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In this February 1999 issue of
On Target :
Membership Subscription - A
Reader Survey :
ICMA members who are also members of other professional
accountancy bodies would realise that the Institute's annual
subscription fee is one of the lowest in the Western world. Most
professional accountancy bodies in Australia (including the
Chartered Secretaries and Administrators) charge between AUD 300
and AUD 800 per annum. At the last AGM of the Institute this was
fiercely debated with approximately half of those attending
wanting to increase fees to about AUD 200, whilst the others
only wanting a modest increase to keep up with costs. Ultimately
the fees were increased modestly by AUD 15 for CMAs and AMAs,
whilst the Graduate fees remained unchanged.
With the AGM scheduled for August this year, the debate is
likely to be once again on the Agenda, hence the importance of
getting your views on the subject. Currently, our Treasurer
informs us that approximately 70% of your fees go towards the
Management Accounting journal, the production of On Target and
the postage. Those who want only a modest increase in fees argue
that our membership services (i.e. journal, newsletter, web
page, manual, CPD program etc.) are similar to the other
professional bodies, and whilst we should be commended for
running the Institute on such a shoestring budget, relativity to
the fees charged by the other bodies does not in itself warrant
an increase in fees. Those who want a substantial increase in
fees argue that very little of the fees collected is left for
professional administration and the advertising of the Institute
and its members, and that such promotion is important for the
recognition of the Institute by the recruitment agents,
educational establishments and the wider community. They also
argue that currently the Institute is run mainly on a voluntary
basis, but that soon paid administrators must be brought in to
make the Institute more professional.
Please fax us your views on this important topic on 61-3-9530
0055.
Beyond Open Book Management :
Continuing the presentations made at the joint ICMA/CIMA
breakfast meeting held on 27 October, 1998 at the Naval and
Military Club, Melbourne.
Before considering aspects that take us beyond open-book
management, let us first consider some of the controversial
issues that have arisen in open-book management itself, and the
results of the research undertaken to date that deals with these
issues.
The issues are as follows :
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Sharing sensitive information with employees is risky
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They may demand more remuneration
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Competitors may get hold of the information
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Employees cannot fully comprehend the big picture'
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Training employees to understand financial reports is not easy
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Not all performance and rewards are measured in financial terms
In a comprehensive research study undertaken in the USA by the
Financial Executives Research Foundation (FERF) seven companies
were investigated in-depth. It was found that, in general, the
risk element of information leaking to competitors was largely
unfounded. It was found in the study, however, that the seven
companies had varying degrees of "openness". For
example, and not surprisingly, the information most frequently
withheld was individual salary information for rank-and-file
employees. All seven companies, however, regularly disclosed
detailed operating data to employees and placed particular
emphasis on numbers that affected incentive compensation.
However, disclosure did not mean that employees received their
own printed copies of reports or had continuous access to
information. Thus "real" open-book management
obviously required broad - but not total - information sharing.
In terms of employees requiring training in understanding
financial reports in order to fully comprehend the "big
picture", the above quoted study found that the companies
in the study group varied in their approach to training. Some
companies found that formal training courses worked the best,
whilst others preferred to incorporate training informally into
the daily activities of open-book management.
The last of the controversial issues is the observation that
'non-financial indicators' are playing a growing role in the
measurement and evaluation of performance against strategic
goals. Many employee incentive schemes are being based on such
measures. This issue leads us to look beyond open-book
management and take a "balanced" view of the
organisation, and simultaneously train employees to understand
both financial, and non-financial measures. This will :
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Empower them to monitor and control the organisation's
activities in a manner measurable against its strategy and
objectives;
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Contribute to the strategic decision making process;
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See how they would be rewarded for the successful implementation
of strategy.
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Balanced Information - Methodology
One of the most commonly used methodologies for developing the
information set and rewards system against the above three
factors is: "to match rewards to the critical success
factors of the business".
The critical success factors of a business are 'the limited
number of areas in which results, if they are satisfactory, will
ensure successful competitive performance'.
The most common
factors cited by executives as being crucial to the success of
their business are :
However, research undertaken in many countries indicates that
most Chief Financial Officers (CFOs) concentrate and provide
only in-depth information on the first of the above critical
success factors, ie. on the firm's cost-structure, or in other
words provide only critical financial information. Further, such
financial numbers are most often reporting past information.
This is the reason why companies implementing open-book
management philosophies concentrate so heavily on financial
indicators, they are the only ones available!
Book Shelf :
Having just finished another Jeffrey Archer novel about a
"penniless" refugee migrant growing rich and famous, I
have been thinking that although someone (or a business) has
little in the way of tangible or financial assets they still
have the potential to achieve big things. The intellectual
capital of a business can be its most valuable asset. An article
in Management Accounting (CIMA) November, 1998 (pp 26-28) by
Rupert Booth discusses the measurement of intellectual capital,
the nature of an organisation's intellectual capital, its
creation and management.
Following an article titled "Would you like your child
to become an accountant?" in the December, 1998 Management
Accounting (CIMA) by Malcolm Hazell (p. 56) which starts
"Do you find letting colleagues know at a party that you
are an accountant is a conversation stopper? …", ICMA's
Malcolm Smith and Susan Briggs have an article in the January,
1999 issue (pp. 28-30) "From bean-counter to action hero:
changing the image of the accountant". The article looks at
the image of accountants portrayed in television, literature and
the movies and some alternatives available to the profession.
Please feel free to share anything that you have found
interesting. You can send your ideas to: Bill Richardson, Dept
of Accounting & Finance, Monash University, PO Box 197,
Caulfield East VIC 3145.
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