This month’s column is based upon my discussion with Paul Walsh, FCMA, CGMA, chief executive of Diageo (at right), the world’s largest and most respected premium drinks company, responsible for iconic brands such as Johnnie Walker and Baileys. Walsh is one of the FTSE 100’s longest serving chief executives and is widely admired by the global business community for his streamlining of the company. In 2008, he received the Decade of Business Excellence award at the UK’s National Business Awards in recognition of his role in building Diageo into a world renowned company.
The CGMA launch report, Rebooting business: Valuing the human dimension, identified the key drivers to help companies achieve long-term sustainable success. This led us to this monthly feature for CGMAs — ‘One-to-One’ through which the world’s leading CEOs, chairmen and other influential business leaders share tips and insights on running a successful organisation.
Here are Walsh’s top tips:
Invest in new markets, but don’t ignore your existing base
Walsh: All companies are, of course, striving for growth. Increasingly that is going to force them into the global environment, because nobody wants to be dependent on one particular market. However, companies like ours still have very big businesses in Europe and North America, and must be careful not to turn their back on their core markets in the quest to capture these opportunities.
The American Institute of CPAs and the Chartered Institute of Management Accountants (CIMA) recognise the importance of organisations’ fully understanding their external environment in order to make the most of potential opportunities. We will be exploring the issues around risk and innovation through a number of CGMA resources, scheduled for early 2013.
Find the right balance between technology and the environment
Walsh: Clearly we access technology to make sure that we source our inputs in the most efficient manner. There’s a level of automation that is now in place that wasn’t around a number of years ago, but we have to be very alert to the environmental requirements that will be placed upon our business. We must ensure that our production processes are as environmentally sound as possible.
CGMAs have the skills, such as risk management, analytics and forecasting, to help their companies create sustainable business models. They can provide the right information to help decision makers understand the true cost of business, and to use resources more efficiently.
Get the right people in place
Walsh: We expect people in their chosen discipline to be quite expert. You then get into a much broader area of what’s required. For a company like ours that operates in 180 markets around the world, you want a global outlook and you want cultural fluency. You want people who operate to incredibly high ethical standards. You want a business partner who is from an accounting discipline and is very strong on their commercial and analytical capabilities. Not just someone crunching the numbers and providing the data, rather a voice at the table; someone who can help steer the overall commercial strategy for the firm.
Our new CGMA research, The fast track to leadership: The challenges, opportunities and action plan, recognises that as organisations operate in an increasingly challenging climate, a board’s expectations of the finance team are becoming more complex. This provides CGMAs with the opportunities to progress and add value to their organisation as strategic business partners.
Help others understand the heartbeat of the business
Walsh: I am not sure that the increased quest for transparency is serving the final user very well. I think we run the risk of not seeing the woods for the trees. Some of the regulations and standards are becoming too complex, and the risk is they may not be understood. In most businesses, boards demand a balanced scorecard, and boards are pretty good at trying to cut through the reporting to understand the heartbeat of the firm. I don’t believe in the regulator’s demands for more information, we have … captured that heartbeat.
Robust external reporting should represent the top slice of information that is regularly reported to the board, but this is often not the case. Boards need effective management information. This is one of the central themes explored in a recent report from CIMA, Tomorrow’s Corporate Reporting — A Critical System at Risk, published in conjunction with Tomorrow’s Company and PwC.
Charles Tilley is chief executive of CIMA.