Controllership: Leading Edge of Corporate Performance

Chapter 1

Job of the Controller

Learning Objectives

• Describe what the controller's job is and how it is rapidly changing and evolving.
• Understand the particular personal and business goals of the controller as a member of the organization.

Introduction

Our business and organizational society is in a major period of change. Technology, management theory, political trends, and the rise of the customer have all had significant influence in the way our organizations do and will have to work in the future. Probably no change, however, will be as significant as the limitation of revenue brought about by external forces.

Business as Usual

Throughout the 1980s and 1990s, our organizations underwent rapid increases in both revenue and expenses. These increases should have had corresponding increases in profitability, since the expenses should have been both fixed and variable. Unfortunately, however, general and administrative expenses increased at greater than a proportional amount, causing lower profits. Some of the reasons are as follows:

• Health care costs – These costs have been increasing far faster than inflation.
• Legal costs – Costs of litigation and the avoidance of litigation have added significantly to our general and administrative expenses.
• Government regulations – Outside entities, such as government, have increased our regulations, causing significant cost increases.

Shock of the Future

The practice of passing on these cost increases met a major shock in the 1990s which has continued into the new millennium.

• Global competition – Organizations could increase prices as long as all organizations had the same costs. All automobile companies faced the same problems, thus they could all increase prices to cover the costs. Then Japan entered the market without the burden of many of the costs mentioned above. All of a sudden, the day of increasing prices was over.
• Taxpayer revolt – Just as the private sector became limited due to global competition, the public sector became limited by the taxpayer. Seeing what they believed as government waste, taxpayers have instituted tax limitations measures and voted "tax and spend" officials out of office. Revenue became limited.
• Quality revolution – Another lesson learned from abroad was that the consumer wants, and in fact demands, a quality product or service. As this has passed through the private sector, governments have also found that their customers (voters), have come to demand better service. We now expect the motor vehicle inspector to smile and greet us cheerfully.

Challenge of the Future

Both the public and private sectors face the same challenges.

The Job of the Controller

When asked to complete a job description for the job of the controller, we get many different answers. The controller for the large, multi-national corporation might describe a detailed, highly focused job in the accounting department of corporate headquarters. At the other extreme, however, is the controller of the small entrepreneurial firm where the job represents everything and anything having to do with numbers. Naturally, there are many levels of controller between the two examples.

Regardless of the details of the position, the job of the controller is rapidly changing. In part this is due to the following developments:

• Changing organizational cultures – These are possibly the most significant changes in the business world and will be discussed in the next chapter.
• Changing technology – Computers, the information highway, transportation, and telecommunications are all changing at an ever-increasing rate.
• Increased productivity – Global competition has forced our organizations to reduce expenses, thus forcing us all to work harder. This problem is further exacerbated with the increased focus on nonvalue-added expenditures. Since most accounting functions only indirectly increase the value of the product or service to the customer, managers are slashing expenses in this area first.

Exercise 1-1: What are some other changes you are seeing in the job of the controller?

Program Objectives

Due to the developments discussed above, we have some very specific objectives for this program. These are as follows:

• Understand the future direction of the job of the controller and help develop a strategy to excel in that future job environment.
• Develop and improve the skills involved with the job of the controller.
• Understand the future of the financial skills of being a controller.
• If we are able to accomplish the first three, we should be in a better position to negotiate more favorable employment.

Goals of Controller

As a member of the organization, the controller will usually have particular personal and business goals. These may include the following:

• Greater responsibility – Moving ahead in the organization is often the result of gaining greater responsibility.
• Have greater financial impact on firm – Management will often assess the worth of an employee by the financial impact of the individual on the firm. For this reason, the controller often has the strategy to gain a position where he/she can have greater financial effect.
• Higher value – Generally, if an employee gains greater responsibility and has greater financial influence, he/she will have a greater value to the organization.