Workplace Issues

Metric of the Month: Number of General Accounting Employees

The best performers need just 4.8 full-time employees per $1 billion in revenue to perform the general accounting function.
Mary DriscollOctober 5, 2016
Metric of the Month: Number of General Accounting Employees

According to the New York Times, 2015 was a record year for acquisitions, which were valued at $2.2 trillion in the United States alone. We’re on a similar track so far this year, with more than $800 billion in deals as of July 31, including the planned $66 billion takeover of Monsanto by Bayer.

Along with any new acquisition comes the challenge of how to integrate two distinct corporate cultures, processes, technologies, and groups of people. And that includes the question of what to do with the acquired company’s finance team, who come with their own quirky ways of doing things. The simple solution might be to tack the new people onto the existing department to handle the suddenly expanded workload. But that’s a good way to end up with a lot of bodies in chairs doing work  but probably not as efficiently as they could be.

While there’s no “right number” of FTEs for every organizations, research done by APQC, the firm I work for, gives us a glimpse into how many people other organizations use to get specific types of work done. Consider general accounting in the graph directly.

driscoll Oct 2016 chart

This metric comes from recent APQC benchmarking data from 1,209 companies in a variety of industries. It shows that the best performers need just 4.8 full-time equivalents per $1 billion in revenue to perform the general accounting function. The worst performers need four times as much labor: 20.6 FTEs per billion in revenue. That’s more than 100 FTEs for a $5 billion company, doing nothing but general accounting. (Click on the graphic for a larger version.)

Which begs a question: How do the best performers do the same amount of work with one-fourth the labor? Clearly, the top performers have taken steps to increase labor productivity. When it takes a comparatively large number of people to work on a problem, chances are very good that they are doing the work inefficiently. Staff size often shines a spotlight on hidden process weakness.

In this space, we’ve talked about the toll that manual journal entry takes on time, accuracy, and the budget. We’ve talked a lot about the value of automating labor-intensive, repetitive processes to free employees to focus on higher-value tasks.

But another important consideration comes down to this age-old question: Do you have the right people in the right jobs? Especially if your company is an acquisitive one, this is a question the CFO will want to mull carefully.

Acquire Wisdom

It’s the CEO’s job to lead the company up one mountain, stand at the top looking for the next mountain to climb, and then lead the expedition on to the next peak. But it’s the CFO’s job to lug the entire accounting infrastructure and supply lines up those steep routes. When the next mountain is an acquisition, that long uphill hike can also entail integrating two disparate accounting teams, technologies, and methods.

While you might assume that any company worth acquiring probably has an accounting team worth acquiring, it pays to think selectively about how you absorb new finance staff. Rather than quickly pulling from the new talent pool to fill your open accounting positions, take your time to fully assess the competencies of all incoming employees.

It’s tempting to simply fill your empty seats with people who already know how to push buttons and run reports. But a deeper look into skills and capabilities may uncover valuable hidden talents or training that you can put to work. You may learn that your company has acquired star team members with specialized expertise who can help you analyze the drivers of cash-flow performance, segment customers effectively, understand the impact of global economic trends, or determine how collectable your outstanding balances really are.

In other words, know who you’re acquiring, and be discerning about the brainpower you choose to absorb. By discovering their talents and making the most of them, you may find that you really can do a lot more in terms of business analysis and decision support.

An acquisition is also an excellent time to be honest with yourself about whether your way of doing things is really the best way. Rather than automatically seeking square pegs from the newly acquired team to fill your finance department’s square holes, ask yourself whether the round holes at the other company might actually be a better solution.

What technologies and automation has the acquired company been using, and why did they choose them? If you’ve been thinking about a new ERP system, you may just find that you now have an entire team of plug-and-play experts who already know one inside and out. How do their accounts payable processes compare to yours? What do they do better, faster, or smarter than your team, and how can you incorporate that know-how into your existing operation?

Rather than duplicating processes and expertise, take a hard look at the knowledge and technologies you are acquiring. You may just expose some cracks in your own foundation and find the resources to fix them at the same time.

Mary Driscoll is a senior research fellow in financial management at APQC, a nonprofit business benchmarking and research firm based in Houston.