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How to meet the needs of a growing business -- and the demands of new regulations -- without burning out the finance staff.
Kate O'Sullivan, CFO Magazine
January 1, 2004
Complying with Sarbanes-Oxley is taking quite a toll on corporate finance staffs these days—particularly on controllers. "When my controller is going home for dinner and then coming back to work, there's something wrong," says Scott Youngstrom, CFO of Compex Technologies, a New Brighton, Minnesota-based maker of electronic muscle-stimulator devices.
But that's exactly what controller Paul Wotta has been doing for months, trying to meet the needs of the growing business as well as the demands of new regulations. The juggling act has meant that both Youngstrom and Wotta periodically work 12 hours a day and another 6 or 8 hours on the weekends. And there's no end in sight: with a fiscal year that ends in June, Compex will be one of the first companies required to comply with Section 404, the internal-controls requirement of Sarbox.
As Wotta's schedule illustrates, controllers are on the hot seat. Besides managing payroll and holding down costs, they are being asked to spearhead the subcertification process that now precedes all financial filings. And the tedious task of documenting internal controls rests squarely on their shoulders. Says Joan Freilich, CFO of New York utility Consolidated Edison Inc., "A year ago, I did not think [Sarbanes-Oxley] had increased the workload. But 404 is clearly an additional layer of work. And the accounting department under the controller has a very big role."
Given these new demands, many CFOs are realizing that their controllers are overburdened. While the whole staff contributes to the internal-controls effort, says Youngstrom, it is Wotta who sits at his desk putting all the details down on paper at 8 o'clock at night. "What would happen to this company if my controller just didn't show up one day?" he asks, adding, "I don't want this to be a sweatshop. We've got to make some adjustments to alleviate this workload."
The controller's job has always been a difficult—and often thankless—one. Day-to-day tasks involve gathering, or in some cases digging for, information from all areas of the company, as well as meeting the constant deadlines of closing the books. Allen Elkin, director of the Stress Management & Counseling Center in New York, says controllers also feel the squeeze of what he calls "the sandwich effect." Positioned between the CFO and the other members of the finance department, they are "responsible up and down," he says. "And being in the middle often results in the most stress."
With the economy poised for growth, controllers are also facing competing priorities. Wotta, for example, has added significantly to his duties: Compex made two acquisitions recently, and the company, which has traditionally sold products to doctors and clinics, is introducing a consumer offering. And in addition to integrating these new businesses into the financials, he recently took responsibility for Compex's Tampa collections division.
The pressures are just as pronounced at private companies. Although KhiMetrics Inc., a Scottsdale, Arizona, developer of revenue-management software, is free from the scrutiny of the Securities and Exchange Commission, controller Debra Standal still tries to keep up with the new regulations. "I like to have the controls in place regardless," she says. But with just four people in the finance group, she has little time to read up on rule changes. Moreover, with every additional scandal—such as the current mutual-fund probe—she says, "there's a tendency to want to scrutinize everything you come across. I'm not balancing very well at the moment."
Not surprisingly, all of this work is creating a palpable amount of anxiety in finance departments. "It's an incredible strain on me and my staff," says Wotta of the speed with which he must meet the controls requirements. In addition, Con Edison controller Ed Rasmussen comments that everyone is more aware of his or her liability now. "It doesn't thrill you when you see controllers on TV in handcuffs. That does cross your mind every once in a while," he says.
To alleviate some of those stresses, many companies are bringing on more experienced finance staff to handle the regulatory issues, or searching for more people to take on some tasks. "The number of controller and chief accounting officer searches we're seeing is up year-over-year and certainly over two years ago," says Barry Bregman, managing partner at recruiter Heidrick & Struggles in Manhattan.
To help balance Wotta's load, for example, Youngstrom has received approval to hire additional staff. At KhiMetrics, CFO John Harbottle is spreading out the work by educating nonfinance staff about finance-related matters. And at Relizon, a business-process solutions company in Dayton, with close to $1 billion in revenues, top finance officer Sarah Burton points out that simple gestures are also important. She recently invited her entire staff out for a drink, "just as a thanks for working hard," she says. "With the pressure on those positions, it's really important to make sure you recognize and appreciate them."
Controllers admit there are benefits to the added work, however. Con Edison's Rasmussen says the increased workload has meant greater visibility within the company. He spends a significant amount of time educating his colleagues about compliance, giving internal presentations, and meeting with the board—"going through the financial statements line by line."
Such regular contact with the board and constant interaction with the CFO, while often anxiety-producing, should lead to opportunities, says Richard Roth, principal at The Hackett Group, a business-advisory firm based in Atlanta. "The good news is [the controller] can be a star. The bad news is it's going to be a hell of a lot of work."
Notwithstanding the demands of his schedule, Wotta tries to maintain perspective. "This isn't open-heart surgery. No one's going to die on the operating table if you make a mistake," he says. But the pressure makes such equanimity tough to achieve. "It's really important to me to bring a sense of fun to the job," he says. "[But] with Sarbanes-Oxley, everything's become a little more serious."