Netherlands, pp 79‐98. Mintzberg, H. (1979), The Structuring of Organizations, Prentice Hall. Nadler D. H. and Tushman, M. L. (1989), Leadership for organizational change. In Mohrman, A.M., Morhman, S.A., Ledford, G.E., Cummings, T.G. and Lawler, E.E. (Eds.), Large‐Scale Organizational Change. San Francisco, CA: Jossey‐Bass Publishers, pp. 100‐119. Neumann, J.E. (1999), Systems psychodynamics in service of political organizational change In French, R. and Vince, R. (Eds.), Group Relations, Management and Organization, Oxford: Oxford University Press, pp. 54‐69. Researchers’ contact details Prof Kim Turnbull James k.james@cranfield.ac.uk Dr Jean Neumann jeanneumann@btconnect.com
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Appendix 1
Brompton Bicycles: a short case study Change Demands and Opportunities Brompton Bicycle Ltd, an industry leader in folding bikes, operates as a privately owned manufacturer based in London. Since 1976, increasing success means their folding bicycles are sold in markets throughout the world. This has required continual adaptation from a small to a medium‐
sized enterprise. In late 2010, Brompton executives and managers faced implications for the next five years of business development. They had to find ways to manage growth while continuing to stay true to values embedded in their products – e.g. innovation and customization – and values related to their British workforce – e.g. involvement and education. One of the most central elements of necessary change turned out to be a revamped remuneration system: one that rewarded quality over quantity as well as developing a multi‐skilled, flexible workforce. This change took two years (and at least 12 iterations) to plan, revise, discuss, propose and negotiate between executives, managers and employees. Management accountants actively supported executives and managers throughout this time. An objective for the new pay system was to emphasize excellent work. Brompton had to move away from an output‐based, piece work system to one paying for skill and quality. Adopting lean manufacturing practices made it possible for framesets and bicycles to be built in production cells. Cross‐training and flexibly across cells could enable both consistent rates of production and improved processes. Because of seasonal fluctuations in demand, banked hours were incorporated along with an employee profit‐sharing scheme. Management Accountants’ Roles during this Change Leading up to this five‐year plan, Brompton struggled to align financial processes with their innovative culture and growth strategy. Success meant more people and more complexity; Brompton needed a technical specialist unit. The current finance director led initiatives for making finance more prominent in the business. He also hired another management accountant, who now manages two accountancy support staff. By the time of this payment system change, the finance director was well established within the strategic apex. Working closely with executives and senior management, he often feels ‘more like a business consultant’ or behaves like a start‐up manager taking a lead on new aspects of the business. Of course, he continues to oversee financial processes for ‘stabilizing the business for continued trading’. Informally, but definitely in role, he provides the financial boundaries and guidance related to strategic scenarios and aggressive growth. For the payment system change, he served as a regular sounding board from initiation through successive rounds of negotiation. The other management accountant ‘initially really just produced management accounts’. He found that his job evolved to include ‘producing financial modelling’ for projects, ‘people coming to me to discuss numbers in new elements of the business’, and asking for help in building a business case. While middle and senior managers redesigned the payment and job systems, this management accountant provided repeated iterations of financial modelling. How Management Accountants Are Helpful and Involved Non‐finance personnel at Brompton Bicycles easily articulate ways that management accountants contributed to payment changes. Managers of human resources and lean manufacturing noted the importance of having direct access to the management accountant for costing and revising their proposals. Once an initial concept was agreed with the management team, these three people worked back and forth through a dozen iterations of planning, costing, 18
consulting and revising both downwards with employees and upwards to the senior decision‐takers. ‘At every stage we would have to go back to the management accountant, have the figures re‐
worked, then we would sit down and say okay, and then we would go back to the finance director and managing director and say this is what it’s costing us’. The managing director expressed confidence in the competence and leadership demonstrated by the finance director, as well as appreciation for discussion and debate of ideas for innovation and growth. The non‐financial managers characterized this strategic apex management accountant as trustworthy in his reactions about cost implications and supportive in offering relevant information from the wider environment. He was their ‘sanity check’. Both management accountants, from their different roles, felt helped by the effective operation of the technical specialist unit because it freed them up to be involved with change. They both praised Excel and other information technology that enabled them to respond flexibly to evolving proposals. The small size and innovative culture of Brompton encouraged them in taking initiatives outside the finance box, including an earlier rationalization of KPIs and expansions into other businesses. Ways Management Accountants Might Improve for Change While non‐financial personnel at Brompton express positive views about management accountants during change, thoughts about improvement tend to be subtle or implied. On the one hand, they place a high value on management accountants being available: nearby for thinking through some possibility, responsive when approached by people from other functions. On the other hand, they notice initiative taken from an accountancy perspective: something that surprises them into seeing the situation differently or originates an action that keeps pace with moving the business forward. One manager stated that ‘people are finance driven and find everything black and white’. But he then provided examples when the finance director saw things that non‐financial people did not, drawing on financially‐related databases wider than a single company. Keeping Brompton in mind as a whole organization, in its business environment, was an essential competence for change. From his role in the technical specialist unit, the management accountant described the pleasure of liaising informally with everyone in the company on one site. This encouraged him to learn from non‐financial personnel about bicycle manufacturing. He paints a verbal picture of shared, change leadership in action: cross‐departmental members gathering around a computer in an open plan office to ‘get people to take in their own numbers’. ‘Being proactive right from the beginning’ can feel counter‐intuitive from an accountancy perspective. Even the support staff members are identifying efficiencies within their own remit. Both management accountants credit CIMA for having provided good foundational training: ‘it was relevant to what we were using in this change, in the real world of actually working’. To use one’s own initiative, however, is not just a question of professional knowledge; finding a voice to speak across occupational and hierarchical boundaries can take courage. As an employer, Brompton is developing a culture that encourages management accountants to be change agents. 19
Appendix 2
Complex Technology Facility: a short case study Change Demands and Opportunities Complex Technology Facility (CTF), pseudonym for a major UK enterprise, operates as a government agency. This high reliability organization has to maintain its large technical system, ensure the future capability of that technology and – as a quasi‐public institution ‐ provide additional services on an as needed basis. The nature of the core work at CTF primarily involves engineering, manufacturing and construction in maintaining and ensuring future technological capability. Procurement is a huge concern as two‐thirds of expenditure is on supply‐chain. Around 2010, changes in CTF’s relationship with government resulted in pressures on funding and heightened expectations on performance. Executives became convinced that ‘transformational change’ was required. The facility needed to be streamlined in how things were done in order to improve performance and reliability throughout. They identified three essential components for comprehensive change: organisational design, measurements and management of funds, resources and people. In short, executives decided to ‘move from classic directorate silos to programmes owning the work, with functions acting as resources to the programmes’. In the resulting matrix, the money stays with projects and programmes responsible for managing tasks (i.e. make things or do things by dates). Everyone sits in a function. Projects and programmes draw on pools of people from functions in order to manage tasks. This structure intends: to avoid previous duplication of sub‐functions, to focus everyone on achieving tasks and to standardize processes. Management accountants are involved extensively in changing how things are done between functions and projects, as well as in improving the finance function itself. Management Accountants’ Roles during this Change As a technical specialist unit within Complex Technology Facility, the finance function is ‘being grown and becoming more proactive’. A new finance director came on board around the same time as an experienced management accountant was hired to lead changes for finance. Executives intend for the finance function to be less passive and more influential. A former strategic management consultant, who happens also to be a chartered accountant previously leading improvements in procurement, moved into heading up the overall transformation programme – a non‐financial position that reports to the new financial director. While management accountants mostly sat together already, that has been consolidated with each assigned to multiple projects or embedded into a significant programme. Accounts payment and accounts payable are being moved into shared services, ‘thereby leaving pure accountants’. The leader of change for finance oversees both design and implementation of these changes and offers strategic input on designing the relationship between functions and projects or programmes. Project and programme accountants find that their role is evolving. In addition to necessary revisions to the ‘cost, spend and forecast’ support provided in the previous directorate silos, ‘cost has now to be cut a different way’. Money ‘stays with the projects and programmes who book hours from the functions’. Management accountants prove central in a ‘restructuring process in order to pick up budget transfers’ from functions into projects. Unusually they are being required to use their financial systems to engage in ‘work breakdown’ at a detailed level. How Management Accountants Are Helpful and Involved Non‐finance personnel at Complex Technology Facility articulate specific ways that management accountants are helpful in this change. Heads of two of the largest programmes 20
consider that the leader of change for finance provides specialist input on the design and implementation of financial processes that cut across boundaries. As a senior manager within the technical specialist unit, she crafts sensible measurements to monitor different degrees of achievement. Her added value on change‐related matters results in more requests to participate on non‐financial teams than time allows. Project accountants have been particularly useful partners to programme heads in conceptualizing and implementing ways to monitor flow of money across boundaries. The head of the overall transformation describes this as ‘task breakdown, job design and work flow based on how internal accounting works’. Because project accountants understand the previous accounting system, they need to be involved in its adaptation. ‘Given their knowledge of the systems and finance, they can dive in quickly and get the detail we need’. Management accountants, themselves, think it is essential to be a strong person with a good image of emerging financial processes. The leader of change for finance has both an ‘A4 framework’ and an approach encouraging initiative from project accountants. She feels appreciated for her ‘voice of pragmatism’ based on understanding how the variety of functions fit into the wider business. A well‐established project accountant explains that she relies on ‘mapping where to focus our efforts, indicating where the sides of the matrix interact’. Clearly, her experience with a cooperative programme manager also helps. Ways Management Accountants Might Improve for Change Both finance and non‐finance personnel at Complex Technology Facility offer thoughts on what hinders management accountants as change agents in terms of relating to other parts of the organization as well as their own development. A common theme between them is developing competence to zoom into detail alternating with zooming out to a wider frame. This capability relates functions and projects as whole systems within the organization‐as‐a‐whole in its environment. Management accountants need to be able to work on such two sides at once: being ‘preoccupied by the granularity of detail’ while ‘still needing to see the big picture’. One programme manager thought this competence had a temporal and occupational element: they ‘need a wider spectrum on other expertise needed’ before final design decisions are taken; instead, we get into ‘too much detail, too early’. He indicated that working across professional boundaries in a collaborative way requires a balance between close‐ups on work breakdown with a more distant focus on organizational change. The leader of change for finance considered that such flexibility comes from ‘having seen something of the world from different jobs’. Another programme manager contrasts the needs of his large programme as practical but flexible, with the tendency of finance to ‘stick in the box once it is planned’. Both management accountants referred to the need to be ‘good at liaising and relating internally with other people’. They mentioned the log book at the end of CIMA training and the benefits gained from moving through the CIMA process. The ability of ‘working with teams in pragmatic and sensible ways’ highlights the impact of emotions during change on individual and group behaviour. 21