VideoNot surprisingly, the new role requires better articulation of the business impact of accounting and finance issues. "I don't have to tell senior management how the clock is made," she says, "but I do have to tell them what time it is."
The fact is, most controllers will have to develop better "people skills," posits Gary Previts, an accounting professor at Case Western Reserve University's Weatherhead School of Management. In this post-Sarbox world, Previts say controllers will also be called on to step back and assess long-term business prospects. In essence, successful controllers will move away from the conventional short-term, profit measure mindset.
Previts believes the big picture often gets muddied by the day-to-day operation of the controllership, especially as time gets tight and reporting deadlines loom. Still, he sees a hiring trend that gives greater weight to candidates with "right and left brain skills." Previts reckons that from now own, CFOs who interview potential controller hires will look at "people, not degrees."
Not Playing Games
Dov Seidman agrees. Seidman, chairman and CEO of LRN, a Los Angeles-based compliance training company, believes the evolution of the controller position is underway, and Sarbanes-Oxley compliance is the springboard. "A CPA is a ticket to entry for the controller's job," he says, "but today a controller must be a business leader."
For instance, Seidman believes the controller's outlook will become less focused on the numbers — other than making sure that they're accurate — and more focused on a long-term approach to corporate success. As guardians of transparency and compliance champions, Seidman says good controllers will sidestep the pressures of earnings management, and other gaming techniques, to zero-in on dealing with financial problems directly and swiftly. As a result, controllers will grow more independent.
But he believes corporate reporting structures will have to be reworked before controller's gain real reporting independence within the corporation. For example, controllers will need the authority to put processes in place, as well as the authority to act or react if those processes are not followed. With that authority should come incentives, as well as penalties, tied to the controller's decisions, says Seidman.
The consultant also predicts that the controller position will be the next to rise to the executive suite, just as risk, diversity, ethics, and compliance officers have been elevated. But, he says it may be too early to tell what the new organizational structure surrounding the controller will look like.
Filter Tips
Tatum Partners' Joe Noga doesn't think it's too early to prognosticate about organizational structures. As a partner with Tatum, Noga has been an interim CEO, COO and CFO, and he thinks controllers should report to the CEO — an opinion Noga says isn't popular with most of his colleagues.
But Noga believes many of the corporate accounting scandals that made headlines during the past two years could have been avoided if information from the controller — the top accounting watchdog — was not filtered by a CFO who "was clouded by strategy." Noga also believes that scandals could have been nipped in the bud if honest controllers were made to certify financial statements, the way Sarbox requires CEO and CFO to attest to those numbers.
The interim CFO says that finance chiefs are almost always well meaning when they filter information to the CEO. Yet they can be "bound and determined" to sway from their controller's recommendations for accounting treatment if they are fogged by larger business interests. "The CFO should be man — or woman — enough to allow the controller access to the top," declares Noga, adding that the corporate control function should have a seat at the management table.
Noga admits that the unconventional reporting structure was not his idea. He credits Sunil Dovedy, president of Adizes Institute in Santa Barbara, with the revelation. As Dovedy explains it, the reason for the separation between the controller and CFO is a good one: it creates an independent point of view and a healthy conflict.
You're a Superstar, That's What You Are
In some ways, an independent controller would actually be a return to the way things used to be. Bala Dharan, an accounting professor at Rice University's Jesse H. Jones School of Management, says that 25 years ago, controllers were considered top management. It's really only been since the mid 1980s, Dharan says, that the controller lost sway, turning into a CFO report. Today, the professor claims, finance chiefs regard the controllership as another corporate function, like information technology or human resources.
In his opinion, the controllers will never be completely independent providers of information as long as they report to CFOs. But he doesn't think finance chiefs will voluntarily agree to a change in reporting lines. Why? Mostly, because controllers have evolved into the keepers of all things financial — and CFOs rely on that information.
Whatever the reporting structure, "superstar controllers are always in demand," says John Holland, vice president at A.T. Kearney Executive Search. Interestingly, Holland says top candidates that interview for corporate controller jobs are now performing more due diligence before accepting offers. They want to know, for example, what type of resources they can expect at their new job. They also want to meet with a company's audit team, audit committee, and talk to the corporate lawyers. Why meet the lawyers? To find out more about outstanding litigation or pending court decisions that may impact the controller's function. Attorneys can also talk about potential liabilities associated with the company's subcertification process related to Sarbox Sec. 403.
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