Putting the 'power of people' into business
Rebecca McCaffry, FCMA, CGMA, associate technical director–Research & Development, Management Accounting at the Association of International Certified Professional Accountants, is author of the recent CGMA report, The Power of People: Business Relationships in Difficult Times (CIMA member login required). She describes in this episode how management accountants’ skills of communication, empathy, and collaboration can enhance relationships that lead to increased value for businesses.
What you’ll learn from this episode:
- About business relationships — with customers, colleagues, and in supply chains.
- How one bank fundamentally changed its customer interactions during the pandemic.
- The importance of KPQs — key performance questions — that lead to KPIs.
- How communication, empathy, and collaboration skills can aid relationship building.
- The shift in trust towards employers as sources of credible information.
Play the episode below or read the edited transcript:
To comment on this episode or to suggest an idea for another episode, contact Oliver Rowe, an FM magazine senior editor, at Oliver.Rowe@aicpa-cima.com.
Oliver Rowe: Welcome, Rebecca.
Rebecca McCaffry: Thanks for having me, Oliver.
Rowe: As we move through the pandemic, what impact has the coronavirus had on the people aspect of business?
McCaffry: Well, it's been quite interesting. Since March we've had a series of CFO forums where we talked to some of our senior members about what’s happening in their business. So this is something we've been doing throughout the pandemic, and we're planning to continue it. So initially, people were looking at very immediate concerns. So we're looking at cash flow which, obviously, is very important but also ensuring the safety of the workforce. So those are the two things that people were looking at right at the beginning. So, real primary concerns for CFOs. Now, it wasn’t very long before conversations started to move into wider issues. So we were thinking about supply chain resilience as supply chains started to break down.
And perhaps how we might pivot the business model. So, for example, we had distilleries producing hand sanitiser because there wasn’t enough hand sanitiser around. So we had to — we went through all of this. So with lots of businesses doing things quite differently and actually now the conversations have moved more towards horizon scanning and kind of longer-term strategies. So what we're going to do, we've survived so far, what are we going to do going forward? But, of course, at the end of the day, the primary concerns of cash flow and people are actually going to be key to all of that.
Now, in terms of the people aspects of business, I would say probably the biggest impact has been on the workplace or the work environment. Because many of us are not in the workplace at the moment. So we're having to work in smaller groups or actually working alone in our homes. And so there’s been a real loss of community. And, in fact, even those people who have gone back to the office have found it to be a very different place than the one they left in March. So no more hanging out around the water cooler, for example. It’s actually rare that you see other people in the office.
And I think as we move into the winter months here in the UK, we're going to see a whole lot of new workplace challenges. So I don't know about you, Oliver, but I don’t have office standard lighting levels in my house. So I think people’s personal resilience and mental health is going to take a little bit of a battering when we're sitting in the dark and the cold at 4pm. And I think we really need to recognise this and to look out for our colleagues as well as looking after ourselves. So that’s something important to think about. For me personally, I think one of the things that I’m missing about the office environment is the interactions that you have when you're walking around. So with the people that you don’t necessarily work with directly but you say hello to, talk to them in the coffee queue, that kind of thing. And it would be nice if we could somehow replicate that in some way.
I spend my time at a lot of conferences. So I’ve basically had six months of Zoom conferences and some of the conference platforms I’ve seen recently have got these kind of networking elements where you have the time that you would be spending having a coffee, they have a kind of networking room that you go into. And this kind of works quite well, but, of course, it’s only going to pick up the people who have put themselves forward to do networking. You can’t just bump into people — it takes the kind of natural side of it away. So actually, you need to look out for the quiet people as well, the people you've not heard from for a while.
And I think one positive aspect of the current situation is that lots of businesses have actually started to reconnect more directly with their customers. So, for example, the Halifax building society here in the UK, they set up a dedicated phone line for their older customers because it's all very well saying let’s all switch to online and digital and whizzy technology. But actually, some people are not comfortable with that. So they’ve set up their own dedicated phone line, you can ring up there. You don’t need to do things online. And they’re also offering advice on online food shopping, on how to book a doctor’s appointment, and maybe how to make a video call.
And they’ve also been ringing out to their customers and not to sell to them but just to say how are you doing? What’s going on with you? So this kind of conversational aspect of things. So they’ve taken this really personal approach, which, if you think about it, is quite a far cry from the automated responses and kind of very standardised communications that we've been used to in recent years. It’s you don’t really expect a person to pick up the phone anymore, do you? If you call a call centre, you sort of spend five minutes navigating the sort of robot system before you can actually speak to the human. So I think we've seen a bit of shift in that regard, which I think is a good thing. It can only be a good thing.
Rowe: And you’ve talked about customers and how relationships with business is changing. What about employees? How is that working within organisations?
McCaffry: Well, again this is an interesting one. So we recently published a white paper called The Power of People, which looks at how you get the most out of the various business relationships in a time of crisis. So we do need to work together; everybody needs to pull together. So trust is crucial, but trust is a very fragile thing. And I think the decisions that we make as employers and the way that we choose to communicate them kind of actually devalue or even destroy these relationships that we’ve spent a long time building up. So Edelman, who monitored brands, trust, and reputations, so the Edelman Trust Barometer, they published a report back in May — which, as you’ll recall, Oliver, was prime time for coronavirus fake news — which showed that the most trusted institution wasn’t government or the media or business, but my employer, which, of course, it will vary by each individual.
So you trust the person who employs you, the business that employs you; you don’t trust the business in general. You don’t trust the media, and you certainly don’t trust government. And I think this really reflects the kind of people-centred approach that businesses are beginning to take. So, in uncertain times as we're in, we're used to things being uncertain now, aren’t we? Everything’s been turned on its head this year. So when financial sustainability and resilience is a key concern if we’ve been — we’ve got to get through this. So the role of the finance professional is actually more important than ever. So we need to know the numbers, but we’ve also got to be able to communicate them.
And in today’s remote working world we've got to work a lot harder to do this. We also need to listen and we need to read between the lines and understand what’s really being said. So that’s not easy, is it? When you’re on your seventh Zoom call of the day and it’s getting dark outside and it's none too warm in your spare bedroom. How are we going to manage to be a real business partner while we're sitting at home, while we’re not actually in the business? So this is a big challenge.
Rowe: And what about an organisation’s other stakeholders? How are things changed there?
McCaffry: So, in the report, we look at a variety of stakeholders. So we look at customers, we look at suppliers, we look at the employer-employee relationship, we look at the board, investors. And actually, what was coming through in all areas was this need for trust, for transparency, and for mutual respect. Now, in an ideal world, of course, we’d have had this already. But for some organisations it’s been quite a wake-up call, I think. And the public have got a long memory, and I think the businesses that didn’t treat their people well or who put them at risk are going to struggle in the longer term.
Now, without mentioning any names there are some very big high street retailers in the UK who have treated their employees very, very badly through all of this. And, yes, we do need to work hard as businesses to survive under today’s conditions, but at the same time, we have a responsibility to look after our people.
Oliver: And moving on to supply chains. Are we in danger of removing the people element from those?
McCaffry: Well, again, this is an interesting point because globalisation means that supply chains have actually become a lot longer and a lot more convoluted and, in some cases, more secretive than they used to be. They’re very globally dispersed, but at the same time, you find that manufacturing tends to be concentrated in quite specific geographical areas, which is a little bit of a risk. So, I don’t know if you remember but there was a report saying that right back at the start of the coronavirus crisis and that said that over 90% of the Fortune 1000 companies had one or more tier-two suppliers in the Hubei province.
So, that’s obviously where the pandemic started from. So, of course, the whole area was shut down so that’s what 90% of those companies have immediately got trouble in their supply chain. Now, this is going to be an issue for any supply chain really if you’re sourcing from a specific geographical area and there’s a problem in that area. So whether that’s an earthquake, political unrest, or a pandemic, your supply chain’s going to be in trouble. Nothing can get in, nothing can get out. So at the same time, we’ve got technology which has made supply chain logistics a lot more efficient. But on the flip side, it's actually taken us to a stage where supply chains have become transactional rather than relational.
So we don’t necessarily ring up the guy in the factory, guy or the girl in the factory, and say what’s going on here? Can you get me this a bit quicker, this kind of thing. Where we don’t necessarily have that sort of relationship anymore. We don’t, perhaps we don’t know the people or even the — we don’t understand the culture in that supply chain. So actually, in a crisis the survival of your business might rely on these relationships, on your ability to pick up the phone and talk to somebody, somebody that you know, that you’ve worked with over time. Somebody that will do you a favour when you need one.
OK, we haven’t really got those kinds of relationships anymore because perhaps we do everything through an online ordering system. We don’t ever speak to a salesperson. So it's a little bit difficult. Here in the UK, we were lucky in some regards because we've had a little bit of a head start through all of this because, of course, we've been preparing for Brexit. So actually, UK businesses had already been carrying out these reviews of the supply chains. Actually, for many it was quite a shock to see just how weak their supply chain relationships were.
And I think this serves as a quiet reminder that we need to remember the human aspects of business, that it's not just about how slick our logistics are. There’s people to think of as well.
Rowe: For management accountants people skills are critical. And there are many skills, but if you had to highlight just three of these what would they be?
McCaffry: So for me, I think it all boils down to the way that we communicate. So, I’ve found that people have a surprisingly emotional response to numbers, particularly the bad news ones, which we have quite a lot these days. And I think we need to recognise that all the more in a time of crisis. And I think it's also about emotional intelligence and empathy. So taking time to talk to people to get the real story about what’s going on. And finally, it’s about collaboration and partnering and how we're going to manage to do this when we're not physically together.
So finance business partnering used to be all about getting out into the business, getting onto the factory floor. And in some cases, we can still do this but it’s not as easy as it used to be. So, we're going to need to find new ways of working together. And I think the people skills are going to be really critical to that.
Rowe: And how can management accountants use these skills, these critical skills in supporting the business? You've talked a bit about that but perhaps you could say a bit more, please?
Rebecca: Sure, well, I mean at the end of the day, management accounting is about supporting better decision-making. And to make the right decisions we need to work together. And to do that we need to understand our stakeholders whether they’re internal or external. And this is the way that we're going to be able to build the resilience that we need not just to bounce back but to actually bounce forward. To build on what we've learned through all of this. And I think one of the things that’s really characterised the coronavirus pandemic from both a business and from a personal point of view is the huge amount of information that’s just been flying around. And some of it is fake news and you can tell it’s fake news.
But actually, there’s so much non-fake news to wade through that you can actually cloud out your decision-making. How do you cut through to what you really, really need to know? And so to understand the long-term impact of any disruption, focus actually needs to be upon not KPIs but KPQs, so key performance questions. So these are the questions that need answering around operational resilience, around financial wellbeing, and around reputation. So what do you need to know. And from this, you can then identify the KPIs that were going to help you address and answer these questions.
So, for example, how are our people coping? Is our business still a going concern, that’s quite an important one these days. Or perhaps how have the changes in working practices impacted on our culture? And then you can look at the indicators that are going to help you answer those questions. So we've got quite a lot more on this in the report if people are interested.
Rowe: Absolutely, Rebecca, and what would be your three takeaways finally from our conversation today?
McCaffry: I’d say first and foremost that we need to look out for our colleagues. Now, I’m sure we've all had enough Zoom quizzes to last us a lifetime. But it doesn’t need to be as complicated as that. Sometimes it’s nice just to have a one-on-one conversation about nothing in particular. So reach out to the colleagues that you haven’t seen in a while and have a Zoom coffee break. This is a great way to brighten up a dark afternoon. Though secondly, I think this is one for the leaders, it’s all about trust. So are you being transparent in your business relationships?
And we're all used to bad news stories by now. So you don’t need to hide them from us, just tell us what’s really happening because I think we all appreciate a bit of honesty. And I think finally, we need to recognise that relationships whether they’re internal or external are what adds value to any organisation. And this is why they’re so important. And we need to recognise this and we need to continue to invest in them. And that investment is not necessarily about money — it’s about time, it’s about trust, it's about respect.
Rowe: Rebecca, thank you very much indeed.
McCaffry: Thank you, Oliver.