How to promote knowledge flows within multinationals

Keeping communication going among team members with different backgrounds who are spread across multiple countries and time zones can be challenging.

During his 12 years at MasterCard, John Pagano, CPA, CGMA, encountered many of the factors that can impede the flow of knowledge within a multinational company. Pagano, who recently left the financial services company, was business financial officer of global human resources and in charge of global payroll at MasterCard. His team consisted of about 20 people spread across the world. The employees worked with the human resources and finance departments as well as with a shared-services center that contracted with local payroll service providers.

Different time zones. Different languages, nationalities, and cultures. Different business units that use different terminology. Different ages and education levels. Communication challenges within multinational companies abound. Pagano’s team dealt with all of the above and a few more.

But all potential communication barriers are not the same. Some have worse effects than others, according to research by the University of Pennsylvania’s Wharton School and Duke University’s Fuqua School of Business. The study, which was published last year in the Journal of International Business Studies, looked at more than 13,000 interactions among members of 289 teams of a large multinational company and compared the challenges.

Establishing contact is six times more difficult among team members working in different countries, world regions, time zones, or business units than among team members of different nationalities who work in the same location, the study found. Also, the negative effects of geographic and structural differences are three times larger than communication barriers created by differences among team members in age, tenure, or education level.

Members of small teams in particular sought more knowledge from others when they worked in a developing country or outside the country where the company was based, the study found.

Team members who were based in different countries or time zones but knew each other from working together on a previous team had an easier time communicating. But familiarity did not make communication easier among team members who were from different nationalities, spoke different languages, or were different ages.

Pagano’s experiences at MasterCard were similar. “It’s much easier to communicate with somebody if you’ve met them face to face,” he said.

Many of the efforts Pagano took to facilitate the flow of knowledge on his team were based on team members’ becoming more familiar with each other:

• Once a year, the team gathered in a chosen location. Not just managers but also team members working for them attended the annual team meetings.
• Monthly teleconferences with dedicated links and multiple screens were held, using virtual technology to give participants the feeling of sitting opposite team members in other countries.
• Weekly conference calls were scheduled at different times to accommodate multiple time zones and holidays in different countries. The calls were never held on Fridays to respect Asian team members’ weekend.
• Team members were encouraged to write emails that were simple and clear, so the likelihood of misunderstanding was reduced among team members whose first language was not English.
• All team members worldwide used the same unified technology platform for human relations functions, such as signing up for benefits or filling out time cards.

The complete version of this article, “How to Promote Knowledge Flows Within Multinationals,” by Sabine Vollmer, is available at cgma.org.

Intangibles drive value in the digital age

In today’s digital economy, intangibles are more important than ever to the success of a business. New research found that the top nine drivers of value in the digital age are intangibles, such as customer satisfaction and brand reputation.

The survey of 744 finance executives in 34 countries was conducted for the CGMA report The Digital Finance Imperative: Measure and Manage What Matters Next.

Management accountants have long been the owners and producers of data and insight. But the survey shows that data about intangibles are more likely to be produced and owned by other functions. For example, information about competitor activity might be held by marketing, and productivity and engagement data might be owned by human resources.

So what is the role of the accountant in the digital age?

Businesses need new key performance indicators (KPIs) to manage intangibles as traditional performance metrics may not capture the value being created by this type of asset. To create these new KPIs, organizations must make connections between financial outcomes and prefinancial measures that they can use as leading indicators, usually based on a causal relationship or correlation.

Management accountants can take on this challenge, acting as brokers of information. The new role involves assembling and validating the right measures and analyses to ensure informed decision-making and performance management. They can also help translate analytical insights into commercial insights to boost performance.

The authors of the report suggest that these brokers engage business managers in collaborative conversations to probe root causes, identify potential leading performance indicators, and source data that could provide measures for management.

Supporting more informed decision-making throughout the business is a crucial role as digitization could commoditize products and services. In this context, the quality of an organization’s decision-making and performance management will determine its ability to differentiate itself from competitors and earn higher returns, according to the report.

The full version of this article, “Intangibles Make Up the Top 9 Value Drivers in the Digital Age,” by Samantha White, is available at cgma.org.

The top drivers of value

Respondents in The Digital Finance Imperative: Measure and Manage What Matters Next ranked the top five determinants of value in their business. Here are the overall results:

1. Customer satisfaction (76%)

2. Quality of business processes (64%)

3. Customer relationships (63%)

4. Quality of your people (human capital) (61%)

5. Reputation of brand (58%)

6. Strategic decision-making (43%)

7. Strategy execution (40%)

8. Patented product or processes (27%)

9. Supplier relationships (26%)

10. Quality of (fixed or physical) assets, such as plant and equipment (15%)

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CGMA Magazine is published in conjunction with the Chartered Global Management Accountant designation, which was created through a partnership between the AICPA and CIMA. The magazine offers news and feature articles focused on elevating and emphasizing management accounting issues.