here are we going, where have we been and how can we best reach our destination together? These are some of the subjects on the minds of the chief executives of the world’s leading accounting organizations representing more than 335,000 members around the globe who work in business and industry. Steve F. Vieweg, business and industry. Steve F. Vieweg, president and CEO of the Certified Management Accountants of Canada (CMA Canada) with 35,000 members in Canada and abroad, Charles B. Tilley, CEO of the Chartered Institute of Management Accountants in London, which has 150,000 members and students worldwide, and AICPA president and CEO Barry C. Melancon, representing the Institute’s 150,000 members in business and industry, sat down recently with Journal of Accountancy senior editor Peter D. Fleming to explore the state of management accounting today.
While many U.S. CPAs might think of management accounting in a very narrow sense based on the cost accounting course they took in college, other countries, particularly Canada and the United Kingdom, use the term to describe the full range of accounting, finance, strategic management, tax and advisory services performed by accountants who work in business and industry.
JofA: Can we start by coming up with a broad definition of management accounting and the kinds of activities its practitioners engage in today?
Steve Vieweg: Management accounting began by looking at and controlling costs. Now we have a much wider field that includes things such as risk analysis and the supply chain as well as management concepts that help with decision making, such as the balanced scorecard. It’s really grown exponentially.
Charles Tilley: Management accounting is the language of business. If somebody asks about your inventory and you determine you have 10 computers worth $1,000 each, the inventory figure is $10,000. That’s absolutely correct, but it’s a completely useless piece of information. If you sell 10 computers a day and there isn’t a lorry coming into the warehouse unloading more computers, you’re going to run out of stock very quickly. What you really need to know is how many computers to order to meet demand. Management accounting is about transforming information into something useful. It tells a company exactly where it is today and then helps the board of directors plan where it’s going. Without this kind of help, management is flying blind.
Barry Melancon: I’d say management accounting also is about developing a system that measures performance and provides information that allows a company to formulate strategy, make decisions and maintain control. It’s the nerve center of an organization.
JofA: What benefits do businesses get from employing management accountants? What critical skills do they bring to the table?
Vieweg: At CMA Canada we’re introducing a brand new competency map focusing on two areas. One is performance responsibilities, which includes being able to work with people in a team environment and having good judgment skills. The other area is conformance responsibilities. That’s a value-added assurance concept, such as making sure you understand inventory practices, GAAP and the like. Management accountants are increasingly being seen as the people who drive change within an organization.
Tilley: All businesses are out to create value. Management accountants are critical partners in that process because they ensure the correct financial decisions are made and provide the structure for financial decisions about where the company is and where it’s going.
Melancon: In addition to reliable decision making, accountants who work in business and industry also are positioned to bring a combination of integrity, confidence and ethical conduct to the table.
JofA: Looking at the history of management accounting, how have the contributions of management accountants changed?
Vieweg: In the last part of the 20th century, management styles changed significantly. Management used to be a command and control structure where almost every decision was made at the top. What we’ve seen evolve is a more decentralized reporting and decision structure. Organizations today face myriad options and challenges. They need management accountants to step in and work at any level as part of a team.
Tilley: Over the last 50 years there’s actually been nothing much new in management accounting. I spoke earlier about creating value; that situation has applied ever since business began. When I talk to some of our senior retired members, what they were doing before World War II and what we’re doing today are not that different. What has changed are the issues, such as the environment or the speed of technology. The ability to make decisions quickly and be an effective partner also has changed dramatically. And the whole issue of ethics couldn’t be more important. You have to be what I call an “honest Joe.” Being a very good communicator is critical as well.
Melancon: The evolution really is about the professionalization of the management accounting function. Looking at the changes over the past 50 years, some of the functions have remained the same, but now they’re perceived as having moved from a functional responsibility to a professional one. Today more than 50% of U.S. CPAs work in business and industry. The need for a high level of competency and professionalism has driven companies to meet their needs at a professional level.
JofA: Turning from the past to the future, what do you see ahead for management accounting and those in business and industry who practice it?
Vieweg: The future has never looked brighter. Every management accountant must have his or her roots in financial accounting, specifically GAAP. Beyond that, the required skill set evolves daily. In general, management accountants need judgment and analytical skills and an ability to work well with colleagues.
Tilley: I agree the future has never been brighter. For the profession to really flourish it is absolutely key to keep on top of technology, to identify critical issues and to be part of the management team. You’ve got to be a team player and that includes being a good communicator.
Melancon: In the future, management accountants must be on the leading edge of issues. One is globalization for both small and large companies. U.S. CPAs will be key players in corporations that engage in cross-border activities. Conversely, management accountants in England and Canada will be key players for businesses that want to focus on the United States. Obviously, technology changes by the moment, and management accountants have to be on top of that and understand its potential to increase value.
JofA: What advice can you give someone who wants to pursue a career in management accounting?
Vieweg: This goes back to my days at the recruitment booth trying to attract people to the CMA program. Management accounting is not for everyone. What we tell students is to look at their own needs and where they see themselves down the road. Just as important is your potential employer. Among the key skills students should have a desire to contribute to the growth of an enterprise and to be involved in teamwork. The bottom line is one word—communication. You have to be able to communicate with colleagues, subordinates, management and shareholders. If that doesn’t interest you, management accounting is not the career you should pursue.
Tilley: Assuming you’ve decided management accounting is something you really want to do, I suspect all of us would say that our individual designations—CPA, CMA or CIMA—are a qualification for success. You then have to choose the right organization to train with—one that will offer you a broad foundation of experience. Your employer is the link between the credential and the academic and practical experience that ensures you’ll become a good management accountant.
Melancon: Today is a great time to make the move to what is known internationally as management accounting. The business changes around the world, led by Sarbanes-Oxley in the United States and the expectations of transparency, are greater than ever before. Because management accounting has become a professionalized function, the credential is a key starting point. Each of our organizations represents a credential with a different focus but with a common goal. In the United States the CPA designation clearly is the starting point for a company that wants to hire someone who meets the ideals we’re talking about. It’s important that you be someone who is motivated by, responsive to and confident in the broad responsibilities of being a senior-level thought leader.
JofA: Tell us about the organizations you represent and your members and what you do to serve their needs.
Vieweg: We have a membership of 35,000 CMAs based primarily in Canada. We also have 3,000 candidates who are studying to become CMAs. Our vision is to be the credential of choice for business. When a business is looking for a management accountant or needs research information or products dealing with management accounting, our goal is for them to contact us.
Tilley: CIMA has 150,000 members and students around the world. Our core market is the United Kingdom and parts of Asia and Africa; we have around 2,000 members and students in the United States. We’re looking to expand by association with other organizations in the United States and the rest of Europe. Our purpose is very simple: to improve the employability of our members in management accounting. We aim to provide what employers are looking for. We offer a substantial amount of CPE support and focused ethics guidelines for accountants in business. Part of our royal charter from the Privy Council, along with qualifying and training accountants, is to further the science of management accounting and be on the cutting edge of thought leadership on technical and accounting issues. We also focus on ethics. We all operate under the IFAC code of ethics that has been revised across the profession, but specifically for accountants in business.
Melancon: Of the AICPA’s 350,000 members, some 150,000 are involved in some aspect of financial management. It’s an extremely large constituency for us and a very important one for business reporting, financial reporting and management accounting in the United States. It’s part of what makes the American economy successful. We offer a combination of training and CPE, leading-edge information exchange and tools individuals can use to make themselves more valuable in their organizations and, more important, to make the organizations more successful. We also focus on services members can leverage to create benefits for their organizations. And we advocate for business with groups such as the SEC, the PCAOB and the IRS.
JofA: We’ve heard the word communication a lot today. How do you help your members communicate better?
Vieweg: We offer our members communication courses. And at our conferences, which about 20% to 25% of our members attend, we make sure communication is an integral part of the agenda.
Tilley: Across the world today’s young people are much better communicators than those 20 or 30 years ago. People coming out of college and university have much better communication skills. We do a lot of the same things as CMA Canada in terms of CPE courses, but there’s room to do a lot more.
Melancon: We help people communicate by providing them with flexible tools. We produced a free CD-ROM members in business and industry can deliver to their boards to help focus top management on fraud prevention and detection. On the audit committee side we created an evergreen document CPAs can use in a turnkey environment to help audit committees be more effective. To help streamline the communication process, we encouraged CPAs to download the material and customize it to their particular needs.
JofA: Both CIMA and CMA Canada offer professional certification for management accountants. How do these programs help those who hold the designations?
Vieweg: We just introduced a new competency map and it stands on three pillars—strategy, accounting and management. Our competencies reflect the relationship between these three pillars and we believe there needs to be a balance among them. This is what differentiates us from our competitors. We will make sure all our products and services, accreditation and post-designation learning align with the new competency map.
Tilley: There are tangible benefits from the CIMA designation. A new U.K. member’s salary is somewhere around 200% of average U.K. earnings. That indicates the credential is worth shooting for. If you look through job advertisements in any country where we have a significant presence, you’ll see either a request for a qualified accountant—which includes CIMA—or a specific reference to our credential. Also look at the accounting “rock stars.” At Tesco, the United Kingdom’s biggest retailer, finance director Andrew Higginson is one of our members, as is Douglas Flint, finance director of HSBC, which calls itself “the world’s local bank.” These people are role models for students leaving university and considering a career in management accounting.
Melancon: In the United States the CPA credential is viewed as the right designation for top-level management personnel and accounting and business executives. In July we issued a white paper, CPAs as CFOs: Why You Should Have a CPA in Your C-Suite, that spoke about those roles all the way up into the boardroom. Many successful U.S. CEOs—and obviously the top CFOs—are CPAs.
JofA: How does the practice of management accounting differ internationally? What can JofA readers learn from their peers in Canada and the United Kingdom?
Vieweg: n today’s global environment there really aren’t any specific issues one of us deals with that don’t affect the others—we’re all in the same game. Our members need the means to translate strategy into operational terms and to make sure it fits competitively worldwide. With respect to sharing best practices, all three of us continuously look at each other’s organizations and share what works with our members and their employers.
Tilley: There are new challenges all the time. Whether it’s in an individual business sector or from country to country, some accountants are going to encounter problems or issues first. The most important thing we can do is share. The other thing none of us should ever lose sight of is the importance of sound financial foundations and a solid code of ethics. They are fundamental to businesses everywhere.
Melancon: The differences are subtle. Certainly tax and compliance laws and cultural issues vary. The leading countries are exporting some of their requirements, not necessarily intentionally. For instance, some of the components of Sarbanes-Oxley have been exported to various corners of the world so businesses can participate in U.S. financial markets. Conversely, some things happening in Europe affect CPAs here. Obviously the United States and Canada have a strong business connection and many Canadian companies are listed on U.S. exchanges. The Internet also has added to the global nature of business. So the differences tend to be more subtle and the commonalities more substantive. Information sharing and learning among our three leading management accounting organizations are really what our groups are all about.
Tilley: There’s much evidence that well-managed companies have higher price/earnings ratios. Therefore, one of the really important issues for developing nations is to have good financial management and good transparency. There’s quite a lot we can share with those countries.
Melancon: It’s also a value proposition for countries or companies that embrace ethical behavior. In developing countries management accounting can be a stabilizing factor and create value by building ethics into a corporate culture.
JofA: How can your three organizations work together to advance the discipline of management accounting and serve the needs of accountants who practice it?
Vieweg: We keep working together as we have been and perhaps even at another level. It’s only a matter of time before the principles in Sarbanes-Oxley are enacted in Canada. Much of the work the AICPA has done related to the legislation will undoubtedly benefit our membership. We can also look at things like joint conferences and research capabilities. We already have informed our members of the relationship they can have with the AICPA by becoming international associates.
Tilley: We’re all trying to do the same thing. As management accountants we should be looking at how we can be efficient. For example, it’s very inefficient for us to be introducing the same CPE materials. So let’s “share up” the cake and see how we can push forward together rather than using our resources individually.
Melancon: All three organizations are at the center of influence on financial management and management accounting. Together we are more effective. Over the months and years to come, we should enhance activities that permit us to leverage our resources and our actions. We can’t lose sight of the importance of our members’ remaining involved in our respective organizations, contributing their knowledge to the profession, because clearly that’s where the leverage occurs.