The Future of Learning for the CFO of the Future

Kenneth Witt, CPA, CGMA

Technical Manager,

AICPA Business, Industry & Government Team

Texas Society of CPAs

Accounting Education Conference

October, 24-25, 2014

Hilton Austin Airport

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Kenneth W. Witt, CPA, CGMA AICPA Technical Manager

Ken serves as Technical Manager in the Business, Industry and Government team at the American Institute of Certified Public Accountants.

Ken is the staff liaison to the Business & Industry Executive Committee which provides insight and guidance on professional issues and trends relevant to AICPA’s members working in business and industry.

He is especially involved in thought leadership and professional development activities for the Chartered Global Management Accountant (CGMA) designation.

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What do employers need?

Pathways Commission

Education

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The future business paradigm?

Complexity and Competencies

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Complexity is increasing

AICPA Business and Industry Economic Outlook Survey Q2 2014

CPA decision makers (primarily CFOs, CEOs and Controllers)

Given the changing US and global economic and regulatory environment…

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…how would you gauge the change in the level of general business complexity that you and your business have experienced over the past 3 years?

Significantly

more

complex

30%

Moderately

more

complex

38%

Slightly

more

complex

25%

No change

in

complexity

7%

Slightly less

complex

0%

More Complex = 93%

9 9 9

Significantly

more

complex

32%

Moderately

more

complex

40%

Slightly

more

complex

22%

No change

in

complexity

5%

Slightly less

complex

1%

Even More Complex = 96%

…looking ahead 3 years, how do you see the level of general business complexity changing?

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And… The role of finance is changing

In addition to traditional financial accounting and reporting…

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…what areas have become your focus?

39%

41%

43%

44%

46%

55%

58%

67%

0% 10% 20% 30% 40% 50% 60% 70%

Human Resources

Pricing and Cost Analysis

Tax Strategy and Planning

Legal and Compliance

Management/Governance

Acctg Information Systems

Strategic Business Planning

Risk Management and I/C

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IBMs Chief Future Officer

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CFOs say that almost everything they do is now more important

Measure/monitor business performance

Provide inputs into enterprise strategy

Develop talent in the finance organization

Optimize planning, budgeting and forecasting

Drive enterprise cost reduction

Support/manage/mitigate enterprise risk

Drive integration of information

Execute continuous process improvements

Strengthen compliance programs/controls

Manage investor/stakeholder relations

Process transactions

Importance 2010 Importance 2013

IBM Global C-Suite Study 2013

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CFO ROLE IN CHALLENGING AND

SUPPORTING STRATEGIC DECISION-MAKING HAS

INCREASED

75%

CFO INFLUENCE OVER EXECUTING BUSINESS

TRANSFORMATION INITIATIVES HAS

GROWN

70%

CFO – The Architect of Business Value

Accenture 2014 High Performance Finance Study

Delivering Growth and Managing Complexity

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Accenture Study - high-level findings

• Significant progress in ability to meet challenge of permanent volatility

Managing Volatility

• High performing businesses find opportunities – optimizing, streamlining, simplifying

Navigating Complexity

• Cost control no longer primary emphasis – investment in growth, building value

CFO as Architect of

Business Value

• Unique position of CFO a clear opportunity – cloud, mobility, big data, analytics…

Rise of Digital on CFO Agenda

Accenture 2014 High Performance Finance Study

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High-performance businesses have…

Accenture 2014 High Performance Finance Study

More Influential CFOs

• Influence in Key Strategic Activities

• High Levels of Satisfaction

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Implications for the Future – The Evolving CFO Agenda

Align Strategy

Prioritize Scarce

Resources

Evaluate Risks

Transform Operating

Models

Agility & Flexibility

Scalability

Manage Performance

Forward Looking

Holistic

Embrace Digital

“Speak Digital”

Evaluate ROI

Develop Finance

Capability

Geography /Industry

Data Analysis

Accenture 2014 High Performance Finance Study

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Embracing Digital…

Collecting Data

Collecting Data

Maintaining Spreadsheets

Maintaining Spreadsheets

Other Activities

Performing Analysis

Developing Reports

Developing Reports

Monday Tuesday Wednesday Thursday Friday

Befo

re D

igital

Accenture 2014 High Performance Finance Study

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Liberates the Finance Function

Collecting Data

Performing Analysis

Performing Analysis

Other Activities

Interacting with

Decision Makers

Interacting with

Decision Makers

Strategic Initiatives

Personal Development

Monday Tuesday Wednesday Thursday Friday

Aft

er

Dig

ital

Accenture 2014 High Performance Finance Study

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Future success depends on data skills

Turning the Tide; Accenture

40%

But only

15% Of those have these

skills available

Reported high-end analytical

skills as being the future

success of their organization

The Future of Learning/Teaching Accounting

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Competency Development

HBR – Nov 2014

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What do employers need?

Pathways Commission

Education

Lighting the Fire

Strategies to fuel the

future of learning

American Institute of CPAs

Business and profession transform

Disruptors emerge overnight

Increased regulation

Hyper-specialization

Globalization adds complexity

Technologies transforming business

American Institute of CPAs

Workplace evolves — 2020 Outlook

Source: The 2020 Workplace

Acute global talent

shortage

Corporate curriculums

will use game

mechanics

Hiring/promotion

based on reputation

capital

Lifelong learning

becomes a business

requirement

Peer-to-peer learning

is preferred method of

learning

Mobile devices –

office, classroom,

virtual concierge

Social media literacy

required

Future of Learning

Recommendations

• Innovate and Experiment

• Ignite a Passion for Learning

• Make Learning Personal

• Measure What Matters

Innovate and Experiment

Adapt and evolve learning to meet

the needs of high-performing

professionals Small changes to learning

can have a huge impact

Leverage technology to

enhance learning

experiences

Create meaningful, purposeful

experiences that motivate and

engage learners Make learning engaging

and relevant

Start with

the learner

Ignite a Passion for Learning

American Institute of CPAs

Gaming and simulation improving outcomes

American Institute of CPAs

Creating

Evaluating

Analyzing

Applying

Understanding

Adapted from "Bloom's Taxonomy of Learning Domains" by Dr. Benjamin Bloom, 1956

Creating

Evaluating

Analyzing

Applying

Understanding

Remembering

Making learning meaningful – Competency models focused on output

CGMA for a Day

CGMA Role Playing Experience

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CGMA Exam

January 1, 2015

All CIMA and AICPA Candidates take same capstone exam for CGMA

May 2015

First exam for AICPA Candidates

Resources Practice Exams

Sample Pre-seen Material

Practice Exam Answers

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CGMA Role-playing experience

Interactive, online simulation based on format

and design of CGMA exam

We’ve raised the stakes. Do you have what it takes?

The goal is to test the candidate’s ability to apply knowledge and

understanding to real-world scenarios.

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Setting the Stage

Your Role

You’ve just been hired as a executive management accountant for La Vie clothing company – a retail fashion chain that operates in Europe selling trendy clothing for men, women and children as well as home furnishings. As the executive management accountant, you report directly to the CEO.

• Founded on the fast-fashion principle where speed from drawing board to retail store is vital, the company operates in the highly competitive clothing retail market in difficult trading conditions.

• 630 shops in operation worldwide

• Almost €2.8 billion in sales

• Operating profit of €634 million forecast for 2013 (before finance costs and tax).

• Planned operating profit of €690 million forecast for 2014

La Vie - Company Info

First Trigger – Email from CFO Board of Directors Meeting Next Tuesday

Three Proposals • Second Distribution Center • Franchise Shops in Asia • Appoint Famous Designer

LaVie

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Proposal 1 – Second Distribution Center

Eastern Europe w/in 300 km of 75% of suppliers

Transportation cost savings est. €4.2mil per year

Additional rent €0.6mil per year

80 new employees -annual staff costs of €1.8 million

70 layoffs - cost = €1.0m; annual savings = €2.0m

IT investment – cost = €1.0m

Operating costs – additional = €0.2m

Inventory holdings – additional 3 days – slower time to shop; Dec 31 holdings = €280 million = 94 days sales

Possible sub-lease – rental income = €1.2m per year

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Proposal 2 – Franchise Shops in China

900 total LaVie shops by 2019; 100 more than plan

La Vie responsible for marketing, IT, inventory system

Franchisee responsible for site and operating costs

Franchise operating profit = €235mil over 4 years

Company-owned stores - 5 year plan

Original = 800 company shops; Revised = 750 shops

Average operating profit = €1.4mil profit per shop

Capital cost = €4.4mil per shop

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Proposal 3 – Appoint Famous Designer

Designer to prepare 4 collections per year for 3 years – expected to increase sales, expand customer base

Exclusivity –

Non-compete with La Vie competitors Limited to .5 million items per year - 672 shops

Sales - €60 million per year (average price =€30 per item x .5 million items)

Designer Fee – to be negotiated – 10% - 50% of line gross margin (approx. 22.5%)

La Vie accepts 100% of risk – designer fees, marketing, unsold inventory, etc.

Task 1

Prepare a presentation for the CFO to present to the

Board of Directors evaluating the 3 proposals

on the table with recommendations on

whether or not to proceed.

15 mins

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The CGMA Exam Process - 2015

Trigger #1

New Resources

Tools

Task #1

Pre-Exam Research Case Study Examination

Response # 1

Role Simulated

Stakeholders

Company Information

Scenario

Trigger #2

New Resources

Tools

Task #2

Response # 2

Trigger #3

New Resources

Tools

Task #3

Response # 3

6 weeks prior exam 0-1 hour 1-2 hour 2-3 hour

Illustrative process only. Pre-read timing may change. Number of ‘triggers’ or tasks that are presented to students in the three hour exam may be between three and six and various length.

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2015 CIMA Syllabus

Strategic Level

Management Level

Operational Level

Enterprise Pillar

Performance Pillar

Financial Pillar

CGMA Competency Framework

Applying accounting and finance skills in the context of the business…to influence and lead

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CGMA Competency Framework Outline

Skills

• Technical

• Business

• People

• Leadership

Foundational Intermediate Advanced Expert Proficiency

Levels

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CFO of the Future will create strategic impact

CGMA Resources for CFOs of the Future

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CGMA - Robust portfolio of resources

Harvard ManageMentor

Reports

CGMA Magazine

Innovation

Value Chain

Big Data

Building Resilience

Tools

Fraud Risk

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Building World Class Businesses: For the Long-term

World-Class Businesses focus on:

Clear Strategy

Satisfied Customers

Cost Leadership

Durable Supply Chain

Motivated Staff

Innovation

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How do we make money?

Customer Value Profit Margin Processes

Strategy and The Business Model

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Finance as business partner throughout the innovation lifecycle

Managing Innovation

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The role of finance throughout the innovation lifecycle Leading innovation and managing risk

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Big Data and Business Intelligence

From Insight to Impact: Unlocking the opportunities of big data

Focuses on finance role in linking decisions to data

Key questions:

What drives the business?

What do customers care about most?

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What is Big Data? Levels

of

An

aly

sis

Scale and Complexity of Data

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Managing Big Data

Who is the Customer?

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Management Accountant and Big Data

Reduce Costs Increased Efficiency

Driver –Based Forecasting

Develop and Monitor KPIs

Increase Revs – Customer

Segmentation

Monitor External Risks

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Data Quality – An obvious concern

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Educator Resources

AICPA CGMA

http://www.cgma.org/BecomeACGMA/HowtoQualify/Pages/Academics.aspx

Beginning in January 2015, applicants will be required to pass a strategic case study exam in management accounting.

Questions?

Thank You

CGMA. org kwitt@aicpa.org