VOL 1 ISSUE 6 NOV/DEC 2009

Performance targets can be defined as ‘the objects or aims of managerial action’ or as ‘borderlines that differentiate success from failure’. Organisations mostly set targets at high levels to stretch performance, but they should always be perceived as achievable for the employees to truly accept them. Although most organisations use performance targets to influence the behaviour of their employees, the results organisations obtain are not always the ones expected.

Research funded by CIMA and conducted by the Centre for Business Performance at the Cranfield School of Management has developed a new framework ‘Cranfield target setting wheel’ to support organisations in the process of setting targets. This research is conducted predominantly on a sales environment. The study highlights that new selling environments require innovative ways of measuring performance, setting targets and designing incentive plans.

Read more on ‘The impact of performance targets on behaviour: a close look at sales force contexts’

Last but not least, my sincere appreciation goes to the contributors of the sixth issue of The CIMA Edge. As I always say, CIMA members and partners are cordially invited to contribute articles to future issues of The CIMA Edge.

Nilushika Gunasekera Technical Manager, CIMA Sri Lanka Division

News and events

Winners lead the way at the CIMA Annual Awards 2009 held in London.

Sri Lanka

- Hasitha Premaratne of Wisdom Business Academy was awarded 'Tutor of the year' and M.M.M. Tariq of Academy of Management Education was highly commended at the CIMA Annual Awards.

- Competing for the 'Finance Team of the year' award, at the CIMA Annual Awards 2009 CD Finance team of Unilever Sri Lanka was highly commended for their successful application of management accounting principles.

Upcoming events: - CIMA Business Brief:'Savings and investments’ by Mangala Boyagoda

20 January 2010 | 6.00 to 7.30pm

- CIMA Mastercourse: ‘Discover the power within you’ by Mahesh Jayasinghe

9 February 2010 | 8.30am to 4.00pm

Past events: - CIMA Technical Symposium 2009 was held

on 3 December 2009, at Cinnamon Lakeside Colombo on the topical theme 'Reshape your business' - provoking thoughts on business crucial areas such as enterprise governance, sustainability, shareholder value creation, business intelligence, strategic execution, and performance measurements.

Middle East

CIMA President outlines need for finance transformation across the Middle East

CONTENTS

1 Enterprise

governance - restoring boardroom leadership

2 Creativity and

innovation (part two)

3 The emerging role

of human resource professionals in Sri Lanka: an anatomy

4 ‘Quote: unquote’

5 Accounting for

climate change

Contents: feature articles

Enterprise governance - restoring boardroom leadership by Gillian Lees

Recent turbulent events have put boards under even greater scrutiny. The board effectiveness wheel provides a useful starting point from which any board can assess areas where they need to improve.

Creativity and innovation (part two) by Anthony Jayaranjan

A positive outlook reinforced with self affirmation will create in us a positive mindset. Linking this with the requisite skills that we could easily acquire with application, together with our knowledge, will unleash the creativity and innovation within us.

The emerging role of human resource professionals in Sri Lanka: an anatomy Many business leaders have testified that people are their strongest asset. People alone bring life to the corporate strategies which ultimately create value to the business. Therefore, managing human resource is a skill to be acquired across the board by managers of varying disciplines.

‘Quote: unquote’ 'Difficulties mastered are opportunities won' Winston Churchill

Accounting for climate change – role of management accountants in helping organisations manage and mitigate climate change Management accountants should play a pivotal role in driving the organisation’s sustainability and climate change agenda.

CIMA Sri Lanka Division

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Enterprise governance - restoring boardroom leadership by Gillian Lees

Gillian Lees MA (Oxon), Thought Leadership Specialist, Profile and Communications, CIMA has been working on corporate governance issues for over ten years. She was heavily involved in the IFAC/CIMA Enterprise Governance project as well as CIMA ’s initiative to develop the CIMA Strategic Scorecard

TM. She has written articles in numerous publications and has presented widely on

enterprise governance and the scorecard. She is currently developing CIMA’s thinking on how organisational boards can engage in strategy more effectively, particularly in the context of a downturn. Gillian has a background in banking, having worked at the NatWest Bank and the Bank of England.

The board effectiveness wheel is divided into eight segments which fall under one of two broad categories as follows: people and behavioural factors

supporting frameworks and perspectives.

Each segment is connected with all the others – so for example, the right approach to reward or remuneration depends on having a high degree of risk awareness. Similarly, it is very difficult to have an effective challenge culture without the underpinnings of an ethical culture built on mutual respect together with high-quality information about the business to support the challenge! Some of the segments have already received extensive attention in governance development, for example, codifying the roles and responsibilities of the board and its committees. What we are seeing now in the light of recent events is an acceptance that structures and processes, while useful, will only get an organisation so far – behavioural issues are of fundamental importance. That said, it can be hard to draw a line between structural and cultural factors. For example, codifying good practice can provide a catalyst in setting cultural change in motion. But let’s now have a brief look at all the key components of board effectiveness.

The paper presented by Gillian Lees at the CIMA Technical Symposium 2009 Introduction Recent turbulent conditions in the world’s economic and financial markets have thrown the spotlight on corporate governance again. While there are many contributory factors to the crisis, one key theme seems to crop-up time and time again – that is, the ability of boards or equivalent governing bodies of organisations to oversee strategy and risk effectively. For example, the President of the International Federation of Accountants (IFAC) has pointed out that ‘regardless of who is to blame, the crisis was unquestionably exacerbated by corporate governance failures’. He mentions specifically a lack of proper risk management processes as well as failings in the systems of governance that ‘do not seem to provide adequately for challenging management’s risky strategies’. The Walker review of governance in the banking industry in the UK – which is also being keenly examined across the world –places considerable emphasis on the board’s role in strategy and risk. For example, Walker points out that when the board is discussing major strategic and risk issues, it is essential that there is a disciplined process of challenge. He also recommends that ‘board-level engagement in the high-level risk process should be materially increased’ with particular focus on the entity’s risk appetite and tolerance. Another related area is stress testing – boards are urged to ensure that they ‘understand the circumstances under which the entity would fail and be satisfied with the level of risk mitigation that is built in’. While the Walker Review is aimed at the banking sector, these specific recommendations are good advice for any organisation. These conclusions are consistent with CIMA’s enterprise governance philosophy which it has promoted in recent years. This emphasises the need for organisations to balance both conformance and performance issues. So while compliance with legislation and standards is crucial, organisations must never lose sight of the need to ensure long-term sustainable success through effective performance. Following our original Enterprise Governance case study research following earlier corporate failures such as Enron and WorldCom, we too identified that board oversight of strategy and risk were key areas that required attention. It seems a shame that these lessons were not taken on board fully and that it has taken further major corporate crises to reinforce the need to improve practice in these areas. So what is a board to do? How can directors become more effective particularly in the way that they oversee strategy and risk? What we do know is that board structures and governance codes on their own are not sufficient. It is how these codes are applied in practice that matters – and for that, you need the right organisational culture and behaviours. The key ingredients towards restoring boardroom leadership can be illustrated in the following diagram:

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Behaviours and perspectives Board composition – a good board should have the right people

on it. But the key issue is that the board should work well together as an effective team. So it is quite possible to have a board member who is time poor but experience rich, for example – but as an entity, the board is right for the business. This is why we think it’s unwise to be excessively prescriptive about time requirements for example.

Right relations – this is a term borrowed from the

psychotherapeutic field, but it is fundamental in business. Once the right people are in place, it is important to consider how board members behave to each other and to its executive team. The board needs to set the right tone from the top by behaving in a professional manner. It should model ethical behaviour by articulating and living out the organisation’s values. The board and executive management need to treat each other with respect and appreciate the contribution that each seeks to make. Interestingly enough, our own experience in talking to senior CIMA members who are CFOs or CEOs of major listed companies is that they will emphasise cultural, leadership and behavioural issues over any other.

Challenge culture – the board needs to create a culture in which

constructive challenge can be tolerated and encouraged. In view of the importance that is being given to the need for better challenge, we explore this in more detail below.

Talent development and reward – this considers longer-term

talent and succession planning, both at board and executive management level as well as how people are rewarded so as to promote the right behaviours. We have found that companies that practise good succession planning tend to be effective generally.

Supporting frameworks and processes Roles and responsibilities – this covers what we would regard

as the nuts and bolts of governance. It sets out clear definitions of the roles of all the key players such as the chairman and the non-executive directors and recommends appropriate structures such as boards and board committees. This is an area that is well covered in corporate governance codes of best practice.

Information and reporting – what information does the board need and how does effective reporting drive good governance? Here is where the chief financial officer has a crucial role to play.

Agendas, frameworks and tools – boards need to use their time in a constructive and disciplined way so that they can consider strategic issues sufficiently. This looks at how boards can structure their agendas and develop robust frameworks to support them in this task. One example of such a tool is the CIMA Strategic ScorecardTM which helps boards to focus on all the key areas of strategy effectively – in particular, the organisation’s strategic position, possible strategic options, strategic implementation and strategic risks.

Risk awareness – this is about ensuring that the board understands risk at the right level, integrating it into strategic thinking and demonstrating a rigorous and consistent approach throughout the business cycle. The crucial point here is the quality of conversation that the board has about risk rather than whether ticking all the boxes of a risk framework.

Let’s now focus on one specific segment to explore how a board might enhance its effectiveness in practice.

Creating a challenge culture If boards are being urged to do one thing, it is to create a culture of effective challenge. The argument is that better decisions are reached when they have been properly debated and subject to appropriate scrutiny. The worst insult that can be hurled at a board is that it is guilty of ‘groupthink’. Many commentators have suggested that this was a major problem that contributed to the crisis in that directors failed to ask the tough questions. It is also suggested that chief executives have such control over the workings of the board – in particular, the flow of information to it – that board meetings are basically stage managed and non-executive directors find it hard to ask awkward questions without the fear of looking stupid. One prime example of where failure to challenge effectively is thought to have been a problem is the now notorious decision of the UK based Royal Bank of Scotland (RBS) to acquire the Dutch bank, ABN Amro. The upshot has been disastrous – RBS came perilously close to total collapse owing to the financial storms that raged a year ago and had to be rescued by the UK government. It is all very well to say you need a challenge culture, but how can you create one? As the board effectiveness wheel implies, you certainly need the following ingredients to encourage the right climate. High-quality information.

Diversity in terms of skills, perspectives and experience.

Mutual respect between players – there needs to be an

understanding and acceptance on both sides as to the need for challenge within an overall climate of cooperation. It is important that both non-executive and executive directors feel that the process adds value and helps to ensure the organisation’s long-term sustainability.

Robust processes and frameworks to support strategic

development. It is difficult, if not impossible to challenge strategy, for example, if the board agenda does not build in sufficient time for discussion on strategic matters. Boards may also find other devices useful such as designating a devil’s advocate for a discussion on, say, a major acquisition.

So even if we all agree that a healthy challenge culture is a ‘good thing’, it is not easy to pin down. Here are some questions to consider: What does constructive challenge actually look like in practice?

How do you know when you have done it ‘properly’ or ‘well’? In other words, how can you assess its effectiveness?

Can you point to situations where an effective challenge saved the day and stopped the wrong course of action?

How much time should you spend on challenging proposals? At what point does it become counter-productive?

And how do you demonstrate to your stakeholders that you have an effective challenge culture?

Recent turbulent events have put boards under even greater scrutiny. They are going to have to improve their governance practice significantly by demonstrating consistently strong leadership and high ethical standards. The board effectiveness wheel provides a useful starting point from which any board can assess areas where they need to improve.

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Creativity and innovation (part two) by Anthony Jayaranjan

5. Seeing what others don’t see

‘The real voyage of discovery consists not in seeking new lands but in seeing with new eyes.’ Marcel Proust. When we look at problems through different perspectives and levels of abstraction and rephrase the questions to be addressed we generate more possibilities to be looked at and come up with creative and innovative solutions. What does it look like?

You will see a frog. If you tilt your head to the right you will see the head of a horse. The way in which we look at something will give us a different perspective. The paralysed man who invented the motorised wheel chair defined his problem as ‘How can I occupy my time while lying in bed?’ rather than ‘How can I get out of bed and move around the house?’ Costs were rising in 1950’s and delivery times for sea freight were getting longer. Shipping industry experts downsized the crew and built fuel efficient ships. Costs still kept rising, but the industry was focused on reducing costs related to ships while at sea and while working. A ship is a fixed asset of significant value and the biggest cost for such capital equipment is the cost of not working. An outsider looked at the problem from a higher level of abstraction to ‘In what ways can the shipping industry reduce costs?’ This allowed the shipping companies to consider all aspects of shipping, including loading and stowing.

The innovation that saved the industry was to separate loading from stowing, by doing the loading on land, before the ship berths at the port. It is quicker to put-on and take-off preloaded freight. The answer was containerised cargo. Port time has been reduced to one fourth of the earlier loading time. Freighter traffic has increased 500% in the last thirty years, and costs down by 60%. Widening the problem by taking it to a higher level made it possible for the shipping companies to challenge assumptions, generate new perspectives, and discover a new approach to the problem. During the implementation of employee suggestion scheme at Mazda there was a significant increase in the number of responses received when the question was rephrased to ‘How can we make your job easy?’ from ‘How to become more productive?’ Galileo, da Vinci, Darwin, Einstein, and Feynman made their thoughts visible with diagrams and drawings while their contemporaries used conventional verbal and mathematical approaches. This technique enabled them to easily clarify their ideas and convey it to others. 6. Thinking of what others are not thinking

We can adapt any of the following techniques to think innovatively. 6.1 More the better Thomas Edison held 1,093 patents. Bach wrote a cantata every week, even when he was sick or exhausted. Mozart produced more than 600 pieces of music. Einstein is best known for his paper on relativity, but he published 248 other papers. In a study of 2,036 scientists throughout history, Dean Kean Simonton of the University of California, found that the most respected produced not only great works, but also more of not so great works. Out of their massive quantity of work they also brought forth work of quality. 6.2 Simple combination of ideas and things In 1448 Johannes Gutenberg, combined the mechanisms for pressing wine and punching coins, and developed movable type that made volume printing possible. Paul Galvin of Motorola introduced radios defined as home sets into cars against conventional wisdom (Full Leadership Development – Bruce J. Avolio. 1999. ISBN 0761906029). Consider the Walkman radio. Sony engineers tried to design a small, portable stereo tape recorder, but they failed. They ended up with a small stereo tape player that couldn't record. They gave up on the project and shelved it. One day Masaru Iuka, honorary chairman of Sony, discovered this failed product and decided to look for its potential. He remembered an entirely different project at Sony where, an engineer was working to develop lightweight portable headphones, and thought ‘What if you combine the headphones with the tape player and leave out the recorder function altogether?’ Iuka was combining functions. The idea that tape players also record was the conventional wisdom that no one had considered reversing it. Even after Iuka made his creative association, no one at Sony believed they could market it. Iuka was not discouraged and plowed ahead with what he called a new concept in entertainment.

Anthony is a fellow member of CIMA and ICASL. He was the senior vice president, head of learning and development at John Keells Holdings PLC until August 2009. He accounts for 36 years of commercial exposure inclusive of board level experience across several industries. He was formally the group finance director of Pership Group of Companies, and was the executive director/deputy CEO of Shaw Wallace and Hedges ltd. His contributions have been published in CIMA, ICASL, FCCISL and IPMA USA finance and management journals.

The first part of this article was published in the previous issue of The CIMA Edge

Iuka took a failed idea and by combining, eliminating, and reversing, found the hidden potential and created a new product. The Walkman radio became Sony's leading selling electronic product of all time and introduced all of us to the ‘headphone culture’.

We see a number of examples of such ideas in our day-to-day lives. Few such examples are:

Trolley + suitcase > suitcase with wheels

Motor + bicycle > motor cycle

Copier + telephone > a fax machine

Bell + clock > alarm clock

Camera + Clock + Internet access + phone book > mobile

phone

Jeep + car > SUV

Many are aware about the equation E = mc2. However, Einstein

neither invented the concepts of energy, mass, nor speed of light. Rather, by combining these concepts in an unusual way, he was able to look at the same world as everyone else, and see something different. The laws of heredity on which the modern science of genetics is based are the results of Gregor Mendel who combined mathematics and biology to create a new science - genetics. 6.3. Finding what you are not looking for Alexander Fleming was not the first physician to notice the mould formed on an exposed culture while studying deadly bacteria. A less gifted physician would have ignored this as irrelevant but Fleming had the wisdom to note this and explored if it had potential. This observation led to discovery of penicillin which has saved millions of lives. Other serendipitous discoveries include:

John Wesley Hyatt - Plastic

Bell Laboratories - Junction transistors

Ray Plunkett - Teflon

Charles Goodyear - Vulcanisation

6.4 Connecting the unconnected In the inner ear the ear drum vibrates and that is translated into sound. Graham Bell invented the loudspeaker where the diaphragm/cone is made to vibrate and make sound.

In 1948, George de Mestral decided to take his dog for a walk in the mountains. When he returned home the dog was covered with burrs. He inspected one of the many burrs that stuck to his pants. He saw all the small flexible hooks that enabled the seed-bearing burr to cling to the tiny loops in the fabric. George de Mestral looked at nature and replicated it by making suitable machinery to produce Velcro.

Desert sidewinder snakes that get their prey by sensing heat was the inspiration for the development of air to air heat seeking sidewinder missiles by United States, the Department of Defence.

Similar connections were made by the following instances:

Leonardo da Vinci - ripples caused by a stone hitting water

and the way sound waves travelled.

Samuel Morse - tired horses being exchanged at relay

stations and boosting of telegraphic signals.

Toyota Motors – Replenishment of goods on the shelves in

American Supermarkets and Just in Time for car parts in

production.

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6.6 Reverse thinking During World War II, Henry Kaiser found an efficient way for the construction of ships. His idea was to build whole sections upside down. This enabled the welders to work in a more comfortable position instead of working overhead.

One day, Cecil Booth held a handkerchief to his mouth, leaned close to a velvet couch and breathed in. He noticed dirt on the other side of the cloth. Later he developed the vacuum cleaner (1901). Up to that point, cleaning a room mostly meant using coal powered fans to blow dirt in all directions, using pressure as opposed to suction.

Vast centralised power plants distributed power over very long distances. To reduce distribution losses there is a boom underway in micro electric power generation, in areas distant to large power plants. Further examples include:

Henry Ford – bring people to work bring work to people –

assembly line.

Alfred Sloan of GM– you can drive before you pay –

installment buying.

Michael Cullen – shop assistants selling customers

picking up what they want and paying the cashier – super

markets.

Louis Pasteur – infecting with the disease to prevent the

disease - immunology.

7. Developing a creative mindset

Fears, uncertainties, and doubts prevent us from having a creative mindset. We have to acknowledge these negative thoughts and then replace them with positive thoughts. Negative ideas such as, ‘Presenting my idea is of no use’, ‘Management is far experienced than I am’ and ‘They may have considered this before’ should be replaced with positive thoughts such as, ‘What if I owned the company, wouldn’t I want all the ideas I could get?’ etc.

Often we do not express our ideas due to fear of being considered unconventional, being ridiculed and rejected. These fears should be replaced with positive thoughts. Further, even if an idea is rejected, people tend to respect those who are constantly trying to improve the current position. When we have this positive thought in our mind, we will be more forthcoming. When our last idea fails and someone else’s succeeds, we are afraid of taking another chance. However, we could restate it positively by convincing ourselves that we may be exaggerating other person’s success and our failure.

Edison’s only road to success was through failure, and the belief that the only shot he will definitely miss is the one he never tried. Now, when we are in this positive frame of mind it is very likely that we will try than not try! Writing down all our self-doubting thoughts and refuting them with positive statements will give us the confidence to be creative and innovative in our ways.

Therefore, record all things we like about ourselves: qualities, characteristics, traits, and successes we have had in life. Keep adding to the list as we think of more and accomplish more.

Self affirmation by acknowledging ourselves, our abilities, and our own unique qualities will encourage us to get moving. A positive outlook reinforced with self affirmation will create in us a positive mindset. Link this with the requisite skills (set out in 5 and 6 above) that we could easily acquire with application, together with our knowledge to unleash the creativity and innovation within us.

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The emerging role of human resource professionals in Sri Lanka: an anatomy

Introduction

Many business leaders have testified that people are their strongest assets. People alone bring life to the corporate strategies which ultimately create value to the business. Therefore, managing human resource is a skill to be acquired across the board by managers of varying disciplines.

Insights from a HR professional

Sunil, having started his career with hospitality industry in 1970s and then shifted gradually to banking, diversified business/conglomerates, aviation, offshore outsourcing and again back to diversified business/conglomerates where he is today. The total span of his career covers experience both in Sri Lanka and overseas.

Sunil stated that all these changes in his career across different industries earned him the much needed maturity and confidence to deal with 'unusual circumstances' as a HR manager. Every HR manager, like professionals in other practices, deals with two types of work, i.e. usual operations and unusual operations. The former is repetitive and most times monotonous which can be handled with the support of standards, policies and guidelines set in the organisation. Sometimes there’s not much of a challenge embodied into managing these monotonous operations.

What is most challenging is handling unusual operations as they are characterised by unpredictability where you may not receive any support from HR manuals or handbooks in handling such operations. He recalls the most critical experience in handling unusual operations which occurred at his previous place of employment, it was a catastrophic situation in June 2001 which has never been felt in such a higher magnitude in the history of the company. As a result, customers, employees, management and fellow countrymen suffered from this incident. There were many sleepless nights for him and his colleagues, not only in HR, but also in other departments handling core and support functions.

Two major lessons for building a career as a HR professional; the indispensability of exercising emotional intelligence coupled with interpersonal relationships and then ability to grasp the business’s very past. It is likely to lose human touch when dealing with totally unforeseen situations or end-up with strong emotions in the work context. The experience gathered across industries built-up the ability to be unruffled during stressful situations and to be socially and technically competent in managing situations in full diversity. The workforce varies between organisations in terms of gender composition, age distribution, educational standards, academic and professional qualifications, and content of work. Certainly a HR manager’s skill is getting along with people from many different walks in life and increasing their level of tolerance of diversity.

Evolution of HR profession in Sri Lanka

Referring to the historical evolution of HR in Sri Lankan context, HR is gaining maturity for playing the role of business partner. If we go back to 1960’s to 1980’s, the role of HR revolved around transactional operations with an administrative orientation. Then functions of HR, i.e. recruitment, selection and hiring, payroll, discipline, grievance handling, compliance, record keeping and employee relations were considered in isolation. Human resource development wasn’t paid much attention and HR established its identity in organisations as a back office function. Notably, ex-servicemen and lawyers had a demand for employment as personnel managers in organisations, be they in public or private sectors. Over decades, this scenario has changed witnessing professionally qualified occupying HR positions owing to the expansion of HR education at universities and professional institutions in the country. Today, most of Sri Lankan organisations, particularly the corporate sector have shown a gradual shift or transition from personnel to human resource leadership. This shift has now started earning the recognition for HR where hiring right people and developing them through a planned approach are considered as the source of competitive advantage. Though the pace of transformation is slow, HR departments in many large organisations have revisited their role and reoriented it to be a partner to business, supporting business goal achievement. HR is maturing to the level of playing the role of business partner from being a mere implementer of the strategy in the past to both the strategy maker and implementer today. In this context, many organisations have structured in such a way where head of HR plays a pivotal role within the senior management team entrusted in building HR strategy aligned to business goals. All HR plans are required to align with the corporate business plan and sector business plan, depending on the organisational design. In light of these practices, HR is developing steadily its identity as a front-end function. Managing HR function, require three key competencies, namely technical know-how, experience and maturity to implement HR functions by applying emotional intelligence, and thorough knowledge of HR technical supply chain. An important point to note here is that HR people need to be technically competent. The evidence from the industry shows that owing to technical competence of people occupying HR roles today, they have been able to upgrade HR in their organisations. But, unfortunately, there are occasions where this phenomenon occurs based on the individual ability of the incumbent of that role rather than the organisation’s necessity to have that role. Professional competence of the person heading HR and his/her team to get the acceptance of others in the organisation is crucial for HR to play the role of business partner.

This feature focus on capturing career related experience of professionals in HR field in understanding ground realities of managing human resources in organisations in Sri Lanka and abroad. This article is based on an interview of Sunil Dissanayake, Head - Group Human Resources of Hayleys Group cum member of the Group Management Committee. The interview was conducted and documented by Dr Saman Dassanayaka, Senior Lecturer in Human Resources Management, Faculty of Management and Finance, University of Colombo.

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‘Quote: unquote’ 'Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, vision cleared, ambition inspired, and success achieved' Helen Keller

'You've got to think about big things while you're doing small things, so that all the small things go in the right direction' Alvin Toffler

'Nothing can be more hurtful to the service, than the neglect of discipline; for that discipline, more than numbers, gives one army the superiority over another' George Washington

'When you come to the end of your rope, tie a knot and hang on' Franklin D. Roosevelt

'The highest form of ignorance is when you reject something you don't know anything about' Wayne Dyer

'When you start out in a team, you have to get the teamwork going and then you get something back' Michael Schumacher

'It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently' Warren Buffett

'The truth is that our finest moments are most likely to occur when we are feeling deeply uncomfortable, unhappy, or unfulfilled. For it is only in such moments, propelled by our discomfort, that we are likely to step out of our ruts and start searching for different ways or truer answers' M. Scott Peck

'Difficulties mastered are opportunities won' Winston Churchill

'Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall' Stephen Covey

'The best executive is the one who has sense enough to pick good men to do what he wants done and self-restraint to keep from meddling with them while they do it' Theodore Roosevelt

'There is always a better strategy than the one you have; you just haven't thought of it yet' Sir Brian Pitman

‘The roots of true achievement lie in the will to become the best that you can become.’

Harold Taylor

Another point which captures the attention in this context is that when a HR professional makes mobility across industries, or organisations within the same industry, he/she needs to exercise strong emotional intelligence coupled with interpersonal relationships and the ability to grasp the business very fast.

HR is a line function, be it in manufacturing, service, public sector, private sector or non-governmental organisations, where all line managers are people managers who can act as an effective delivery point of all HR policies and practices of an organisation. It is line managers who interact closely with people, for example, employees at plant/floor level act as a people’s manager where they can develop rapport that is mutually beneficial in delivering HR services.

The active involvement of line managers are indispensable in delivering certain HR services, for instance the contribution of line managers in recruitment and selection, performance management, learning and development is essential.

People working in HR departments discharge their duties and responsibilities as catalyst or facilitators who have specialised expertise in HR. This was the fact emphasised earlier as technical competence. Line managers are experts in their own domain of work, not in HR. Therefore it is the role of HR departments to share its technical competence with line managers and train them systematically in delivering HR functions depending on the size of the workforce they supervise which is a part of partnership building between HR department and line managers.

On top of all these initiatives, HR departments should recognise explicitly line managers as people managers and then take the measures to build competencies in those line managers to manage their people with the support of HR department.

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Accounting for climate change – role of management accountants in helping organisations manage and mitigate climate change

Introduction

'Climate change' the most conversed global issue of the recent past drew much attention from the global leaders at the Climate Change Conference 2009 in Copenhagen, Denmark. The world leaders pledged once again to reboost the climate momentum and incorporate actions into their national agendas in tackling climate change. As national governments design policies to trim down climate change, the role and contribution of businesses in addressing climate change becomes increasingly important.

Stern Report 2006 stated that climate change poses major risks to the global economy and it could possibly shrink output by 20%. A management accountant can play a key role in driving sustainable strategic and operational decisions. However, CIMA research revealed that most finance teams engaged in climate change related activities mostly on an ad hoc basis rather than on a sustainable long-term plan. Without the rigour and commercial acumen of the finance function, it might be impossible to embed sustainability into normal business life. Not having them involved at the key decision making stages could result in higher costs, lost opportunities or reduced competitiveness.

Incorporating climate change into the strategic business agenda

Research by Carbon Trust and McKinsey proposed that tackling climate change could create opportunities for a company to increase its value by 80% while poorly positioning on climate change could destroy its value by 65%.

CIMA’s international survey conducted among 900 finance and sustainability professionals, one in five respondents admitted that climate change is not in their organisations agenda while 63% agreed that their organisation could do better in reducing environmental impact.

Barriers to change

The key reason identified as to why finance professionals aren’t more involved in climate change management in many organisations, and why more organisations aren’t taking concrete steps to manage, mitigate and adapt to climate change were as follows. Most managers don’t consider the matter is worthy of attention, where they are more focused on their day-to-day role and consider sustainability a side issue. With no short-term financial benefits, organisations overlooked sustainability initiatives unless it had a legal connotation and compliance association. There are challenges in identifying a globally recognised reporting framework and getting the correct measurements in place for the key contributors. In most organisations, capital investment activities are given priority as oppose to cost saving initiatives where sustainability initiatives are overlooked. The high cost associated with these initiatives also discouraged organisations adopting projects and policies. Also there is not enough pressure from external forces for most businesses. Customers are interested in purchasing the product at a lower price where it is questionable if organisations can involve themselves and still remain competitive especially during the economic meltdown. Also with already full work role, finance teams lack time to involve themselves in climate change initiatives. In addition, reasons such as lack of specialist knowledge and skills, and among sustainability professionals, there was a sense that finance people are too bound up with budgets and targets to adapt to long-term sustainability planning were identified.

Management accountant’s role At the moment, finance has a formal role in developing, implementing, monitoring and/or reporting on climate change in around a third of organisations. The CIMA survey showed that management accountants are typically employed in fairly traditional roles around climate change, whereas they could add greater value in to other cutting-edge areas such as carbon footprint calculations, tracking climate change KPI’s etc.

• Management information There will continue to be conflicting methodologies for measurement, and differing requirements for disclosure, of environmental impact. Management accountants specialise in the provision of accurate, consistent, comparable and meaningful intelligence to their businesses, stakeholders, regulators and pressure groups.

• Business forecasting and planning Preparation for the move to a low carbon economy is essential. The pace of change, and the degree of uncertainty around the decisions of policy-makers makes forecasting and scenario planning even more critical.

• Cash flow and financial planning Management accountants are the best placed to advise the best use of cash, when grants or collaborative grants options are available.

• Performance measurements 'If you don’t measure it, you can’t manage it' where better accuracy that comes with measuring drives away debate, if energy management needs improvement. Benchmarking industry energy and carbon reduction tables with organisation’s results would show how well the organisation is performing.

• Investment appraisal This tool is most likely to commonly bring the management accountant to the table on climate change. They could provide long-term financial payoffs for incorporating environmental costs.

• Value based management This would allow accountants to measure value, to analyse if there is value at risk or a value creation opportunity where a proper evaluation will help the organisation differentiate between a sensible long-term investment and money wasting activity.

These are few of many contributions that a management accountant can make to drive the climate change agenda in the organisation, and the time is now to make that initiative.

This article is based on a recent CIMA report published to advocate finance professionals to take ownership of their organisation’s climate change initiatives. Read the full report entitled Accounting for climate change

Chartered Institute of Management Accountants

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T. +94 (0) 11 250 3880

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