CGMA launch focuses on non-financial value, long-term business strategies

A panel of executives meeting in the finance capitals of New York City and London discussed new research Tuesday on the importance of the human dimension and non-financial value in long-term business strategies.

The event, hosted by the AICPA and the Chartered Institute of Management Accountants (CIMA), was part of the launch of the organisations’ global designation.

The finance executives joined one another by satellite to mark the debut of the Chartered Global Management Accountant (CGMA) designation. (To watch an archived version of the event go to www.webcasts.com/cgmalaunch.)

“Today’s announcement of the new CGMA is the culmination of a longstanding effort to help companies experience maximum integration between financial and non-financial information to drive a business’s growth, and to include that information in the financial reporting process,” AICPA President and CEO Barry Melancon, CPA, CGMA, said at the launch. “CGMAs will accomplish that by managing change, risk and uncertainty; promoting operational efficiency and effectiveness; and protecting corporate assets.”

The transatlantic panel discussed new research commissioned by the AICPA and CIMA and led by Oxford Economics. The research in “Rebooting Business: Valuing the Human Dimension” digs deeply into some of the issues CEOs and management accountants face in growing businesses.

Panellists discussed measuring non-financial value and the human dimension of organisations; the focus on short-term financial results versus long-term sustainability; the value of transparency; and working in collaboration to understand where value exists in a company to drive successful results.

The research showed that 76% of the 280 CEOs surveyed in more than 21 countries believe the current reporting system promotes excessive focus on financials. Seventy-five percent agreed that more emphasis needs to be placed on demonstrating the non-financial value of businesses.

“The expression is, ‘What gets measured gets done,’ ” Xerox Vice President and Chief Accounting Officer Gary Kabureck said during the panel discussion. “And if you can measure something reasonably objectively, and people can understand what that measure is, and how it changes over time, for better or for worse … you can get a shared vision of the organisation and what’s going well and what needs to change.”

The human element – the value of customers, employees and partners – is a key element of non-financial information that isn’t routinely getting measured or reported, the survey found.

Panellist Chris Stanley, Americas vice president and CFO of Global Network Services at American Express, talked about the customer angle of the human element. He said targeted marketing by American Express individualises special offers to customers for their favourite restaurants. He said it’s amazing how that makes customers feel like individuals.

“There definitely is a link between treating the customer as an individual and the financial results,” Stanley said.

The survey showed, though, that many CEOs believe that those non-financial values are not appreciated by investors because of their attention to short-term financials rather than long-term success. Four out of five CEOs surveyed said investor demands are inconsistent with growing a sustainable business.

“In essence, the financial markets are holding businesses to ransom as many investors show little or no interest in the longer term,” CIMA Chief Executive Charles Tilley, FCMA, CGMA, said in his address at the launch. “This absolutely has got to stop.”

Panellist Angelo Messina, vice president and CFO of Otis Elevator Co., said the quarterly financials are always going to be important, so the role of management accountants is to explain to investors why investing in the long term makes sense.

“If you communicate appropriately, I think investors will be willing to make investments for the long term,” Messina said.

Kabureck said long-term goals should remain paramount despite the focus on the short term.

When asked about transparency, another key topic of the survey, 87% of CEOs said transparency is an opportunity for companies, while just 13% saw it as a threat. Panellists extolled the virtues of transparency but said sensitive information and details about customers must be protected.

“I think transparency is hugely important,” said panellist Douglas Flint, group chairman of HSBC Holdings. “I think not just the investor base but society generally wants to know far more today, not just what the financial results were, but how were they delivered. What were the values that drove the behaviour that drove the results?”

Roger Tomlinson, finance director for business partnering at Rolls-Royce, said sharing information about goals with employees has been pivotal at his company. He said over the past 20 years Rolls-Royce has made “great strides” in being open with its employees in an effort to get them to embrace its business strategies.

“That way the business starts to prosper because the people involved get brought together and are able to contribute a lot better,” Tomlinson said during the panel.

Panellist Helen Weir, a former group finance director for Lloyds and current non-executive director of SABMiller, said transparency now is inevitable. That being the case, she said, it’s important for businesses to use that trend and better explain themselves.

“The information flow is increasing rapidly, and the volume of information is also increasing very rapidly,” Weir said. “More and more information is being provided by businesses. I think we need to change our mind-sets. Democracy is in control here. It’s not about what organisations choose to disclose. … Actually, what they don’t choose to disclose is probably going to get out there. It’s actually how you then do that in a way that is helpful, rather than dysfunctional.”

The survey found just 12% of CEOs turn first to their finance team to measure non-financial value in a company. The report also said CEOs need competent people to understand where value exists in a company, and that CGMAs can help work across the organisation to connect the dots.

American Express’ Stanley said it’s up to finance teams to show how they can take the data they generate and turn it into something concrete to drive business success.

“They want that information,” Stanley said. “They want to be able to understand how they can unleash the power of the company. I think to sit there and wait to be asked, it’s never going to happen. You’ve got to push. You’ve got to think strategically and differently.”

Photo (left to right): Angelo Messina, vice president and CFO at Otis Elevator Co.; Gary Kabureck, corporate vice president and chief accounting officer at Xerox Corp.; Chris Stanley, vice president and CFO Global Network Services, Americas at American Express; and event emcee Kathleen Hays of Bloomberg Radio. Photo by Robert Milazzo.