As President of CIMA, the Chartered Institute of Management Accountants, George Glass presides over a myriad of training, research and brand-building activities across the globe, including Asia. But that does not mean that he has neglected his day job as Finance Director of UK enterprise UCM Timber Group.
Indeed, if anything, his stint as CIMA president has enriched Glass’s appreciation of what the finance function can achieve and how it can get there. When he hands over the CIMA presidency to Harold Baird sometime in June, Glass will be drawing on global insights gleaned in the past year to continue enhancing financial management at UCM.
CFO Innovation’s Cesar Bacani spoke to Glass in Hong Kong two weeks before the handover to Baird. Excerpts:
Your term as CIMA president is ending. What have you learned about financial management around the world, particularly in Asia? Are accountants in the East more focused on routine accounting work whereas those in the West are doing more value-added services?
You may have a Western multinational operating in Hong Kong, but given that the vast majority of the people there are working within the Eastern culture, the whole place still operates on that basis. You may get more proactive style coming out from the top, but it doesn’t trickle down very far . . . It is just different because of the culture.
So Asian accountants are resisting expectations for them to move beyond routine accounting?
No, I don’t think they’re resisting. I think what it comes down to is that the question is interpreted differently . . . the interpretation of what you mean by ‘strategic thinking.’
The Western interpretation is more proactive that the Eastern reaction, which tends to be more reactive – I will do what I’m asked to. In the West, it is: I’m trying to move on, I want to do the next thing.
But if you [ask]: What do you think you should be doing? Everyone says I want to add value. The question is how do you add value? And that is where it starts to get different, because I think that in the Western model of how you add value, you are encouraged to think outside the box. In the Eastern model, how you add value is without going outside the box.
Is there a case to be made, though, for the finance function to limit what it does to routine accounting work, to compliance and financial reporting? Isn’t that an equally valid model as accounting-plus-business partnering?
No, I don’t think it is. I believe that model [routine accounting work] is fine for standing still. But it does not represent progress.
If you’re going to have successful progress, that comes with good partnership, where you can share ideas, where the complementary components of different discussions will actually produce a better product or better delivery, which obviously will improve your profitability and the long-term future of the organisation.
Do you find that, within the business partnering model, there are different sub-models, so to speak, that apply to Asia, which is different from the West?
I think at the moment, yes. If it’s true business partnering, [the sub-models] are all on a continuum. Some are more sophisticated, some are more open than others, and I think that there are other drivers which affect business partnering.
This is again where the East-West model kicks in a bit, because the Eastern model is probably more gerontocratic. The acknowledgement that age equals experience is something which is much more prevalent in the East. In the West, if anything, there’s a danger that you have the reverse.
If you consider some of the technology companies, their success is based on the fact that they thought about something that no one else has thought of. The visionaries will probably be people who maybe are younger, although there are some older visionaries as well. But part of the development [of that idea] will come from experienced people [dealing with the issue of] how to construct the [needed] infrastructures.
Are you saying that Asians should not be so respectful of age?
The reality is, everybody has a contribution to make . . . Regardless of anything, your background, your age, you have a contribution to make. And that contribution will be different depending on how you got there and how long you’ve been there. Balance is always the issue.
The research [by CIMA] points out the fact that age is one element. There is still this respect for the elder members of the organisation. There should be no problem with that, as long as it’s appropriate.
The other element is ownership of companies. What our research shows is that a very significant proportion of Eastern companies, at least 20%, is owned by the family, however one defines that.
If you look at a lot of Western companies, if you actually look at who owns the company, nobody owns it, effectively. Less than half percent of the company is held by one person. So nobody is interested in the long term future of the company, because if you own half a percent of the shares and the shares go the wrong way, you sell. You don’t try and fix the problem that’s causing it.
I think that questions the whole sustainability model of the business, because in that structure, nobody has an interest in the long-term future of the company.
So in this sense, family ownership in Asia has advantages . . .
One example which one can cite of a very successful family-owned and managed company is [Indian conglomerate] Tata . . . It has always worked on the principle that one person heads the company and the rest of the family can go do what they like, as opposed to the Guinness model, because what happened with Guinness [in the UK] was that every time somebody in the Guinness family died, the shares got divided, to the point where there were not enough family members who have an interest in the success of the business. It just fell to pieces.
Would you say that finance at Tata has become a true business partner?
They are moving well towards it. I had a meeting with the senior finance people in Pune and a couple of guys who had come down from Delhi. And they are very much focused on using the management accountant techniques to build the business partnering activity. So finance function is embedded within the organisation and they are doing more and more of embedding management accountants into the organisation, rather than leaving them sitting in the finance office.
They got project teams and so on with embedded finance people. In the UK, where Tata owns Jaguar and Land Rover, they’re actually committed to building these business partnering teams. They’ve got some great successes as a result. Once you’ve actually put the whole team together, after a while you can’t tell who’s actually doing what.
They were describing how they put a team together to develop a new sound system for Jaguar. They had finance, they had electronics, they had audio engineers, they had the whole lot. And they said after a while, you found they were sitting there arguing about the quality of the sound and you realised the one person who wasn’t contributing was the sound engineer.
But the finance people still report to the CFO?
Yes, you must make sure you maintain that relationship with the CFO. Or else they’ll go native, as we say, and then you’ve got problems.
Finance should not forget transactions and compliance . . .
That’s got to be there, and you have to make sure you maintain that because otherwise you lose integrity. The thing you get away from is the feeling that the accountant is just somebody who always says no. Traditionally that’s what it was.
Recently somebody joined my company as senior salesman. He had for the last 20 years had very bad relations with the finance department. He rang me up, and he said: you know, my understanding of our relationship is we love to hate each other. I said we don’t do it like that here; we actually get on and work together. It took six months to convince him that we were on his side.
Let’s talk about finance at your company, UCM Timber. Is finance a business partner there?
The accountant who looks after the stocks has a very close relationship with all the sales people. Yes, he has to make sure he looks after the finance, but he also [interacts with sales] in making sure they do their share in making sure that we get paid. Credit control is everybody’s job, just as the same as buying is everybody’s job. That’s the sort of message one can put across in a small organisation.
Translating that into a big organisation is very difficult because you can’t have everybody doing everything. What you need to do is everybody understanding where they fit and what they contribute.
Does finance in your company get involved in business-facing activities?
We don’t necessarily go and visit the clients. The thing we do find is that we get to know the key players in the client organisations and the customer organisations very well, because a lot of time is spent on the telephone to them.
The definition of business partnering varies hugely. In some cases it is true partnering. In other occasions it is just a relationship. To me, true business partnering is where you get this merging, and everybody remembers where the responsibilities are, but contributes to the whole thing.
In your company, the same accountant is both business partner and doing transactions and compliance?
Yes, we’re small enough that we don’t split those two functions. The test of compliance in the end is the annual audit. One is attempting to compliance the whole time, but it’s the annual audit which is what tidies up and proves that you are doing it, because the focus has to be day to day on producing the right information to run the business.
The challenge for the finance function is to also do forecasting and analytics and make sure that everything is done efficiently.
That’s a big part of our focus at the moment. I was working with another company when [it was taken over by UCM Timber] 18 months ago. One of the big challenges is to get their systems and procedures, which were sort of unfinished, to a point where we can start to move forward. They were in a situation where their procedures had grown in a disorderly fashion.
In the previous company, when I arrived, it was in a similar state and I spent two years getting it straight. But after two years, it was running itself and I had time to go and do my thing for CIMA. But we’re now in a situation where we’re trying to achieve the same thing in [UCM Timber].
There is a limited number of hours that you can work in a day, so it depends on how fast you can change, but we now are well down the road to making that change. We have now reached the point where we got these little piles of problems, but we have isolated the piles and we’re now working our way through them.
Already the monthly closing is a lot quicker than it was. In the old system, some of the processes weren’t automated, and therefore it took three days to do something that we can now do at the press of a button.
The idea being to make transactions and compliance as efficient as possible, so finance will have more time for analytics and strategy and business partnering.
Yes, but first you have to make sure the whole of your ledger is working properly. A lot of the work we did in the audit this year was to show where compliance was complete and where compliance needed work.
A big chunk of the process is handling invoicing, handling all the transaction that you have going through the system. Traditionally people used to hand-write contracts. They now batch the contracts into a computer system and once the contracts are in then they then start the invoices through.
It’s made the finance function’s life much easier because, instead of having to handle all this [handwritten] stuff, every invoice that they put in just sits in batch and waits until we’re ready for it. And we then clear everything through.
And the system helps in analytics as well because all the information is in there?
Actually getting analytics to work is an interesting challenge because nobody’s been used to having them. If you don’t know how to ask the questions it’s very difficult to formulate the answers. So one of the things we’ve had to do in structuring the system is to try and guess what the questions would be, and then write the reports to deliver.
Did you meet resistance in pushing through with these changes?
There is resistance. I think the best way to overcome it is training. A couple of the staff started off with resisting, but the reason was because they were used to [doing things] in a different way. Also they didn’t actually understand what they were doing. They did it because they always did it.
Changing the system means changing the system, but also making sure that staff understand why they’re doing [the things that they do]. Once you understand why you’re doing [something], you’re actually going to ask the right questions.
The evidence of success on this is, we’re getting much better questions. They put the numbers in, and they have much better analysis when there’s something’s wrong. Before, it was almost blind – I put it there because I’ve always put it there.
We were talking about how finance should think out of the box. It seems that finance at UCM did not even know where the box was.
They certainly didn’t know ‘why’ the box is. I think the ‘why’ is more important, because they’re doing something without knowing why they’re doing it.
Interestingly enough, the thing which the managing director said to me was that you had to keep reminding people to do the same thing every month. I said to him, if you can explain why you’re doing it, they’re probably remember to do it.
My associate, Simon, is one of those people who only do something when they understand it. He’s very good at explaining it and that I think has done a huge amount to encourage this question because he tells the [finance staff], if you don’t understand, then ask.
So now that finance staff knows the ‘why’ of it, what’s next at UCM?
The next piece, other than what is the next step in the evolution of the organisation in terms of systems and structures and actually delivering, is to get the accounting staff to think outside the immediate boundaries.
A very important part to this is not feeling threatened when somebody says something that you think is your territory. That takes a long time to develop. The first reaction is to be defensive and say: No, this is mine; you’re not going near it.
When I first joined the company I experienced a lot of that. The trick is to find out the [pain] points of people. If they realise that you can help solve that problem, you will then have credibility.
So people skills are also important.
Soft skills are the things which we keep banging on about. They are becoming more and more important because the more technology you’re applying, the more routine stuff happens by itself. You’ve got to be able to relate to people. As I say, it’s talking to people in non-technical terms. There are soft skills, the ability to get through to people and to influence them. And the key to influencing somebody is to do it without their realising you’re doing it.