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May 2010 £4.50

On form Tony Kelly’s tips for winning in the racecourse business

12

Remote control: the rise of virtual teams – advice on managing and integrating people across continents

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Health cheque: why the NHS Institute for Innovation and Improvement brought finance back in-house

29

Noise abatement: you can’t manage costs until you free your staff from the tasks you don’t know they do

37

Smart money: the salary survey that reveals what CIMA students can earn around the world

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>inbusiness

The western model of governance is flawed, so perhaps it’s time to look to Asia for inspiration What does the name Tata mean to you? Many people are familiar with Tata Motors’ purchase of Jaguar Land Rover in 2008 and the launch of the world’s cheapest car, the Tata Nano, a year later. But business commentators are watching the £45.8bn conglomerate with growing interest because, to all intents and purposes, it seems too good to be true.

The Indian company has enjoyed remarkable success, but at the same time it has held on to its founding credo of ploughing money back into the community – it is profitable and has a social conscience. Some critics have argued that its generosity is unrealistic and that something will have to give as the group’s operations become increasingly international. But the global recession has prompted many more people to question the Western business model and its potentially ruinous preoccupation with short-term profits.

Businesses in Asia have generally avoided the worst ravages of the downturn, so could it be time to look eastward for cases of more robust, sustainable business models? Could we even combine best practice from East and West to create an entirely new

way of doing business that is both financially sustainable and socially responsible?

With this in mind, CIMA has launched a project to study the strengths and weaknesses of business practices in both regions. The aim is to explore the key differences in approach and help corporate leaders to extract the best from both worlds.

This subject is of great interest to me. My work as a management consultant has taken me to many countries and it’s been fascinating to see how methods differ from continent to continent. The research provides an ideal foundation for considering a new, more balanced way to do business.

The Asian model places particular emphasis on trust and relationships. This can create benefits for stakeholders and, in particular, nurtures a more benevolent approach. But this system is comparatively more vulnerable to corruption and cronyism. The Western model has traditionally focused on developing appropriate governance structures and processes. Yet the financial crisis has highlighted the limits of what can be achieved by tightening checks and balances alone.

Aubrey Joachim CIMA president

A good business model is one that balances governance with performance. The best form of governance could well be a blend of East and West, but performance management transcends all borders – and the ideal framework for performance management is based on the concepts of management accounting. No wonder emerging economies such as Vietnam and Indonesia are adopting management accounting to help drive their GDP growth.

I look forward to hearing the full results of the research at the World Congress of Accountants in Kuala Lumpur on November 8‑11. At the same event CIMA will also be releasing a fascinating report that focuses on the need for a corporate change in attitude rather than more regulation.

One of Tata’s executive directors, R Gopalakrishnan, was recently quoted as saying: “We may be among the few companies around the world who think and act first as a citizen.” Perhaps one of the greatest challenges ahead is to make Tata one of the many rather than one of the few.

Further information about the congress can be found at www.cimaglobal.com/wcoa.

“

The Western business model has traditionally focused on developing appropriate governance structures and processes. Yet the financial crisis has highlighted the limits of what can be achieved by tightening checks and balances alone

CIMA is the Chartered Institute of Management Accountants, 26 Chapter Street, London SW1P 4NP. Tel: +44 (0)20 7663 5441 President Aubrey Joachim FCMA Deputy president George Glass FCMA Vice-president Harold Baird FCMA Chief executive Charles Tilley FCA

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CIMA, 26 Chapter Street, London SW1P 4NP +44 (0)20 7663 5441 www.cimaglobal.com

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Contents

Editorial and production Caspian Publishing 198 King’s Road, London SW3 5XP T: +44 (0)20 7368 7170 F: +44 (0)20 7368 7201 E: rp1@caspianpublishing.co.uk Editor Ruth Prickett Chief sub-editor Neil Cole Creative director Nick Dixon Art editor Clare Meredith Account manager Tina Franz Head of production Karen Gardner

6 One2one Tony Kelly, group managing director of Northern Racing, on the ups and downs of racecourse finance.

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For the USA FM (ISSN 1471 9185) is published ten times a year for $60 by Caspian Publishing, 198 King’s Road, London SW3 5XP. Periodicals postage paid at Rahway, NJ Postmaster. Send address changes to: Financial Management, c/o BTB Mailflight Ltd, 365 Blair Road, Avenel, NJ 07001.

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Opinions expressed in FM are the authors’ own and do not necessarily represent the policies of their employers or CIMA council. Caspian Publishing and CIMA accept no responsibility for views expressed by contributors. The publisher reserves the right to refuse, cancel, amend or suspend any advert or insert.

No liability is accepted for loss arising from non-publication, incorrect or late publication of any item. The inclusion of any advertising material does not imply that CIMA endorses the product, service etc advertised.

Jul 1, 2008 to June 30, 2009: 154,496

12 So far, so good? A guide to getting the best out of geographically dispersed teams.

6 4 First in…

All the latest news affecting accountants in business, including regulations updates.

10 Opinion

Why many of the biggest companies in the EU are overdue for some massive goodwill impairment write-downs.

29 Technical matters

29 Cost management.

32 Commercial disputes.

34 Managing sustainability.

37 Career development

The highlights of CIMA’s annual student salary survey, which has expanded to cover 15 key territories around the world.

41 Study notes

Your guide to entering, taking and passing the CIMA qualification.

41 Student one2one: Rowan Bomphray, finance graduate, Network Rail.

42 Exam tips: paper E2 Enterprise Management.

46 Exam tips: paper P3 Performance Strategy.

49 Exam notice: essential information for candidates.

18 Transplant operation How the NHS Institute for Innovation and Improvement implemented a new finance system at the same time as bringing the function back in-house.

24 Don’t miss 50 Institute update the boat Is your CIMA news and a diary of organisation up events, featuring the CEO’s to speed with notebook by Charles Tilley. developments on the carbon reduction 55 So you want commitment? to be… … FP&A controller.

56 … Last out

Bizarre communications from the wonderful world of business.

CIMA is a gold sponsor of the

All the latest news affecting accountants in business, including regulations updates

>firstin…

SMEs spend to save Four out of five finance directors at small and medium-sized enterprises in the UK are maintaining or increasing their investment in new equipment and machinery despite the recession, according to research by the Carbon Trust.

Three-quarters of the 200 financial decision-makers in the survey said that they were planning to increase or maintain their investment in new equipment in the first half of this year, compared with 65 per cent in the second half of 2009. The responses showed that 80 per cent thought buying energy-efficient equipment would give their firms a competitive advantage; 24 per cent viewed

The Council of Europe and the Organisation for Economic Co-operation and Development have agreed to update an international treaty to help governments enforce tax laws and combat cross-border tax evasion. The update takes the form of a protocol amending the convention on mutual administrative assistance in tax matters. It will be opened for signature in Paris on May 27. Visit www.snipurl.com/vgjfe for further information about the convention.

IESBA publishes plans for ethical guidance The International Ethics Standards Board for Accountants (IESBA) has released for comment an exposure draft setting out its proposed strategy and work plan for the next three years. This includes its intention to expand guidance for accountants who face conflicts of interest and to provide advice for accountants on how to respond to a suspected fraud or illegal act. The IESBA will liaise with national standard-setters and regulators on convergence and seek views on how the code can help to achieve greater convergence.

To view a copy of the exposure draft or to submit a comment, visit www.snipurl.com/vi3t2 by June 15.

such investments as essential to their companies’ survival; and 31 per cent expected energy to be one of their three main costs in 2010.

The Carbon Trust’s “Big business refit” campaign has funded more than £60m worth of equipment upgrades with interest-free loans since April 2009. So far these have provided annual energy savings of £20m and saved 125,000 tonnes of carbon dioxide emissions.

“The research shows understanding among finance directors that investments in energy-efficient equipment help to control costs, boost productivity and make companies more competitive,” said Tom Delay, the trust’s chief executive. “It reveals that financial leaders in SMEs have continued to seek opportunities to invest in their businesses despite the downturn. Only six per cent said that they were avoiding investment until economic conditions improved.”

This contrasts with the more cautious attitudes revealed by a survey last September, when just over half of procurement decision-makers at SMEs planned to “make do and mend” old plant rather than replacing it.

“The survey shows that SMEs are now firefighting less, looking to the long term and keen to invest in energy-saving equipment to gain a competitive edge,” said Ray Perry, executive director of brand, profile and marketing at CIMA. “Management accountants can drive sustainable performance and embed it in corporate strategy. Reliable forms of alternative finance, such as Carbon Trust loans, are key to making these initiatives a reality.”

Interest-free funding of £3,000 to £500,000 is available through the Carbon Trust’s “Big business refit” programme. Visit www.bigbusinessrefit.co.uk for further information.

financial management

Move over, Darling Anyone frustrated by the UK election campaigning and convinced that they could do better at tackling the national deficit can test their ideas by designing their own tax system using an online calculator designed by the think-tank Reform. Putative chancellors can see how changing the thresholds and rates of income tax and national insurance contributions would alter their own tax bills and affect the nation’s finances.

Reform argues that the main UK political parties are planning to increase taxes too much. It recommends rises of £12bn over the next three years, as opposed to increases of £22bn planned by the Labour Party and £16bn by the Conservatives. It also believes that the parties will raise the wrong taxes.

The designer behind the calculator, Patrick Nolan, created similar tools for New Zealand’s 2008 election. “Getting the public to support the tough measures necessary for restoring the public finances requires them to feel part of the process,” he said.

The calculator can downloaded free at www.reform.co.uk.

www.cimaglobal.com A feather in our cap Financial Management has been highly commended in the “best magazine” category of the annual MemCom awards, which recognise excellence in marketing to membership organisations.

CIMA, which was also highly commended for its annual review, was the only accounting body to be recognised in the awards. It was pitted against fierce competition from hundreds of professional bodies and societies, including the Royal British Legion, the Royal Institute of British Architects and the Royal College of Nursing.

IFAC issues guidance The International Federation of Accountants (IFAC) has released the 2010 Handbook of International Quality Control, Auditing, Review, Other Assurance and Related Services Pronouncements, and the 2010 Handbook of the Code of Ethics for Professional Accountants.

IFAC’s code of ethics has been revised by the International Ethics Standards Board for Accountants (IESBA) to make it clearer and strengthen the independence requirements. It will come into effect on January 1, 2011.

You can download the handbooks free of charge or buy printed versions at http://web.ifac.org/publications.

Huge growth in international work placements predicted The number of people working on foreign assignments increased by 25 per cent over the past decade and the number is expected to grow by a further 50 per cent by 2020, according to research by PwC. The study found that, whereas global organisations placed employees in an average of 13 locations in 1998, this had increased to 22 by 2009 and could reach 33 by 2020. The shift will lead to the emergence of new “capital” cities based on the size of their working-age populations and new income streams. Employers and governments will start to collaborate more to share costs and knowledge, and to remove barriers to mobility, while immigration rules may need to be relaxed for specific workers.

Not only will the number of people working outside their home nation rise; they will also work in more countries – creating challenges for compliance, remuneration and communication.

More than half of the CEOs questioned in the study said that they were planning to reconsider their approach to global mobility as a result of the recession. But, if they are to realise the economic benefits of international assignments, businesses need to change the way these are managed and used, the research report warns.

“While we’re not consigning existing international work models to history, governments and companies will have to work together to manage some of the barriers to mobility that will otherwise impede global competition,” said Carol Stubbings, international mobility partner at PwC. “As companies venture into underdeveloped locations, organisations and governments would benefit from sustainable co-investment in the infrastructure needed for individuals to live and work comfortably. This might extend to schooling and training, medical facilities or entertainment.

Economic growth in emerging markets will also have an effect on mobility patterns. The report predicts that the GDP of the E7 countries (Brazil, China, Mexico, India, Indonesia, Russia and Turkey) will overtake that of the G7 by 2020 and be about 30 per cent higher than it by 2030.

New business capitals are also emerging: of the 30 most populated cities in 1950, 11 have been replaced on the list by new entrants including Lahore, Shenzhen and Chennai. London is on course to be pushed out of the top 30 by 2025.

To download the research report, “Talent mobility 2020: the next generation of international assignments”, visit www.pwc.com/managingpeople2020.

FTSE 100 companies prefer CEOs with accounting experience More than half (51) of the chief executives in the FTSE 100 have strong financial backgrounds, reflecting the continuing importance of financial acumen to running a business. Of the 11 chief executives appointed by FTSE 100 companies in the past year, seven have financial backgrounds, including Michael Queen of 3i (pictured) and Peter Voser of Royal Dutch Shell. Both were promoted from the role of finance director, according to Robert Half’s annual survey of chief executives in the FTSE 100.

But the research also shows that blue-chip boards still lack diversity – only four of the FTSE 100 are led by women, for instance. Four CEOs are aged under 45 years old. The youngest is Oleg Novachuk, 38, who runs copper mining company Kazakhmys. Jaime Lomelín, of Fresnillo, is the oldest at 74. Most of the CEOs (59 per cent) are UK nationals. Those who aren’t British come from a wide range of countries, including Mexico, Syria, India and South Africa.

Visit www.roberthalf.co.uk for further information.

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Tony Kelly FCMA Group managing director, Northern Racing Is racecourse management a good bet?

It’s a leisure business like any other and it competes with firms in this and other leisure industries. My background was in hotel management and, when I started here as FD in 2004, I was perhaps a bit naive about the challenges of racecourse finance – I had a lot to learn about media rights and sponsorship, for example. But areas such as reporting, asset management, marketing and corporate governance are similar across all sectors, so I had plenty of experience in these.

Photographs (Including cover): Tom Harford-Thompson

Who goes to the races? Hooray Henrys and the flat-cap-and-whippet brigade?

Those are the two stereotypes, but we’re trying hard to change this perception. That’s why I’m a board member of Racing for Change, which aims to widen racing’s appeal by, for example, demystifying the terminology.

In fact, racing is still the UK’s second-most attended sport: 5.4 million people visited UK racecourses last year. It’s a long way behind football, but well ahead of cricket and rugby.

Why do these misconceptions persist?

One reason is the relative lack of terrestrial television coverage. When I was growing up, racing was shown widely on TV and most people watched it, partly because there were far fewer sports competing for airtime. This has changed and the only terrestrial station that still regularly shows racing is Channel 4 on Saturdays – and the sport even has to pay for this slot. The BBC shows only 13 days of racing a year, including huge events such as the Grand National. There have also been big changes in the way that football and cricket are shown on TV and developments in betting online, so our industry needs to engage a new audience in a new way. My kids don’t want to study the form or learn a new language in order to enjoy a race.

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What’s so good about a day at the races?

It’s a great social event. All our courses hold special ladies’ days, “Guinness days”, hen nights and lads’ nights, as well as our normal race meetings. It gives people a chance to get dressed up and it’s also family-friendly.

If you go to the races at, say, Fontwell Park in West Sussex, under-16s get in free and there are loads of activities for them – fairs, pet farms and face-painting, for example.

A family of four can get in for £38. You couldn’t go to watch Chelsea play for that.

Racecourses have more space than football grounds, so you don’t get crowd problems and the spectators don’t have the in-built hostilities. There’s a complete lack of the kind of rivalry that you see in other sports.

Are you trying anything else to generate more revenue?

The ten racecourses and one golf course that we run cover huge amounts of land – much of it still under-used. We hold 20 to 28 race meetings a year on each course, so we’re using our assets at about six per cent of their capacity. Of course, we need to work out how to use them the other 94 per cent of the time, which is something that we thought even harder about when the recession started. For example, we’ve developed marketing plans for weddings and other big events that have long been common in the hotel business but are newer to the racecourse sector. My experience in the hospitality industry has proved useful for that.

So how have you fared in the recession?

Racecourses have four main income streams: admissions, corporate hospitality, sponsorship and media rights income. Our admissions income has held up well, but corporate hospitality revenues were, not surprisingly, down by about 25 per cent last

year. Bookings from the construction and financial services sector fell by half almost over night, but those from private companies were less badly affected. The banks are starting to return, but they’re booking tables now rather than the whole marquee.

Sponsorship income, much of which comes from the big bookmakers, has remained fairly constant.

Media rights income is the cream on top and there have been some interesting new developments here. We sell rights to allow betting shops to show our races. There are 9,500 in the UK, so these contracts are significant. We also sell international and online rights for races to be shown abroad and receive a share of the betting income.

The international market is opening up – operators in Europe, Australia and Asia are getting more interested in British racing.

What about revenues from betting at the racecourse?

We actually make very little money from this – a single-figure commission on the Tote. The real money comes from the statutory levy collected on racing bets that the government set up 50 years ago. It’s distributed to the UK’s 60 racecourses.

It comes to about £1bn a year, of which Northern Racing gets ten per cent. It’s then used to pay for prize money and integrity costs (things such as stewarding, security and blood-testing at all meetings).

What are your biggest costs?

Staff and prize money. The latter is the return on investment for the owners and trainers.

The better the quality of the race, the higher the prize money. In general, better-quality races attract higher returns – from hospitality clients, sponsors and gate receipts.

One2ONE As soon as I started as MD, I got the credit crunch, the global recession and the worst summer weather on record. I think I deserve a good one this year

Apart from recession, what are the main threats to your business?

The weather is our biggest headache. When I took over as managing director three years ago, the honeymoon was over so fast that I felt like Gordon Brown. As soon as I started, I got the credit crunch, the global recession and almost the worst summer weather on record. I think I deserve a good one this year.

We always expect to write off some meetings to bad weather in the summer.

The company used to take these losses on the chin, but I brought in new systems for forecasting and planning around this. We have 207 race meetings this year (representing about 15 per cent of the UK fixture list) and we base our predictions on past events. It’s a complex situation, because some meetings are more valuable than

Quick CV 1987-96

Kelly starts his career as a food and beverages controller at the Copthorne Hotel near Gatwick airport. A rapid rise through a series of roles, including a job at Ocean Cruise Lines, culminates in his appointment as group financial controller of Nike Group Hotels in 1992.

1996-2003

Kelly is recruited by the Hanover International hotel group as its financial controller. At the time of his promotion to group finance director in 1999, the plc’s portfolio includes six wholly owned hotels around the UK. He then works on a series of acquisitions and disposals.

He is elected as an FCMA in 2001.

2004-

He joins Northern Racing, an AIM-listed company, as group finance director.

Entrepreneurs Simon and David Reuben acquire the firm in a deal worth £90m in 2007 and delist it the following year. When the firm goes private, Kelly is promoted to the role of group managing director.

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others. We have a contingency fund and sometimes we get lucky and don’t have to use all of it. But in 2008 it was murder: we lost eight consecutive fixtures to rain at our two biggest courses, Chepstow and Newcastle. It had a terrible effect on our customers, even though we tried to transfer them to other dates. They simply gave up.

You became MD when the company went into private ownership after being a plc. How did that change things?

Northern Racing was publicly traded on the Alternative Investment Market when I joined, but about 80 per cent of its shares belonged to two shareholders. They put us up for sale and we were acquired in April 2007 by Reuben Brothers. Working in a private company changes how you report to the board. The way it works depends on what the board wants. Our corporate governance structures were as good as any in the FTSE 100 and we have maintained these as a private company, but we lost many of the requirements for reporting and our audits became easier. It was a big shift for me.

When you’re the FD you don’t carry all the responsibility. As the MD you’re first in the line of fire.

Did your background in finance help?

The onset of the recession meant that my financial experience was vital – I’m sure many MDs with the same qualification as mine have found this over the past couple of years.

When you need to monitor governance and cash flow closely, you’re grateful for your financial training. I’ve also needed it to make other departments aware of the financial implications. You have to make everyone in the company responsible for finance. The challenge for the MD is to maintain a balance: you don’t want to tighten the purse strings and stifle creativity or long-term sales.

Is this why you’re investing in a huge new grandstand at Fontwell?

It’s a massive investment: £6.5m. We agreed the plan 18 months ago. We delayed it a bit,

but decided to proceed because we thought we’d get a good deal from construction firms and we needed to be ready to benefit when the recovery started.

Over the past two years the business has made some tough decisions that have included redundancies, negotiating with creditors and rejecting some investments, but we decided to go ahead with this particular project. We’ll open it on August 19 on our ladies’ evening fixture.

I’d like to see more of an upturn in the hospitality industry by then, but I’m glad we didn’t open it nine months ago.

How are you funding it?

About 60 per cent is from the capital fund, an interest-free loan from the statutory levy paid back over five years. This means we’re asking the owners to put in only 40 per cent to build assets that should look like very good value in five years’ time. Bookings are looking good, but you have to remember when you open a new venue that you need to maintain momentum after the initial fuss.

And you opened a new racecourse last year in Wales.

Ffos Las is the first new turf course to open in the UK for 80 years. It was built on the largest open-cast mine in Europe and it’s the only one that we manage but don’t own.

The opening was a huge success: 12,500 people visited on the first day, even though it’s quite remote. Part of the reason we took it on was because of my experience in hotels, where it’s normal to own a venue but not necessarily be an expert in running it. This is the case at Ffos Las, where we manage the business for its owners.

Have you become a big racing fan?

I meet people who have been in the sport all their lives and I don’t know anything like as much as them. But I love the spectacle, even if I can’t always remember all the horses’ names. We all get a buzz when the sun shines, we put on a great meeting, everyone goes away happy and the takings are up.

It’s what makes my job so rewarding.

>opinion

Cloudy, with a chance of write-downs

photolibrary

Research suggests that many of Europe’s biggest firms have yet to report the full extent of their goodwill impairment charges on acquisitions made between 2005 and 2008. Marc Hayn offers a grim forecast.

10

Although the global recession has affected almost all businesses, the impact and timing of the poor economic conditions have been different for each industry and company. Several sectors suffered a rapid decline in orders, revenues and profits owing to a drop in demand and an increase in bank interest rates. This was reflected by a downturn in the capital markets until early 2009, when they started to recover.

Despite this and recent encouraging news about positive GDP growth forecasts in Europe and smaller than predicted increases in unemployment, the economy is not yet back on track. This might be one reason why the combined market capitalisation of companies in the Dow Jones Stoxx 600 index (which comprises only European firms) is still significantly below its 2007 peak.

Only 200 of the Stoxx 600 booked goodwill impairments in 2008. Comparing the adjusted amount for total booked goodwill impairments among companies on the index for that year (€32bn) with the equivalent figures for 2007 (€28bn) and 2006 (€44bn), it seems that the booked goodwill impairments on the index for 2008 have not properly reflected the scale of the crisis. In the light of all the acquisitions made by members of the index between 2005 and 2008, which were worth a combined total of €1.7trn, the relatively small amount of goodwill impairments already booked indicate the tremendous potential for writedowns for the fiscal year 2009.

Economic activity has improved since the first quarter of 2009, with positive indications for this year. The global economy has begun to stabilise, partly as a result of strong political intervention. But does this imply that the economic crisis has had hardly any impact on balance sheets and that, owing to the recovery of the capital markets, the goodwill impairment test is less crucial for this accounting season?

Under international financial reporting standards, goodwill is impaired when a

financial management

company is not able to recover the book value of a group of assets through either their use or their sale. The higher of the two values counts for the impairment test, so the fair value less selling costs and the value in use are the two valuation concepts that have to be considered here. A company’s market capitalisation can be used as an indication of its fair value. Despite the improvement in the capital markets, for about 120 members of the Stoxx 600 the book value of equity still significantly exceeded market capitalisation as at June 2009.

More than 40 per cent of companies in the following industries displayed this worrying characteristic: automotive, metals, financial services, real estate and leisure. For such firms, market capitalisation seems not to be an appropriate metric to challenge the goodwill. A company’s business plan is a big influence on the value in use. A higher value in use compared with market capitalisation shows that the business plan is more optimistic than the market’s expectation. It’s more than doubtful that such ambitious business plans can still be used for the fiscal year 2009.

My firm has developed the concept of an impairment risk factor (IRF) as an indicator for potential impairment risk. The IRF is based on the market capitalisation in relation to the book value of equity and the purchase price paid (2005-09) in relation to market capitalisation. It indicates both the potential impairment for various industries and whether the impairment test will be challenging. Based on the IRF, there are four

possible impairment forecasts – sunny, cloudy, rainy or stormy – for an industry.

Only healthcare came out with a sunny outlook under the IRF. Despite the economic improvement, a lot of industries are still experiencing stormy conditions. For these firms, impairment testing and potential impairments will be challenging for the fiscal year 2009 – large amounts of booked goodwill impairments seem likely.

Marc Hayn is managing director and head of northern European financial advisory services at the Frankfurt office of Houlihan Lokey, an international investment bank.

Visit www.snipurl.com/vae7x to see the full results of its research.

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14/04/2010 12:55

So far, So good?

getty images

Many managers run teams spread across continents, cultures and time zones. Scott Payton learns how to make such long-distance relationships work seamlessly.

12

Working as part of a geographically dispersed team is not only a common occurrence at BT; it’s standard practice.

“At any given time about 45 per cent of our 107,000 employees are working with colleagues and customers in different time zones,” says Caroline Waters, director of people and policy at the telecoms giant.

Even where colleagues share a time zone, working in the same location simultaneously is the exception rather than the rule. Eight out of ten BT employees participate in its flexible working scheme, while almost 15,000 members of staff, from accountants to HR managers, work from home.

BT may have taken virtual teamwork further than most firms, but globalisation, the growth of outsourcing and advances in online communications mean that senior managers in all sectors are being asked to lead geographically dispersed departments. At IBM, for example, three-quarters of managers are responsible for employees who are either mobile or remote, says Gary Kildare, its vicepresident of HR. Indeed, about 160,000 of

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IBM’s 400,000 employees do at least some of their work while on the move.

So is there a secret to managing virtual teams effectively? What are the advantages of collaborating across continents and cultures? And what are the biggest barriers to making dispersed collaboration as effective as traditional, face-to-face teamwork?

Waters believes that ensuring that far-flung employees are doing what they are supposed to be doing is the main challenge for anyone in charge of such teams. “The most important thing is that people understand what’s expected of them: what they need to do, when they need to do it – and to what standard,” she says. “Managers need to establish absolute clarity in these areas.”

Another priority is to ensure that team members are communicating with each other frequently, which helps to avert unnecessary duplication of effort, Waters adds.

When it comes to employing homeworkers, it’s crucial to hire people with the right attitude, according to Jim Austin, director of contact centres at the AA. The car

The four keys to successful virtual team management n Design a structured training programme for new team members – possibly with a mentoring or “buddying” programme. n Create a clear personal development plan for each member. n Ensure that knowledge is shared throughout the team. This is something that happens naturally in an office environment, but it must be worked at in a virtual team. n Hold regular team meetings or away-days, involving every team member, in order to maintain the team’s integrity and identity.

Lynette Swift, managing director of flexible working consultancy Swiftwork.

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insurance and breakdown cover firm employs 240 home-based telephone operators, who “have got to be able to use their initiative.

Working from home is not necessarily as flexible as some people may think,” he says.

“It’s not a case of looking after the kids and working with one hand on the phone.”

When you’re managing teams across several countries, it’s crucial that the performance management process is applied consistently, says Ajoy Mukherjee, global head of HR at Tata Consultancy Services (TCS), an Indian company with offices in China, Europe, Latin America and the US. “We provide training and written guidelines about how people should be appraised to ensure that the process is transparent and consistent,” he explains, adding that the appraisals are not conducted verbally in order to minimise the potential for misunderstanding. A bespoke online software application is used instead.

“Shallow reporting lines” are a further key ingredient of effective team management, according to Matthew Briggs, CEO of Capita Insurance Services. He is in charge of staff in 20 UK locations, plus four sites in India. “I ensure that I have clear accountability and one point of truth at each location,” he says.

Equally, it is vital that everyone knows exactly who will keep them updated with information coming from higher up the organisation.

Managed well, remote workers can certainly hold their own in the productivity stakes. Waters reports that BT homeworkers get 20 per cent more work done than their commuting counterparts and also take fewer days off sick. Employees who switch to homeworking “give back” 60 per cent of the

time they used to spend on travelling to and from work in the form of extra working hours.

This amounts to an additional £8m worth of output a year for the company, she says.

The AA also reports comparatively lower absence levels and lower staff turnover among its homeworkers. “What you get is a very loyal and flexible workforce,” Austin says.

When you aren’t physically there with someone you are managing, “the most important thing is trust”, says PwC’s director of global resourcing, Charles McLeod, who has people in Ireland, the UK and the US reporting directly to him. “If you’re in the same place as the person you are managing, you can read their body language. In a remote relationship, you don’t have that same visual stimulus and you can’t build the same sort of personal connection,” he says.

Being open and honest with employees about the limitations of virtual contact is important in order to help establish a strong relationship, McLeod adds. “Right at the start you’ve got to explain to your staff that it’s not going to be the same as if you were only 20 minutes away from them.”

Managers of virtual teams agree that the proliferation of broadband telephony and the growth of video conferencing and other online communication tools have provided a huge boost to collaboration among geographically dispersed teams.

“Five years ago we used little collaboration technology – it was a case of phone calls and face-to-face meetings. Now we use all sorts,” says Neil Malpas, operations director at Serco Consulting, which has offices throughout Europe, the Middle East and the Asia-Pacific region. His company uses a

global intranet and specialist collaboration software that combines video conferencing with a “digital whiteboard” to allow people to work on the same documents simultaneously.

IBM, predictably, is another heavy user of online collaboration tools. Alongside established technologies such as e-mail and video conferencing, the company also has its own social networking sites. “We have a Twitter-like tool, blogs, wikis, podcasts, RSS feeds and so on,” says Kildare, who acknowledges that, while these are all useful, remote workers must beware of information overload. “There is so much happening – so much data, so much communication – that you can’t keep abreast of everything. You have to focus on what is relevant,” he says.

IBM also has an online “Blue Pages” – a directory of all employees worldwide, including each person’s e-mail address, mobile number and biography. “This kind of thing promotes flexibility, because I know I can find out where people are and what they do instantly,” Kildare says.

Many virtual team managers sing the praises of instant messaging software as an effective way to stay in contact with distant employees. “It works really well for fast communication,” Kildare says. “People in a different time zone often sign on to instant messaging late at night in the hope that they can catch me during my working day.”

McLeod is also a fan of instant messaging, finding it “very powerful. I can tell if someone is available to speak to me by seeing if they are logged on to the system. Then I can send them a quick question and we can have a dialogue on screen through the day.”

Yet video conferencing might still not have become as affordable as many people might think, McLeod says. “Holding a video conference can be as expensive as air travel.

For example, when I looked into doing a series of video conferences with people in Singapore, it worked out cheaper to fly there.”

He sees the advent of BlackBerrys, iPhones and other mobile e-mail devices as a mixed blessing, too. “This has created a cult of accessibility – the idea that, if you can’t get hold of somebody, they must be skiving. As a virtual manager you have to accept that they may be doing something that’s even more important than what you want them to do.”

Moreover, virtual contact is not a total replacement for face-to-face interaction, Malpas stresses. “If you talk to 49 out of 50

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of Serco’s key people in the UK, they would say that they’re still not getting comparable quality from their remote interactions,” he says. “It’s terrifically important to us that managers spend sufficient time with their staff. Without this, they’d have no real understanding of the environment in which their people are operating and couldn’t empathise with them.”

Kildare agrees. “While I use all of the technology at my disposal here at IBM, there are still times when it’s important to be with team members so that, when they interact with you in chat rooms or video conferences, they know what you’re really like in the flesh.”

Most virtual team managers believe that it’s important to meet their remote staff face to face fairly regularly to ensure that everyone is on the same wavelength. Even at BT managers often meet their remote staff in person every four weeks or so.

Kevin Horgan, the manager in charge of the AA’s 240 homeworkers as well as its Birmingham call centre, takes a more formal approach. “Most homeworkers live within 45 minutes of one of our offices. Performance managers meet each of them once a month.”

On top of this, all newly recruited remote workers spend six months in training at one of the AA’s central offices.

Malpas argues that it’s even helpful to experience the local climate at first hand. “I could read in someone’s e-mail that it’s 37ºC and 90 per cent humidity in Sydney, but it would be meaningless. When I’m there, it gives me a different perspective on what we’re doing. You can’t get that from any kind of collaboration software.”

Serco Consulting also believes that it’s important to give team leaders from, say, India, experience in central offices. “It makes them feel inside the tent, rather than a subcontractor within the organisation,”

I get to my office at 9am and ask my virtual team questions that I know they won’t answer until after lunch Malpas explains. “Technology alone can never overcome the silo mentality.”

Cultural differences can be more of a challenge to those managing dispersed teams than many firms would admit, says Malpas, who considers them “the most significant issue of all”. For example, executives in some countries can be more process-orientated than those in others, leading to frustrations during a project.

This issue calls for “cultural dexterity” from managers at PwC. “If you are someone who is going to lead a global team and not have the opportunity to do it face to face, you’ve got to be emotionally intelligent, sensitive and worldly – and you’ve got to expect parts of that team to respond in different ways and at different speeds,” McLeod says.

Mukherjee uses training to mitigate this problem at TCS. “If part of our team is in China, part of it is in India and another part is at a customer’s location, we have to do a cultural orientation exercise to ensure that everyone understands what is and isn’t socially acceptable in each country,” he says.

Virtual team managers obviously need to be aware of religious festivals and their impact on distant employees’ availability for work, for example, but they also have to understand local attitudes towards dress codes, working hours, meal times and a whole range of other issues on which they could inadvertently cause offence.

Another problem is that it’s hard to prevent valuable employees from being poached by competitors if they are on the other side of the world, warns Martin McGrath, head of restructuring at Grant Thornton. “At another firm I worked for, we had situations in India where people would go to lunch and not come back in the afternoon because they’d been offered a job by another company,” he says. “You have to understand local labour laws and local employees’ expectations in order to be prepared for such a situation.”

Collaborating across time zones has inevitable drawbacks. “I get to my office at 9am and ask my virtual team questions that I know they won’t answer until after lunch – and some answers won’t come through until after my day is done,” says McLeod at PwC. “So we all have to be fairly flexible about what we consider to be our working time.”

Time differences can be less of a problem for managers in Europe than for their colleagues in the US or Asia, because they are only a few hours from each.

And one benefit of working across multiple time zones means that your team can be “the function that never sleeps”, McLeod adds. For example, Briggs says: “Our Indian colleagues at Capita work on back-office admin tasks, which helps us to make the most of our time when we get to our desks in the UK.” Looking ahead, McLeod believes that the next generation of workers – brought up in a world of Facebook, Twitter and other social networking tools – will take to virtual teams like ducks to water.

“Social networks support all kinds of behaviour, including collaboration and networking. But the next generation also does a range of other things online, such as making purchases, rating products and publishing blogs,” he says. “There are people who sustain friendships via Facebook who may have never met in person. Virtual relationships come naturally to them.”

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Scott Payton is a freelance business journalist and editor.

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If you think implementing a new finance system is hard, try doing it amid a huge reorganisation. Tim Reardon and Roger Gaskin describe how the NHS Institute for Innovation and Improvement did it all within a year.

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On April 1, 2008 the NHS Institute for Innovation and Improvement, already in the early stages of a fundamental transformation, decided to abandon its shared services finance system and introduce one that offered the flexibility to handle a changing business model, new processes and a restructured organisation. Despite giving ourselves only a year to do it, we were determined to establish a tool for the business, not a financial straitjacket. Along the way we took calculated risks, made mistakes, learned a lot and, ultimately, achieved a sound foundation for the future.

Ever since its creation in 2005, the institute had aimed to part-fund itself by selling products and services, which remain highly marketable outside the NHS. But three

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years later we needed a more flexible way to plan priorities, objectives and resources. This would require a fundamental shift in focus from product development to delivery. To this end we were seeking a totally new business model, processes and systems – which could deliver on a large scale to NHS England and also offer products to organisations abroad – up and running within a year.

We soon realised that we’d need direct control of financial management, so we decided to bring in-house the services being provided by NHS Shared Business Services (SBS). This would mean implementing a new finance system. From the outset we believed that it had to be implemented in phases. Our priority was to find one that could take over from the SBS’s Oracle system before the

start of the next financial year: April 1, 2009.

The initial response to the deadline was controlled panic – we were asking people to go on a journey into the unknown during the busiest part of their year. But in a way this made it the right time to do it, because the tight schedule focused people’s minds.

Our one concession was that we would aim to have just enough of the system in place to provide robust accounting capability in the new financial year. Our key tasks would range from learning how to operate the NHS’s highly technical VAT system and setting up interfaces with supplier and banking systems to engaging people to design and take charge of 37 business processes before we could start designing and building the system and training people to use it.

In the early stages we sought independent research and advice from Logica to help us with the transformation process, the new management structure and our project plan.

Its recommendations included: strengthening the roles of programme sponsors, directors, managers and the programme management office; clarifying the new business model; tracking progress and value added; strengthening the project’s roles; and planning communications with stakeholders.

It was vital that the project should be transparent and engage all interested parties, including customers, suppliers and auditors.

Six weeks before consulting Logica, we’d also hired an experienced project manager, which increased the pace and effectiveness of the programme. The project continued to be controlled by our “work stream leads”, who ensured that deadlines were met and took responsibility for the outcomes.

Our priorities at this stage were to engage the project’s senior sponsors and establish

What is the NHS Institute for Innovation and Improvement?

The institute was formed in July 2005 to develop and disseminate new ways of working, technology and world-class leadership in the National Health Service.

It also manages NHS England’s graduate training schemes in finance, HR and general management for an intake of about 500. It has fewer than 200 employees (plus contractors for specific projects) based at offices in Birmingham, Coventry, London and Manchester.

It has three types of grant-in-aid funding from the Department of Health: revenue, capital and cash. It must deliver its objectives using the funds available against each limit or face the automatic qualification of its accounts. The annual

budgets and business plan objectives are communicated to managers before the start of the financial year (April 1).

The business planning process typically runs from September, involves all managers and is finalised once it’s approved by the Department of Health’s main sponsor and the NHS Institute board.

Most of the institute’s corporate functions were performed in-house, but treasury, accounts payable, accounts receivable, VAT, system interfaces and certain financial accounting tasks were outsourced to NHS Shared Business Services, while payroll and expense functions were provided by the NHS Business Services Agency.

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detailed plans. We also had to define changes to roles and processes (and analyse their impact); manage our stakeholders, communications and training; and draw up a support plan for sustaining change after the project went live. Everyone involved would need to understand that the system existed to serve its users, so we had to find out what the users actually needed. We put a lot of time and effort into asking them and understanding their answers.

Our most significant problem was that the institute was undergoing a fundamental change influenced by factors outside its control. The much-derided aphorism coined

by Donald Rumsfeld, the former US secretary of state for defence, about known unknowns and unknown unknowns suddenly seemed ominously relevant. We needed a flexible system that could easily be altered and augmented after implementation.

We also had to rethink the structure and role of finance: we needed it to evolve into a leaner function that focused less on controlling and processing transactions and more on supporting decisions and strategic accounting. This was vital if, for example, we were to develop pricing models that would enable us to compete in new markets.

We would then need to assemble a project team; define current and future user requirements; define selection criteria; identify system options; organise product demos; compare systems and vendors; select a vendor; work with it on a limited prototype; and sign the contract. We wanted a managed IT platform, so we would be focusing on establishing a service-level agreement with a tight contract – any system is only as good as the support provided before, during and after set-up. We evaluated the shortlisted suppliers on their professionalism, quality, approachability and flexibility of their people, their experience in comparable organisations and their attentiveness to their clients.

Before work on designing the system started, our vendor ran a one-day session introducing users to it so that they were aware of the implementation timetable and the magnitude of the task. The technical emphasis of this event was balanced by the presence of a business change expert, who was there to ensure that people wouldn’t underestimate the importance of the new organisational processes or the effort that would be needed to insource services.

We designed our system in a series of workshops facilitated by the vendor. These continued through October and November 2008 and included tests to prove its functionality and integrity. At the same time we were keeping the rest of the organisation up to speed with the new business processes, getting to grips with complex VAT rules and setting up interfaces with banks’ and suppliers’ systems. At times we did wonder whether our self-imposed timetable was a recipe for disaster.

We packed the whole project team into an office that looked as if it housed the wiring for a rock festival. The environment may not have looked congenial, but it was ideally suited to the kind of information exchanges that were essential for the parallel running of complex activities that would normally be hard enough to perform in sequence. The result was that the system’s design gelled with the business processes and was completed on schedule as the starting point for construction.

Here we had two configuration options: assisted build or managed build. The first would mean that our staff would configure the system according to the solution design document. The second would mean that the vendor’s consultants would build the system to our specifications remotely. We wanted to build knowledge in-house so that we could develop the system after it went live, so we chose the first option.

This was not without its challenges. Our staff weren’t experts in the system, so they needed training. This strained an already tight schedule, but it did mean that we could change the specification as we went along.

One example of this was an idea for a “travel team”, which emerged while building the procure-to-pay module. The institute’s wider transformation involved changing static project teams into a flexible workforce that could be deployed on projects as and when individuals’ specific skills were required. We had no administrative staff to make travel arrangements, so we needed a robust booking and receipting process. Building the system ourselves meant that the manager in charge of this module could adapt the specification and test it with users while the system was being constructed.

We were also able to start testing as individual components were completed.

This meant that we could find bugs early and ensure that the interfaces were working – eg, that payroll could feed easily into the new system. This stage also involved establishing banking software, closing down SBS cash draw-down access and setting up in-house capability without undermining the institute’s year-end cash target.

At this point we still needed to find out whether the system was living up to expectations. Our user-acceptance testing (UAT), involving representatives from the business, noted any defects and, if appropriate, fed these into training. Once we tested the build and were confident that hitches had been resolved, we decided that testing the business processes would flush out any remaining integration and UAT problems. One of our main concerns here was to ensure that there were no security breaches. We documented our assumptions and results to provide a basis for future regression testing.

The managers leading the work streams were responsible for the tests and their results. There were two versions of the system with a common core – self-service and “smart client” – and both were tested.

The six most important issues that determined the risks and mitigation strategies in our testing were: n Setting up test environments for both versions of the system.

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n Setting up workflow in sufficient detail to enable the realistic testing of all aspects. n Producing exhaustive test scripts to cover all likely scenarios. n Writing scripts to test the business processes sequentially. n Feeding any idiosyncrasies identified in the testing into training. n Involving business users in writing the scripts and witnessing the testing.

We then produced a test strategy and archived it, together with test results.

Stakeholder engagement had been a priority from the start. We made huge efforts to maintain awareness among the workforce and seek feedback – from one-to-one interviews with executive directors to system selection groups, system and process workshops and presentations. We knew that the scale of changes could cause anxiety and that the finance system implementation was a visible sign of these changes. In February 2009 we invited members of staff to sessions where they could see sample screens, discuss the logic of the system, understand how it would affect them and raise concerns for the sponsoring directors to consider. The sessions were challenging for those working

Lessons learned With hindsight, we would have: n Recruited our own project manager from the start. n Recognised the project manager’s skills as distinct from those of the accountant who uses the system. n Reminded ourselves regularly that this was not only a system implementation, but also an insourcing and change management project. n Prioritised reporting so that we could return to business as usual earlier.

What we did well: n Listened to what users wanted, wrote it down and checked it with them. n Selected, designed, built and implemented the system to run the business, not to crunch the numbers. n Resisted “scope creep” and stuck to the original plan. n Kept the project team members in the same location to aid communication.

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on the project, but they were valuable, serving as a release valve for human issues that could have derailed later training sessions.

We chose an external company to help design and deliver training in how to use the system. Our initial meetings with trainers took place in December 2009 once the system design documents had been written.

Based on these, we developed a training package that could be modified whenever the design of the system changed.

n Refused to change the schedule. n Involved all stakeholders from the start – eg, the NHS auditors attended all the system design workshops. n Recognised that there’s no such thing as too much communication. n Accepted that training is training, not a debate about how to do things. n Established training requirements in time to allow it to be customised. n Ran extra training sessions. n Ensured that things were done in the correct order – eg, the system design followed the business processes and the training followed the system design. n Got the business to design the business processes and “own” them. n Revealed as much of the big picture as possible as early as possible, so that people could see how they fitted into it. n Conducted user-acceptance testing. n Ensured that the project team had decision-making authority. The team believed that a poor initial decision was better than no decision.

The financial year-end is, of course, a particularly busy time. To ensure that people could attend training, we booked slots as soon as we could. But, with changes to the wider business running alongside the system project, some users’ roles were still unclear.

In finance, for example, no accounts payable, treasury or accounts receivable staff would be in post until March. The project workers identified the users and their roles while they were configuring the system. As soon as their roles were understood, users were booked on to short, tailored courses in small groups.

Trainees are often apprehensive about their ability to cope with a new system under everyday pressure, so they depend on a lot of support in the early stages of operation. The users’ post-implementation support included a helpline, an intranet site providing answers to frequently asked questions; further training; and regular meetings.

The original plan was to provide support after the system had been live for a month and then disband the project team to return to their roles in the finance department and use their knowledge to supplement training for the rest of finance. But some business changes took longer than the finance project to embed; the deadline for producing our year-end accounts was reduced by three weeks; and the new finance team was reorganised. What’s more, the business demanded system modifications sooner than we’d planned, which meant that the project team’s skills were needed immediately in order to achieve this. So in May we retained a reduced project team to deliver further training, improve reporting capability and implement a time-sheet pilot. This also necessitated new budgets and plans.

The project ended up delivering its objectives on time and within budget. Our auditor wrote a favourable review and went so far as to “congratulate the finance team for the successful implementation”.

“In each case significant assurance has been provided, with some review points for the finance team to action,” stated the audit committee minutes. “This is very positive, as typically the level of assurance drops when a new system is introduced.”

Tim Reardon ACMA is assistant director of finance at the NHS Institute for Innovation and Improvement. Roger Gaskin FCMA is a business consultant.

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UK organisations using large amounts of energy have fewer than six months to register with the carbon reduction commitment (CRC) energy-efficiency scheme. We ask members of the energy-reduction team at EDF Energy what this will mean for the power giant – and businesses around the country.

illustrations by Russell cobb

Don’t MISS the boat

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What has been the biggest challenge for EDF Energy posed by the carbon reduction commitment (CRC) so far?

Jonathan Foot, chief environment officer: It’s been the complexity of our business.

We are a foreign-owned subsidiary with a parent company linked to several joint ventures with various ownership structures.

Our challenge has been to get the information we need in order to work out our relationship with these entities and then to understand who’s responsible for reporting energy consumption at different sites.

And what about your future challenges?

JF: The main one will be to determine how we account for changes to the company’s structure when reporting to the CRC scheme. If there is an acquisition, for example, we will have to explain why our

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energy levels have changed and work out how we can avoid being penalised for a spike in our energy consumption.

There is also the issue of office space.

Staff from several business units may share the same floor of an open-plan office. The only way to allocate their energy use to the appropriate company is to estimate it. But estimated consumption incurs a ten per cent penalty under the CRC. We’re also having to run parallel environmental reporting systems, because the CRC is more restrictive than our Climate Commitments reporting framework on what we can disclose. For example, our carbon footprint reporting covers transport, but the CRC doesn’t require information on this. We also use diesel for back-up generators at some of our offices, but we would exclude this non-core fuel from the CRC.

The new scheme will reward organisations that build energy efficiency into their long-term strategy.

What has EDF Energy done so far to reduce its carbon footprint?

JF: In 2007 we introduced Climate Commitments, which was one of the biggest environmental initiatives launched by a UK energy provider. We have pledged to reduce the intensity of carbon dioxide emissions from our electricity production by 60 per cent by 2020.

We have also committed to eliminating office waste that goes to landfill by the same date, and by 2012 we’ll cut the energy consumed in our workplaces by 30 per cent. We’ve achieved a 16 per cent reduction in carbon emissions across our estate since 2006, avoiding about £1m in energy costs to date.

How have you achieved these cuts?

JF: We’ve regulated the heating in buildings so that the air-conditioning systems aren’t run so hard. We’ve reduced our travel emissions by using teleconferencing more, travelling to Paris by Eurostar and banning people from taking domestic flights in the UK for business. With our branded vehicles, we looked at driving standards to reduce fuel consumption and introduced devices that have enabled us to track our vehicles and make their call-out routes more efficient.

We also have a business performance team that tracks and audits our progress against our delivery plans.

What other measures can you take to ensure that you get a good position on the CRC league table?

JF: With all the uncertainty about how the

EDF Energy’s experts

Dr Jonathan Foot, chief environment officer.

Siobhan Hyland, regulation analyst.

Charles Jegar, energy services commercial manager.

Sarah Bee, product development manager.

league table is going to work, it’s a watching brief. I’ve picked up some concern from companies about the possible effects of rating private businesses against public bodies on the league table. For example, if EDF Energy comes out at the top and the NHS comes out at the bottom, the allowance it pays into the scheme will be recycled back to us. This could have an impact on the public’s perception of our brand or the acceptability of the CRC scheme.

So what should firms be doing now?

Siobhan Hyland, regulation analyst: April 1 marked the start of a new era for the UK. Bodies classed as “large non-energyintensive organisations” will have to report carbon emissions every year as a legal duty.

They have to register with the Environment Agency by September 30. Actual trading

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Some companies initially perceive the CRC as an additional cost.

But they will achieve big savings in the longer term won’t start until April next year, but there’s a lot to be done, so these companies need to get their skates on.

What does the registration process entail?

SH: Companies need to have collected information about the number of sites they have, the type of energy they use and their total energy consumption for the first benchmark year of 2008. Large firms will also have to decide how they want to report this data: as a group or as separate entities.

Many companies are deciding it’s better to report all subsidiaries as separate entities, because this will accommodate possible acquisitions or disposals. The Environment Agency is accommodating this by extending the registration deadline to the end of June for companies that want to report this way.

But the September 30 closing date remains.

What are the implications for executives?

SH: They will need to understand how their company will organise itself for registration; what the annual routine will be for reporting emissions and the purchase of energy use allowances; and how the firm will maintain its focus on long-term energy efficiency.

Executives also need to look at the resource implications for upstream and downstream activities. It’s time to listen to the energy manager and put more resources into this area. They need to focus on how to manage the implementation using existing resources. They must ensure that they have the authority to go to procurement, estate management and finance to secure

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the support to register for the CRC scheme accurately, completely and on time.

What has been the overriding reaction from companies so far?

SH: The main concerns are complexity, cost, and the view that they can’t save any more energy. Most companies acknowledge that reducing carbon emissions is a good thing, but many struggle with the detail.

There has also been confusion because the guidelines have been changed at various points. A lot of companies have decided to wait until things are clear and settled before acting. The result is that they may still have a lot of preparation to do.

The main message is that, once you’ve got your head around what needs to be done, you’ve got to do it. We have been urging companies not to delay acting on the CRC, as it can take time to collect all the information needed on their organisational structure, the sites they own or rent and the different fuels they use.

They must collate this data correctly.

If any of a company’s sites are omitted, it could mean penalties in the long run. Senior managers play a central role in ensuring that all the different pieces of data are collated.

The extra cost must be the greatest concern for most companies, surely?

Charles Jegar, energy services commercial manager: Some companies initially perceive the CRC as an additional cost, which is understandable. CFOs are being approached by their energy managers,

who are saying that the company has to find the money to make improvements. But, once they are made, the firm will achieve big savings in the longer term. When we help our customers to reduce energy consumption, we often enter contracts of two years or more. It’s an ongoing improvement.

And it’s not only the engineering we can help with. It’s about people and bringing the organisation with you.

What about the companies that have already done everything possible? Won’t they lose out in the new league tables?

CJ: When we have advised customers, we’ve highlighted areas that they hadn’t considered before. We have yet to come across a customer where we haven’t been able to contribute something.

Conversely, some businesses think they are more energy-efficient than they really are.

We recently worked with a leading high-street retailer with strong green credentials. We guaranteed to make it savings of £85,000 over two years and we achieved this by optimising working practices. There is always something you can do better, but there’s no panacea. It’s a blend of upgrading your equipment and optimising what you already have.

There’s also the annual cost of the CRC allowance, isn’t there?

CJ: Once a year organisations need to purchase their energy-use allowances. But

all this money is recycled back six months later. The amount yours gets back depends on how well it performs in comparison with other organisations. The CRC offers incentives as well. Installing automated meter reading (AMR) meters, or smart meters, will help an organisation to score points once the scheme is running, but all meters must be upgraded by March 31 next year. They will also get points for accreditation to the Carbon Trust Standard for the measurement of corporate carbon emissions.

If you’ve already done these two things, you won’t miss out. The Carbon Trust has a way of balancing everything so that organisations that have already acted systematically to improve their energy efficiency will also be rewarded.

Are AMR meters expensive to install?

Sarah Bee, product development manager: All companies now pay in their standing charge for a man with a van to come and read their meter. It costs about the same to install an AMR meter. So it’s not a new expense. It’s simply a change in the way the meter is read.

Can the meters help with CRC reporting?

SB: The new meter uses mobile phone technology to send readings directly to the supplier. This means more accurate readings for customers.

An AMR meter records energy consumption every half hour so customers can see the patterns of usage throughout the day.

EDF Energy has a metering division, Energy Field Services, that can install meters nationally and is open to all organisations. We also have a product called Energy View, which takes

How Nando’s has prepared for the CRC In anticipation of the scheme, restaurant chain Nando’s started to consolidate its gas and electricity meter information and bring all contracts under one supplier with EDF Energy.

“Measuring our gas and electricity usage has become increasingly important to ensure that we can forecast more accurately to avoid penalty charges for exceeding our available supply capacity,” says a spokesman for Nando’s. “Through our relationship with EDF Energy we have been able to implement a new AMR metering system and have benefited from significant cost savings by purchasing

the data from the AMR meter and displays it online for customers.

This is a much more accessible way to see what you’re using.

For example, a large retailer with sites all over the country can see all the energy consumption on different sites through one portal.

It can then use sites that are particularly efficient as an example of best practice.

Can these meters be installed relatively quickly?

SB: It’s simple on single sites, but a big organisation will need to allow time for preparation. If you have many meters to install, it’s important for you, the installer and the energy provider to have a common site list. If this isn’t accurate, mistakes – eg, initiating changeof-agent flows for the wrong meter points or sending a meter installer to a de‑energised, unoccupied site – are easily introduced.

If you have a

products and services directly. We have seen an annual reduction in our electricity costs of £2.4m. And, on top of the invisible savings, we’ve also saved £5,000 as a result of a direct price negotiation with EDF Energy, rather than using a broker.”

The financial and reputational pressures of the CRC have been a key factor in Nando’s energy planning, the spokesman adds. “As with all businesses, we recognise the importance of becoming more energy-efficient – from an environmental perspective and to streamline our business to deal with challenging legislation such as the CRC.”

particularly large installation programme with time or access problems – eg, telecoms companies with remote stations or airports with tight security – it can take months to ensure that the right health and safety training has been provided or security clearance granted for metering engineers to access these sites.

So you don’t necessarily have to get your meters installed by your energy provider?

SB: No. Companies can shop around for the best deal. But, if they choose a different company, they may be cutting off their nose to spite their face. The end-to-end delivery process is complex, so it may not be advantageous to separate your metering.

Bearing in mind the complexities, it’s probably wise to try keeping things simple.

Further information

See the user guide at www.decc.gov.uk or visit www.edfenergy.com/crc.

For details about a CIMA Mastercourse on “Accounting for carbon”, visit www. cimamastercourses.com/acfc.

financial management

27

22 November 2010 | Royal Lancaster Hotel | London

Celebrate the sound of success at the CIMA Annual Awards 2010 Whether a soloist or group, step into the spotlight and be recognised for your winning performance.

Nominations have opened for this year’s prestigious CIMA Annual Awards 2010 and we want to encourage you to make a nomination.

The CIMA Annual Awards 2010 acknowledge excellence in management accounting and celebrate the talent of people who are leading the way within our profession.

To nominate and for a full list of categories, along with judging criteria and entry forms, visit the website www.cimaglobal.com/awards The deadline for nominations is 15 July 2010.

Winners will be announced at the awards dinner on 22 November 2010 in central London. For further details visit www.cimaglobal.com/awards Best of luck! sponsored by

>technicalmatters Cost management 32 Commercial disputes Employees waste a lot of effort working around systemic flaws that get buried. Brian Plowman explains how to dig them up and solve them.

34 Managing sustainability For more articles on management accounting, careers and development, see www.cimaglobal.com/insight.

It’s difficult to take out costs from your organisation if its resources are already stretched. Such constraints make it important to target where changes to business processes will give the best possible return.

It’s crucial not to waste precious time and effort on making changes where few benefits can be realised or where an inappropriate cut could damage the core business.

My firm’s detailed study of the work done by employees in more than 300 organisations recently made a staggering finding: no organisation ever documents more than half of its routine activities. Most respondents had put in place written job descriptions and

procedures, but there was a big discrepancy between the tasks these listed and what people actually did. The reality is that staff are constantly handling unforeseen variations to their formal duties. The tasks they perform in order to adapt to these variations are undocumented. Within a short time the invisible but routine “interfacing activities” – so called because they link the tasks carried out by individuals and teams – outnumber the documented interfacing activities.

This means that in any organisation about half of the processes are designed spontaneously by employees to work around the problems they face. You might well think

Getty images

Even in high-performing organisations, up to 25 per cent of resources can be absorbed by ‘noise’ – activities such as chasing up missing equipment, doing avoidable rush jobs etc financial management

29

>technicalmatters

that this situation would be noticed quickly and solved. Unfortunately, this isn’t the case.

Take, for instance, one employee at a hospital who was responsible for issuing a particular piece of equipment. His anticipated interfacing activities included receiving a requisition and then locating and distributing the equipment. His unanticipated interfacing activities included having to compensate for the fact that the item, despite being shown on the computer as “in stock”, was clearly elsewhere. After phoning the person who’d ordered it and establishing that an alternative would not suffice, his quick fix was to scour the many places where the equipment might be. Asking the stores manager to improve the tracking system elicited an all too common answer: that his team would get on to it as soon as it could. This practice, with all the extra work it entailed, became the routine.

In another case, a sales manager at a supplier of ready meals raised a production order to fulfil a special promotion for a supermarket chain. His anticipated interfacing activities included placing orders with suppliers for all packaging and ingredients, and giving his manufacturing team a schedule for the project. His unanticipated interfacing activities included chasing up extra materials for another production run at short notice to meet a shortfall at the end of the promotion period. This panic order reinforced the view among factory managers that the sales team didn’t fully grasp the impact of promotions on the firm’s processes and costs, which was why every promotion had lost money. Their request to the sales manager to sell promotions as a fixed quantity of meals rather than for a set period elicited the old chestnut that he would get on to it as soon as he could. Of course, the usual wasteful practice stayed in place and became the norm.

We found similar cases among our research sample time and time again – no sector or industry was immune.

The invisibility of these interfacing activities and the lack of understanding that surrounds them is always costly. Such situations reduce employees’ job satisfaction and the level of

30

financial management

Most organisations had put in place written job descriptions, but there was a big discrepancy between the tasks these listed and what people actually did customer service provided. Since interfacing activities usually account for half of the work they routinely do, employees feel the impact on their productivity keenly. For one thing, it’s unlikely that all these extra tasks would have been included in the budget, so staff are constantly under time pressure. And the rub is that they know that, if they were asked, they could probably suggest workable solutions.

An analysis of the research data found that about 80 per cent of the undocumented interfacing activities all had the characteristics of the examples described above – chasing missing equipment, doing avoidable rush-jobs etc. I use the word “noise” to describe such processes. The frightening statistic is that, even in highperforming organisations, up to 25 per cent of resources are typically absorbed by noise.

For some less fortunate organisations, this figure rises to 60 per cent or more.

When managers are asked to document in detail what their staff actually spend their time on, categorising these tasks in order to highlight problems and propose solutions, such requests often tend to drop into the “Sorry, too busy” file. The level of detail required to expose noise can be a stumbling block, too, unless an efficient and costeffective method of handling the volume of data is used. But, with the right tools, it is

possible – and working with employees to do it makes them really keen to fix the problems that they’ve struggled with for so long.

Finding noise not only gives an immediate opportunity for cost reduction; it provides a foundation for systematic and continuous improvement. Employees are committed to the exercise because it measures their reality, revealing the constraints and sources of process failure. Managers who suspect that processes are failing can pinpoint all causes and prioritise them for correction.

The imperative for most organisations this year will still be to improve productivity. But trying to motivate their employees by giving them financial incentives to work harder etc simply misses the point. You’ll find the real improvements only when you get close enough to the hidden detail that exposes noise – the unanticipated and undocumented interfacing activities that every organisation could do without.

Finding the noise, working out what’s causing it and eliminating these problems should deliver at least a 25 per cent cost saving, probably with no capital investment.

Brian Plowman is managing director of DevelinBevington, a consultancy specialising in productivity improvement (brian.plowman@develin.co.uk).

Further information

CIMA Mastercourses entitled “15 ways of reducing costs” will be held in London on July 29 and October 29. For more details visit www.cimaglobal.com/mastercourses.

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Business Law

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>technicalmatters

Commercial disputes

Any company, however good its risk management policies, can be hit by a legal claim. Paul Green offers his guide to dealing with one.

Nobody wants to think about disputes until they have one. But all too often companies find themselves stumbling into conflicts that they didn’t see coming, without knowing how to deal with them or how they could affect the business.

For many, the simple answer is to run to a firm of lawyers. Although that is often necessary, there are several other steps that managers should consider at the outset to ensure that the dispute is managed efficiently and cost-effectively, with minimal impact on the business.

An essential part of risk management is the ability to anticipate potential problems and prevent them from reaching a courtroom.

Being sued is a stressful, time-consuming and costly process. Even if your company succeeds in defending the case, the disruption can outweigh any financial gains.

A key objective, therefore, is to avoid litigation in the first place. But economic crises tend to lead to more legal action: commercial failures can upset loan repayments, while insolvencies spark competing claims among creditors.

Other claims can be caused by a change of heart – the motivation to recover money quickly is greater when business is bad.

Minimising the impact of litigation on your organisation can be separated into two stages: first, during the normal course of your dealings with a client; second, once you’re aware that a legal claim is imminent or has been issued.

A fundamental rule in business is not to do any work without first having a contract in place. The contract should be in writing,

where possible, and define the scope of the services being provided and the terms of remuneration. Without a written contract, the likelihood that a misunderstanding will arise between your company and a client is much higher. Furthermore, if a claim is issued against your company, you’d have no physical evidence of what was agreed.

Contracts can always be renegotiated, even after they have been signed, but you should ensure that any alterations made are meticulously documented.

Many claims by clients are based not on serious legal issues but on their dissatisfaction with the service provided. It’s essential, therefore, to treat clients with respect and keep them well informed. Problems such as exceeding cost estimates or missing deadlines are most easily tackled by assessing such risks early and informing the client as soon as possible. If the client is unhappy, having been informed by you of a problem, then their complaints must be tackled immediately and appropriately.

Many companies have a complaints manager who’s responsible for understanding the nature of the grievance and identifying ways to resolve it quickly. Simply ignoring a complaint will not make it go away.

Fees are the main source of unhappiness among clients, so your billing needs to be clear and consistent with the terms of the contract. Invoices should be rendered on time, too. You must also ensure that your business has up-to-date professional indemnity insurance. Before taking out such a policy, you should check that it is relevant

If initial talks prove fruitless, the courts offer a relatively cheap mediation service using an independent third party to facilitate discussions 32

financial management

to the services your business provides and covers the amounts likely to be sought should proceedings be instituted.

On average, businesses spend about 50 per cent more time preventing litigation than responding to it. In certain situations litigation cannot be prevented. A balance needs to be struck between the management of existing risks and those that have yet to emerge. By anticipating problems before they become serious, your company will have a much better understanding of its overall exposure.

It is, of course, advisable to seek legal counsel as soon as you become aware of the threat of litigation. Instructing lawyers in commercial disputes is a long, expensive process, but there are steps you can take to reduce the costs and time involved. First, you should be aware of what is involved in a claim and the processes that your business will be required to undertake (or contribute to, if lawyers are instructed). The most common ones are preparing your case; disclosing the documentary evidence your business will rely on if the matter goes to court; and preparing the witness statements of individuals who are able to give factual evidence in support of your case.

If your firm does instruct a lawyer, it’s advisable to appoint one member of staff to handle discussions with the lawyer on behalf of the company. To ensure objectivity, this should be someone who is not personally involved in the dispute.

The diligent preparation of evidence is the most effective safeguard. Most companies store their data electronically and it’s essential that this information is managed efficiently. Disorganised data storage, an absence of document management policies and a high turnover of IT staff can all cause problems. Courts are keen to ensure that both sides in a case can identify the relevant areas of contention. In doing so, judges demand the disclosure of all documentary evidence on which the parties will rely. For the unprepared, the cost of searching for this

Alamy

A little give and take: negotiations are best held on a “without prejudice” basis.

information and assessing its relevance can be onerous. Accordingly, it makes good sense to review the documentary evidence and filter out any clearly irrelevant information to ensure that your lawyer does not have to do the same review only to arrive at the same conclusion. Effective data management allows you to evaluate the merits of each party’s position. You can’t be certain that a claim made against your company has been prepared with full knowledge of all the facts. The prompt disclosure of key documents that best show the strengths of your case may encourage an early settlement.

Witness statements are usually left to the lawyers to draft, but this is not always necessary. It is important that all of the relevant information is discussed and crossreferences are made to other statements to check that the information they contain is correct and consistent.

Even if your staff aren’t confident about producing statements themselves, they should prepare a detailed written summary of events. Claims take time to reach court, at which point relevant people may have left your business or be unable to recollect key events.

The summary can be used as evidence if an employee cannot give evidence or as a

memory aid if your lawyer is asked to prepare a statement on their behalf.

You should be open to making and/or receiving offers to settle the claim and be aware of the other methods (apart from straightforward negotiation) upon which a resolution can be reached. It is almost always better to accept a reasonable offer than to go to trial. If initial talks prove fruitless, the courts offer a relatively cheap mediation service that uses an independent third party to facilitate discussions. It’s best to hold negotiations on a “without prejudice” basis to ensure that the other party may not later seek to rely in court on anything that you said during the talks.

It should also be agreed that the terms of any settlement be kept confidential so that the dispute and the resolution are not advertised to other clients, who could be concerned that a similar situation might affect them.

If the dispute is overly complicated, there’s little sense in trying to conduct the

litigation yourself. More often than not, a business that attempts to do this will end up spending more money on instructing lawyers to undo what has been done and start the litigation process afresh. By seeking legal advice early you can gauge whether you have the time and ability to do it yourself or whether the matter would be best left to the specialists.

It is impossible to guarantee immunity from the threat of litigation, but proficient data management systems and a willingness to negotiate a settlement are fundamental. Improving your knowledge of the litigation process and the potential costs involved is also vital. Any business, no matter what country it is based in, should adopt this strategy, particularly at a time when cash is so important.

Paul Green is a commercial litigation solicitor at Barlow Robbins (www.barlowrobbins.com).

Further information

Visit www.cimamastercourses.com for details about a two-day CIMA Mastercourse entitled “Understanding commercial contracts workshop”, which will take place in London on July 16.

financial management

33

>technicalmatters

Managing sustainability

alamy

CIMA has published a series of organisational case studies showing the key role of finance in planning and implementation. Gillian Lees reports.

34

The article “Accounting for sustainability” in FM’s January/February issue explained the strategic imperative of managing the effects of climate change. But what should financial managers actually be doing to help their organisations tackle this challenge?

An international survey of financial managers and sustainability professionals

by CIMA in conjunction with Accounting for Sustainability has uncovered some useful examples of best practice. The nine case studies it has derived from this research and published are a rich resource for management accountants keen to start tackling climate change.

One of the key conclusions of the study was that finance needs to be involved in sustainability initiatives – eg, in forecasting, investment appraisal and cost/benefit analysis – so it’s helpful to see how some firms have made this happen. The Asda case study, for example, shows how the finance team plays a key role in the planning, testing and implementation of sustainability programmes such as “Zero waste to landfill”.

The Fife Council case study features a cross-functional framework for implementing its carbon emissions reduction plan that sets out the specific role of the finance team.

Other sustainability governance structures can be found in the Jaguar Land Rover and Marshalls case studies. Marshalls, a supplier of stone and concrete landscaping products, conducted a carbon labelling project. Its case study shows some of the spreadsheets designed and used by the finance team to help generate a label for each product group.

As another example of sustainability in action, Compass Group, one of the world’s

financial management

largest food and support service providers, worked with Sherwood Forest Hospitals NHS Foundation Trust on new technology to reduce wastage in catering. A model shows how the management accountant calculated the potential cost savings of the investment and how a tracking system was used.

There are also plenty of sample models and project summary documents in the Asda case study. One model shows how the finance team monitors a project whereby food that cannot be sold is bulked up at its recycling centres and sent for reprocessing into biofuels or pet food. Finance is a key member of the Asda project team, providing actual and forecast cost/benefit analysis every month.

The Asda finance team also pulls together project summaries under the sustainability programme’s umbrella title of WO4L (“We operate for less”). It captures measures of success, issues full-year forecasts and reports the year-to-date actuals, along with performance against targets. It also engages with other members of the project team to update reports on the milestones reached.

The finance team at Fife Council played a key role in evaluating and explaining what was at stake if the local authority were to fail to hit its emission reduction targets. It presented three different carbon management scenarios, illustrated the success of the local authority’s existing carbon management initiatives and highlighted the

potential savings to be achieved by meeting reduction targets.

The case of Masisa, a forestry business based in South America, demonstrates how the balanced scorecard can be adapted to incorporate social and environmental factors with financial ones to create a sustainability scorecard. And there are some revealing insights into the “dashboard reporting” approach to sustainability adopted by Punch Taverns, the UK’s largest pub group.

The case studies would not be complete without referring to both cost and carbon emissions savings. Punch Taverns, for example, has worked with the Carbon Trust to reduce its consumption of electricity and gas by 11.5 per cent and 12.8 per cent respectively in five years. And a Unilever factory in Canada has saved more than C$4.2m (£2.7m) since 1999 by meeting its goal of cutting energy consumption by an average of six per cent a year. The Cathay Pacific case study also demonstrates the fuel and emissions savings achieved as a result of the airline’s investment in more efficient aircraft and routes.

The successful organisations of the future will be those that address big strategic challenges such as climate change most effectively. There is no better time to learn from some of the current leaders in the field.

Gillian Lees is an enterprise governance specialist at CIMA.

Further information

To access the case studies, along with CIMA’s “Accounting for climate change” discussion paper, visit www.cimaglobal.com/sustainability.

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>careerdevelopment

Package tour

Amy Campbell presents the main findings of the institute’s 2010 student salary survey, which has been extended to encompass 15 key territories. longer have a significant proportion of the highest-earning CIMA students.

There are twice as many men as women in the top salary tier. The pay gap between the sexes can vary hugely by country – in Sri Lanka there is a 42 per cent gulf, for example, while in Ireland the disparity has come down to two per cent.

The higher the level of study attained, the more likely a respondent is to anticipate receiving a bonus this year. For the 58 per cent of respondents who anticipate receiving a bonus in 2010, the global average pay-out is expected to be 8.3 per cent of salary – down from nine per cent in 2009. The figure rises to 12.1 per cent for those in the highest pay bracket. Ten per cent more men than women will receive a bonus this year.

Students in the Asia Pacific region are significantly more likely than those elsewhere to get bonuses, with 80 per cent anticipating a pay-out this year, as opposed to 67 per cent in Europe, the Middle East and Africa – although those in Zambia expect to receive the biggest bonuses as a percentage of their salary (see table, right). Students in Ireland and the UK are the least likely to receive

CIMA has expanded its second annual student salary survey to include Botswana, China, Pakistan, Poland, Russia, the UAE and Zambia, while continuing to cover Australia, Hong Kong, India, Ireland, Malaysia, South Africa, Sri Lanka and the UK. The survey, conducted in February, collected salary data in local currencies from 2,563 employed students who’d sat a CIMA exam in the previous two years under the 2005 qualification structure. In some countries the average salary is reported as an annual figure; in others it is reported as a monthly figure (see diagram, below).

Looking at salaries by city, London, Dublin and Johannesburg have significantly more high earners because of their preponderance of students working in financial services. The average annual student salary is £36,900 in London, €43,000 (£37,800) in Dublin and R392,400 (£35,600) in Johannesburg.

As in 2009, the financial services sector has a large proportion of higher-earning students, but the salary gap between industries has closed since last year. In particular, the IT and telecoms industries no

Russia 154,250 roubles**

UK £30,800* Ireland €41,400*

Poland ZL11,800**

UAE 16,500 dirham**

* Yearly salary ** Monthly salary

Pakistan PKR68,900**

Hong Kong HK$35,000**

India Rs8.1lakhs*

Sri Lanka Rs48,800** Botswana P162,000*

China RMB215,500*

Zambia K6.4m** South Africa R364,200*

CIMA students’ average salary by territory (2010)

Malaysia RM68,750* Australia A$88,800*

2010 sample size: 2,563 2009 sample size: 2,093

Bonus as a percentage of salary Country/ region

Average bonus as a % of salary (2010)

Zambia

15.9

Russia

15.2

Pakistan

13.9

Sri Lanka

13.6

UAE

13.6

Poland

12.8

China

12.5

Malaysia

11.7

South Africa

11.3

Hong Kong

10.8

India

10.6

Australia

10.0

Botswana

9.2

Ireland

7.8

UK

7.4

Global

8.3

bonuses. About 70 per cent of students in healthcare, education and the public and voluntary sectors are not anticipating any bonus this year.

Globally, 51 per cent of CIMA students are satisfied with their pay – a seven per cent decline on 2009 – while satisfaction with benefits has remained relatively steady at 67 per cent (see table, next page).

Students in two of the new nations covered this year – Botswana and Zambia – are particularly dissatisfied with their pay and benefits, but this may be explained by the fact that they also have relatively high expectations. No group stands out as particularly satisfied, but satisfaction among students in Australia has fallen by 20 per cent in the past year.

Bonuses and pensions remain among the most sought-after benefits across the board.

The provision of support for CIMA studies also remains highly valued, especially among students aged under 35. Over 60 per cent of respondents are benefiting from study leave and/or contributions towards their CIMA fees.

financial management

37

>careerdevelopment Students’ satisfaction with their benefits packages Country/ region

Satisfaction with Satisfaction with Highest-rated benefits (2010) benefits (2009) benefit (2010)

Hong Kong

73%

75%

Bonus

Poland

72%

n/a

Bonus / healthcare

UK

70%

70%

Study leave / CIMA fees paid

Ireland

68%

72%

Pension

Russia

68%

n/a

Bonus

India

61%

56%

Healthcare

South Africa

61%

60%

Study leave

Australia

58%

80%

Study leave / bonus / flexible hours

UAE

58%

n/a

Healthcare

Pakistan

56%

n/a

Company car

Malaysia

55%

51%

Bonus

China

53%

n/a

Bonus

Sri Lanka

50%

51%

Bonus

Zambia

40%

n/a

Healthcare

Botswana

30%

n/a

Pension

Global

67%

68%

Pension / study leave / CIMA fees paid

Students in Hong Kong and Malaysia are more likely than average to receive a bonus, while those in UAE prefer to receive travel benefits. The ability to work from home is particularly valued by students in Russia, India and the UK, but of little interest to those in Pakistan, where a company car is the highest-rated perk.

Pakistani students put in the longest working week (49.7 hours on average), closely followed by those in Hong Kong.

The global mean is 41.7 hours and about a third of students feel under pressure to work outside normal hours. Whereas last year Indian students felt the most pressure, this year it’s those in Hong Kong.

Preferred destinations The top ten locations cited by students considering a cross-border job move: Location % of sample citing location Main reasons for considering move 1 Australia 47 Improve quality of life 2 US 35 Experience a different culture and

improve quality of life 3 UK 31 Take up new career opportunity and

increase salary 4 Canada 21 Improve quality of life 5 UAE 14 Increase salary 6 New Zealand 12 Improve quality of life 7 Switzerland 10 Improve quality of life 8 Singapore 9 Improve quality of life and experience a

different culture 9 South Africa 7 Increase salary and improve quality of life 10 Hong Kong 6 Experience a different culture

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Nearly two-thirds of respondents intend to change jobs within two years – a four per cent rise on 2009. For the 19 per cent of potential movers who are planning to relocate abroad, mainly English-speaking countries are the preferred destinations (see table, bottom). Australia, the numberone choice, is particularly popular among Sri Lankan students.

The only nation to see a significant decline in popularity is the UAE: 23 per cent of respondents cited it as a potential destination in 2009, compared with 14 per cent this year.

This may reflect the nature of the economic downturn in the country, which struck in late 2009, long after other regions had been hit.

Nearly 60 per cent of respondents don’t expect to be affected by redundancy, pay cuts or freezes, or reduced hours. Perhaps surprisingly, given the changes that have occurred in their industry, students in banking, finance and insurance are among the most confident about job security, along with those in the retail, natural resources, energy and utilities industries.

Just under 40 per cent of the respondents believe that their pay will be frozen in 2010. The biggest earners among them are the least likely to anticipate a freeze, but they are more expectant of a cut, even though this is a much less common concern for the sample overall (five per cent). Among all those respondents expecting a pay cut, the average salary reduction anticipated is a sizeable 6.5 per cent. Students in the highest salary bracket are contemplating an average cut of 8.5 per cent.

Amy Campbell is an information analyst at CIMA.

Further information

For more country-specific analysis and reports, visit CIMA MY JOBS at www.cimaglobal.com/myjobs.

For further details about the research, e-mail yourvoice@cimaglobal.com.

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Tools to manage reverse logistics Reverse logistics is an area that retailers and manufacturers cannot afford to ignore. Tight margins mean that improving the management of returns can have a very significant impact on bottom line performance. There can also be a considerable impact on environmental CO2 emissions.

A CIMA study focused on the management of retail returns, explored the reverse logistics process from a holistic supply chain approach and the role that management accountants can play.

Download a free copy of the tools to manage reverse logistics from our website at www.cimaglobal.com/reverselogistics You can’t afford not to read it.

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Paper E2 Enterprise Management

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aper P3 P Performance strategy

>student ONE2ONE Paper T4 part B clarification The “Case Study” article in April’s FM explains how to apply the assessment criteria to maximise your marks, but it’s important to read the unabridged version at www.cimaglobal.com/t4article.

The new specimen Case Study paper is split into questions 1 (worth 90 marks) and 2 (ten marks). The number of issues in the case material for this paper, which has been adapted from November 2008’s exam, has been reduced by one to compensate for the extra time needed to tackle question 2.

Ten marks are available under the “logic” criterion for the new question 2 requirement, which is designed to get you to summarise issues from your point of view. Since question 1 is likely to have already required a narrative, question 2 tests your communication skills – you’ll be awarded marks for presenting key points in a logical way. It may require you to produce a range of documents – letters, draft presentation slides, e-mails etc, for instance. (You can take the specimen paper answer for question 2 as a guide to what’s acceptable for slides – ie, bullet points, not narrative.)

Guidance on how to target the ten marks for the new question 2 requirement is given in the full website article on page 6 under the subheading “Prioritisation”, and on pages 8 and 9 under the subheading “Logic”.

>study notes Rowan Bomphray Finance graduate, king’s cross station redevelopment project, network rail You won world prizes in both diets of the exams last year. That’s impressive.

I got the highest marks in the world for P8 and the fourth-highest for P2 in November and I came fifth in P1 last summer. The generous amount of study time allowed by Network Rail helped me a lot, but the company also has a really encouraging atmosphere – we’ve had prizewinners here before, which means that we all know it’s an achievable goal. Otherwise, we probably wouldn’t believe that such a feat is possible. One of the other finance graduates came first in the world for another paper and someone else here came joint fourth with me in P2, so we all did well.

How many of you are there?

There are seven finance graduates in my year.

For our first placement we were sent to work in the shared services centre in Manchester.

We shared accommodation, so we learned about the finances of the company while also bonding. We study together – we are granted four study days and four revision days per module as well as ten days of study leave – which makes the atmosphere both supportive and really competitive.

That seems a generous study programme.

Is there a catch?

It is generous. Network Rail does expect us to pass all our exams in two years, which is fast, and we are expected to become ACMAs as soon as we can collate the necessary work experience. We are also expected to work for the company for a couple of years after we pass our finals.

Did the training scheme influence your choice of company?

I decided to take CIMA while I was travelling round the world for a year after graduating in maths from the University of Warwick. Part of

the attraction was that the qualification is updated constantly so that it stays relevant, and that it’s recognised internationally, which creates more career opportunities. I applied to other firms as well, but chose Network Rail because I liked the fact that I would be using my training to do something tangible – to improve transport – rather than move money around. In the longer term I’d like to move into a more strategic role and I may do more studying, but I’m not planning this in detail yet.

What roles have you worked in so far?

After spending two months in the shared services centre I went on two three-month placements. The first was in the enhancements team, which manages the budgets for projects that improve the railway system (rather than maintaining the existing infrastructure). This was interesting because it included all the 2012 Olympics projects, so it had a huge budget. Then I went to Edinburgh to work in the maintenance finance team there. This was a three-person outfit, so it had much smaller budgets, but we worked much closer to the budget-holders so were able to exert more influence. I’m now working for a few weeks on the redevelopment of King’s Cross station because the company is centralising many projects and has asked a few of the graduates to go in as extra help before the transfer.

Do you have any advice for other students?

Don’t overwhelm yourself. We studied with Kaplan and I focused on class study notes, not the textbooks. It’s much more important to understand the general principles and how to apply them than to read every page of a vast tome. I’d tried that and panicked. You can’t learn everything. I found it was much more important to listen to the tutors’ advice about what to focus on and to look at the past exam papers than to get bogged down in detail.

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>studynotes

PAPER E2

Enterprise Management

Getty images

The rise of shared service centres and outsourcing is changing the face of the accounting profession. Alan Marsden discusses the key issues.

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If you glance through the results of recent surveys about the finance function, it’s easy to conclude that the profession is in a state of flux. Research reports with titles such as “Brave new world” and “Transforming the finance function” are common.

It’s clear from the findings that finance directors are understandably concerned about how they can keep their businesses going through the most serious recession since the Thirties. But a closer analysis reveals a deeper-rooted sense of unease among accountants about their profession’s changing circumstances.

Some of the challenges they face stem from incidents such as the Enron and

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WorldCom scandals in 2001, which resulted in the enactment of strict compliance laws in the US. But others are more long-standing, having arisen from changes in business that began in the late 20th century. They stem primarily from technological innovations, globalisation and the resultant increase in competition. These trends will continue to exert pressure on companies – and on the way the finance function works – for many years to come.

As all finance professionals are aware, advances in IT have provided a range of tools to aid the collection, storage, manipulation, analysis, interpretation and communication of the data that’s the raw material of their craft.

Financial software packages have substantially improved the efficiency and effectiveness of accountants by removing much of the toil of their everyday tasks.

But perhaps more significant for the future of accounting has been the development of enterprise resource planning (ERP) software to the point at which all functions can be integrated into one system. Although many firms are still using older labour-intensive ERP systems that still force accountants to use spreadsheets offline for analysis, the latest packages offer a single database that contains all data for the various software modules that typically address each functional area, including finance. These

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>studynotes

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innovations have enabled large multidivisional organisations to centralise their finance function, possibly from operating units around the world, into a shared service centre (SSC). Such a centre operates to a set of rules that ensure consistency in the methods applied across the organisation, resulting in a constant standard of output.

The advantages of SSCs are summarised in a CIMA technical briefing, “Contracting out the finance function” (August 2001), which argues that centralisation offers both financial and non-financial benefits.

These include: n Economies of scale that enable the organisation to cut posts and so reduce its employment costs. n The potential to locate an SSC in an area where labour costs are low. n Savings on the cost of premises and associated outgoings on insurance, security and legal fees. n The ability to achieve tax savings by moving more profits to a low-tax regime. n The consolidation of the various disparate systems used by different business units. n The ability to cater for the company’s growth in a cost-effective way, because any acquisition, new product or service can be handled by the SSC with only a marginal increase in resources. n Quality improvements arising from a dedicated SSC pursuing a more professional supplier-client relationship. n The ability to measure SSC processes and standardise them via internal benchmarking.

The number of SSCs continues to grow: half of all respondents to CIMA’s ongoing survey last year claimed to work in an organisation that used such a centre.

Recent studies have assessed the impact of SSCs on efficiency and effectiveness.

Research by the Hackett Group in 2006, for example, found a steady reduction in companies’ finance and accounts costs as a percentage of turnover since the early Nineties. The top-performing respondents cut

financial management

their costs by 60 per cent. They achieved such efficiency gains through process improvement (simplification, standardisation and automation), greater use of technology (ERP and business intelligence systems) and economies of scale, whether their SSCs were in-house or outsourced.

American Express provides a useful example of an SSC implementation. The company rationalised its financial activities from 46 locations around the world into three SSCs with the objective of achieving cost savings, economies of scale and improvements in quality. Two years later it was able to close one of these centres because the other two had become so efficient.

Although SSCs have proved their value, setting one up can entail considerable effort and expense. This is particularly true where the centre is to be located abroad, because different legislation, tax rules and financial reporting requirements – not to mention the cultural, linguistic and currency management issues – must be taken into account.

An alternative to the SSC approach is the arrangement known as contracting out or business process outsourcing. Both terms refer to the act of procuring a product or service from a third party in accordance with terms that are legally enforceable. This involves a considered decision to entrust internal functions to an external supplier. The reasons for entering an outsourcing arrangement overlap with those for setting up a SSC, but they do differ in some key respects.

One of the main reasons for using outsourcing and SSCs is to save costs. In the case of outsourcing, the saving on direct labour costs can be substantial, especially if the service is located in another country (“offshored”) where employment costs are significantly lower. Where the outsourcing supplier has many customers and a large operation, the client could benefit from the reduced costs associated with the supplier’s economies of scale. It may also be able to obtain a service of a higher quality than could

be achieved in-house because the supplier has the ability to attract specialist expertise.

The second main reason for outsourcing is that it allows the organisation – particularly the finance function – to focus on its core activities. For finance, much of the routine work involved in transaction processing can be outsourced, but the analysis and interpretation of data for decision-making is seen as central to the organisation, requiring a deep knowledge of the business.

As with any function, the outsourcing of finance has drawbacks as well as advantages. The main ones include: n A loss of control arising from the reliance on a third party to provide the service. n A loss of expertise arising from the lack of an in-house finance function. n A threat to confidentiality. n A risk that the service provided will be of unsatisfactory quality.

All of these issues need to be addressed whenever a service is outsourced, so it’s particularly important to draw up a watertight service-level agreement.

The challenge that such developments pose to the finance profession is that a substantial proportion of what was traditionally the work of accountants is now being done in large “factory processing units” employing hundreds of people. While there is no question that they are qualified to do the work, there’s a risk that a division of labour will open up between the accountants who are involved in routine processing and those who take the chance to assume the role of “business partner”.

Leaders in the finance field see the transformation in the profession wrought by technological innovation and globalisation as an opportunity for finance and accounting professionals to move up from the routine tasks of transaction processing to assume a business partnering role in which they will use their finance and accounting expertise to help managers at both strategic and operational level make and implement decisions. But the changes represent threats as well as opportunities. It has been argued that, unless finance professionals actively promote the business partnership role, they are unlikely to fulfil their potential and their organisations may suffer as a result.

PAPER E2

The role of business partner has always existed. Many FDs have assumed it partly because they have developed a good understanding of their organisation and are able to contribute to strategic decisionmaking. But structural changes in many organisations have meant that the typical finance professional is no longer a member of a relatively small team providing and interpreting data for the company in which they are embedded. They are increasingly employed in an SSC or an outsourced processing centre that may employ hundreds of people. When financial professionals are physically and socially remote from their nonfinancial colleagues, the mutual learning that once occurred between accountants and their colleagues in marketing, sales, HR etc is far less likely to take place.

Organisations and professional bodies have responded to these new structural arrangements by formalising the development of the previously informal role of business partner. CIMA, for example, is committed to ensuring that its members understand the managerial aspects of business, while several leading organisations – eg, Unilever and Kimberly-Clark – have set procedures in place to develop their financial professionals into future business partners.

To date there is no clear “best practice” model for the finance business partner, but a meeting of the CIMA Improving DecisionMaking in Business Forum last year made the following observations: n SSCs, including outsourced centres, can offer reporting and analysis services that would otherwise have been provided by a business partner. n Most business partners are embedded in the business and provide tactical financial support – for example with budgets, planning and analysis – to line managers.

Some of this support can now be provided by SSCs. n Some business partners are more definitely expert members of the finance function, reporting directly to the finance director. These may provide business partnering in specialist areas such as risk management or mergers and acquisitions, or they may be strategic business partners who support the group FD.

n Only a select few finance people who are embedded in the organisation can combine the business understanding and working relationships gained through their proximity to non-financial colleagues with strategic thinking to provide leadership.

The forum regards these as true business partners. They can challenge line managers as sparring partners.

Despite the debate about the business partner role, the early findings of independent research commissioned by CIMA suggest that most organisations have yet to develop a more strategic role for finance. Although there is evidence to show that some accountants are assuming a more business-orientated role, many are occupied mainly by transactional accounting and financial reporting.

“Having introduced SSCs, we still have about 800 finance managers, but only 100 of these could be considered strategic business partners,” reported one member of the forum.

“Many of the rest may not have the aptitude to develop the broader soft and business skills to complement their core financial skills.

Even those that do have these qualities may find that their core financial skills will not suffice for the form of quantitative analysis often required to support decision-making.”

If this example is typical, it suggests that all those organisations involved in training and developing accountants must make a concerted effort if these professionals are to realise their full potential.

Alan Marsden is associate lecturer at Manchester Metropolitan University Business School.

E2 further reading

A Norton and J Hughes, The Official CIMA Learning System – Enterprise Management, CIMA Publishing, 2009.

The CIMA Improving DecisionMaking in Business Forum, “Improving decision-making in organisations: the opportunity to reinvent finance business partners”, CIMA, July 2009.

Exam practice Try the following question to test your understanding. The solution will appear in CIMA’s student e-magazine, Velocity (www.cimaglobal.com/velocity).

CB, a western European company that had established global leadership in electronic transmission technologies in the late Nineties, began a rapid expansion programme that targeted markets in the US, Latin America and Asia. Having pursued joint ventures and acquisitions involving 18 different companies, CB found itself with multiple finance reporting units and finance directors in each of the 43 countries in which it operated. Faced with IT duplication and complexity, the senior management team realised that CB’s finance and accounting department was not aiding profitable growth and needed to be standardised.

In 2009 CB addressed the question of how best to restructure the finance function across the organisation. One option was to outsource routine finance activities to a third-party supplier and the other was to establish a centralised shared service centre, which, although it would be expensive and time-consuming to set up, would allow the company to retain greater control of its own operations. Whichever alternative was chosen, the implications for the members of CB’s finance department would be significant.

You are required to: (a) Discuss the merits and drawbacks of outsourcing CB’s finance function to a third party compared with those of setting up and centralising the function in a dedicated shared service centre (15 marks). (b) Explain the implications for the employees working in CB’s finance department if (i) the function were to be outsourced and (ii) the function were to be restructured so that its tasks were performed centrally in a shared service centre (ten marks).

financial management

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>studynotes

Performance Strategy The examiner for P3 sets out the new syllabus and offers some hints and tips on improving your own performance strategy for the exam.

The P3 syllabus reflects the growing emphasis on risk management among businesses and not-for-profit entities, whose decision-makers must be seen to be managing both upside and downside risks.

Risks can arise in a variety of ways, so P3 draws on those aspects of earlier papers that develop a sense of commercial awareness. This paper will also lay some important groundwork for T4 part B. The topic weightings have changed slightly with the introduction of the 2010 syllabus. This is really only fine-tuning, though, because there are strong links among the different areas of the syllabus.

The weightings are intended as a guide to the emphasis of the exam, but there will always be scope for interpretation because some questions could be said to be drawn from more than one area.

Syllabus area A: management control systems (ten per cent weighting) This topic was worth 15 per cent in the 2005 syllabus. Its lower weighting here indicates that questions on it will almost always be set in conjunction with another syllabus area.

This means that a question will often combine areas A and B, with the first part requiring the identification of risks and the second asking for a suggestion for appropriate controls.

Syllabus area B: risk and internal control (25 per cent) This topic, which was worth only 20 per cent in the 2005 syllabus, has three elements: the evaluation of risks; the design of strategies and internal controls; and the governance implications, including ethics.

Candidates are often nagged to read the question properly, but that advice is particularly relevant here. If a question describes a scenario and asks you to evaluate the risks that are described, the question ought to provide some guidance on the dimensions that you should use in doing so. It would be legitimate to ask for only significant risks to be identified, or for those

46

financial management

that are controllable or those that arise from location or marketing strategy. The degree of direction will vary from question to question.

In designing strategies and/or controls, you should focus on solving the problem effectively and at a realistic cost. Scant credit will be given for a recommendation that would cost more to implement than it would to leave the problem unsolved.

Risk management is an important area in the development of corporate governance codes. You should be aware of the approach that’s taken to ensure that agency problems are addressed and that the mechanisms for reassuring stakeholders are working effectively. You must also be aware of the ethical implications of practising as a management accountant and of managing an entity. Questions on this topic will reflect the political and cultural sensitivities that can arise. They will not test a rote-learned knowledge of the CIMA code of ethics, but you will have to be aware of its principles and be able to apply them if required.

Syllabus area C: review and audit of control systems (15 per cent) The design and audit of control systems is important. All accountants must engage with controls and almost all have to interact with auditors. The CIMA qualification is, of course, a suitable basis for a career in internal audit – many members and students are employed as internal auditors.

You must be able to design cost-effective and relevant responses to control weaknesses. Questions will reflect the fact that audit is not a big element of the syllabus as a whole, but you should still be able to recommend an appropriate solution.

Syllabus area D: management of financial risk (35 per cent) This area was worth 30 per cent in the 2005 syllabus. Most organisations are exposed to significant financial risk, which is reflected by the increased weighting attached to the topic in the new paper. The syllabus is

based on the assumption that the most significant areas in which financial risks are likely to arise concern foreign currency, overseas investment and financing strategies.

There were often computational questions here under the old syllabus. This will continue to be the case, although such questions won’t carry many marks. The emphasis will continue to be on identifying risks and recommending appropriate responses.

The syllabus requires a knowledge of the nature and purpose of a range of financial instruments. You should be aware of the implications of issuing and/or holding such instruments. Questions will tend to focus on the practical situations in which they might be used, rather than on asking you to recall any and every instrument that might be used to control, say, currency risk.

Weak answers often focus too much on the selection of financial instruments, but it’s often more appropriate to consider simple ways to achieve natural hedges instead. For example, transaction risks from the sale of goods in a foreign currency might be reduced by importing materials priced in the customer’s currency. But you should note that some obvious solutions would simply pass the risk on to a third party, who may be unwilling to accept them.

Syllabus area E: risk and internal control in information systems (15 per cent) Virtually all entities rely on the output of their information systems, which are almost always computerised. This section, which was worth 20 per cent in the 2005 syllabus, reflects the fact that accountants must be aware of the specific risks associated with the design, implementation, maintenance and operation of information systems. This area is also likely to be examined in the context of a broader question covering other topics.

Paper structure As with the other two strategic-level papers, 50 marks are available from answering P3’s compulsory question. The other 50 marks

PAPER P3

are available from answering two 25-mark questions, taken from a choice of three.

The common case material for the strategic‑level papers provides the context for the compulsory question. You won’t necessarily be able to predict its requirements, but you can at least consider the nature of the entity concerned and take that into account in your answer. For example, if the case describes a service business with no work in progress, you shouldn’t list inventory management as a significant issue in managing working capital.

The compulsory question will contain up to four separate requirements, each of which could be subdivided. This means that it could cover a significant proportion of the syllabus.

The other questions will tend to be scenariobased, too. They will typically have two or three requirements, with the possibility that each requirement will be subdivided.

Assessment criteria The P3 paper might pose some questions that require you to discuss concepts, but most of its marks are awarded for applying those concepts to a scenario.

The questions that were set under the 2005 syllabus are still indicative of P3’s broad approach. For example, question five in the November 2009 paper dealt with material drawn largely from section D of the syllabus: management of financial risk. It had three requirements, all of which broadly concerned interest rate risk.

Part A asked first for an explanation of the implications of entering a swap in order to convert a floating-rate loan into a fixed rate.

There was a computational element and also a requirement to discuss the results. Few of those candidates who attempted the question picked up on the fact that the savings associated with the swap were comparatively very small, so entering it might not be worth the time and effort.

Part B asked why companies might choose to accept the risks of borrowing at floating rates. Many candidates answered this well,

but large numbers failed to appreciate the fact that a lender entering a fixed-rate arrangement risks suffering a loss if interest rates rise and so would have to charge a higher rate in the first instance.

Part C asked about the shareholders’ views of the outcome of a risk management arrangement.

The point of this question was to test awareness of the fact that managing risks is often about making the best use of the facts available at the time. It is often irrelevant to look back to see whether the outcome would have been better if we had behaved differently. In this case the swap protected the company against a possible hike in interest rates that it couldn’t afford. The swap was undoubtedly successful in that respect, even though hindsight revealed that the rate rise did not occur.

The whole of the question could be summed up by asking “what is management trying to achieve?” with respect to each of its three requirements. That requires knowledge and understanding of the course content combined with the ability to relate it to the circumstances described in the scenario.

The post-exam guides are designed to indicate how an examiner intended the question to be answered, but there is always scope for giving credit to alternative approaches. There is a marking scheme to ensure consistency among markers (the process of quality control and checking consistency would require an article of its own), but this is for guidance and is not entirely prescriptive. Valid points will always be awarded marks, providing that they are relevant, whether they’re covered in the marking scheme or not.

Presenting answers If you have ever been taught Latin, you’ll probably remember that the key to

understanding is to “look to the verb”. If, for example, a question asks you to “discuss” an issue, your answers should “examine in detail by argument”. This implies that there will typically be two sides to the issue and that your discussion should consider both of them before drawing a conclusion.

You should plan and structure your responses by spending a few minutes for each question listing the key points and then deciding the order in which to make them. Marks are not given for presentation, but well-structured scripts that are clear and concise demonstrate a clear and logical thought process, so they tend to score more marks.

This is not only about gaining marks in the exam – it will be a huge help in your career if you can work in such an organised way.

Preparing for the P3 exam No matter what approach you have taken to studying for the paper, whether it’s an online module, a classroom course or simply working on your own through a textbook, you will need to supplement it by reading more widely. All CIMA papers require some understanding of business, but this is particularly true of P3.

Developing a degree of commercial awareness is difficult, but the key is to find out what’s going on in the corporate world.

All candidates should aim to read the business press at least once a week. While you are reading, consider the ways in which the firms in the news are responding to the real challenges facing them.

Remember that risk management can be as much about exploiting upside risk as it is about mitigating the downside. It’s important in the real world and it’s a fascinating aspect of any financial manager’s responsibilities. It should be possible to make this an interesting and enjoyable subject to study.

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>study notes

EXAM NOTICE

Visit www.cimaglobal.com regularly for updates.

May 2010 exams The next exams will be held on May 25, 26 and 27. Online entry for the exams is closed.

The institute does not accept cancellations and will not refund fees. The deadline for requesting changes to papers or exam centres was March 22.

Admission advice letters You must log into your MyCIMA account and download your admission advice (which has been available since last month). This document shows the exact details of your exam centre, as well as the papers for which you are entered. You must print out and take a copy of your admission advice with you to the exams and retain it afterwards, because it contains your candidate numbers.

You must also download and read the exam rules when you download your admission advice.

It’s your responsibility to download this and familiarise yourself with it before the exam. A “clean” copy of the pre-seen material and the assessment matrix will be given to you in the exam. You cannot take any notes in with you.

F1 Financial Operations – tax rules Information on the relevant tax rules is made available on CIMA’s website for at least six weeks before the exam. It will also be reproduced in the question paper.

Strategic level papers – pre-seen material Pre-seen case study material, which applies to all three strategic level papers, will be available online six weeks before the exams at www.cimaglobal.com/strategicpreseen.

It’s your responsibility to download this material and familiarise yourself with it. New unseen material will be provided in the exams.

Going to the exam As well as your admission advice letter, you will also need to present photographic identification in the form of a passport, driving licence or national identity card.

Student or employee IDs are not acceptable.

You must complete an attendance slip before starting each exam. It has a tearoff section that you should retain. This is your confirmation of attendance and it is valid for four months from the date of the exam.

Post-exam guides Guides for each subject will be available three to four months after the exams. These are essential reading for unsuccessful candidates and those studying a new subject.

Appeals process for exams Details of the appeals process can be found in the “Instructions for exam entry” document on the CIMA website.

Talkback service You can send CIMA your comments on the exam papers, exam centres and facilities via the Talkback line. The service is available for two weeks during and after the exams. Visit www.cimaglobal.com/talkback for details.

Note for P1 and P2 candidates The tables of formulae, which will be included in the P1 and P2 exam papers, have been revised and can be viewed at www.cimaglobal.com/p1samples and www.cimaglobal.com/p2samples.

T4 part B Case Study – pre-seen material The pre-seen material for the May T4 part B Case Study exams is available on CIMA’s website at www.cimaglobal.com/t4preseen.

Computer-based assessments at certificate level For full information about entering for a computer-based assessment, visit www.cimaglobal.com/certificateentry.

Exam results The May results will be sent out on July 15.

Visit www.cimaglobal.com/cimaonline by July 9 to register to receive yours by e-mail.

Queries Visit www.cimaglobal.com or get in touch with CIMA Contact or your nearest office (see panel, right).

Global contact details n CIMA Contact E: cima.contact@ cimaglobal.com T: +44 (0)20 8849 2251 F: +44 (0)20 8849 2450 n Australia office Suite 1305, 109 Pitt Street, Sydney, New South Wales 2000 E: sydney@ cimaglobal.com T: 1800 679 996 (toll-free in Australia) or: +61 (0)2 9376 9900 F: +61 (0)2 9376 9905 n CIMA Botswana Physical: Plot 50676, Second Floor, Block B, BIFM Building, Fairgrounds Office Park, Gaborone Postal: PO Box 403475, Gaborone E: gaborone@ cimaglobal.com T: +267 395 2362 F: +267 397 2982 n CIMA China office Unit 1508A, 15th floor of AZIA Center, 1233, Lujiazui Ring Road, Pudong, Shanghai 200120. E: shanghai@ cimaglobal.com T: +86 (0)21 6160 1558 F: +86 (0)21 6160 1568 n Hong Kong Division Suites 1414-1415, 14th Floor, Jardine House, Central HK E: hongkong@ cimaglobal.com T: +852 2511 2003 F: +852 2507 4701 n India liaison office Unit 1-A-1, 3rd Floor, Vibgyor Towers, C-62, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 E: india@cimaglobal.com T: +91 22 4237 0100 n Malaysia Division Lots 1.03b and 1.05, Level 1, KPMG Tower, First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan E: kualalumpur@ cimaglobal.com T: +60 (0)3 77 230230 F: +60 (0)3 77 230231 n Poland contact point Warsaw Financial Centre, ul E Plater 53, Warsaw 00-113 T: +48 22 528 6890 F: +48 22 528 6701 E: thierry.iovane@ cimaglobal.com

n Pakistan office No 201, 2nd floor, Business Arcade, Plot 27-A, Block 6 PECHS, Shahra-eFaisal, Karachi T: +92 21 3432 2387 E: pakistan@ cimaglobal.com n CIMA Ireland 45-47 Pembroke Road, Ballsbridge, Dublin 4 E: dublin@ cimaglobal.com T: +353 (0)1 643 0400 F: +353 (0)1 643 0401 n Russia/Ukraine contact point T: +7 906 091 4550 F: +44 (0)20 8849 2472 E: helen.buniatyan@ cimaglobal.com n CIMA Singapore 51 Goldhill Plaza #08-02, Singapore 308900 E: singapore@ cimaglobal.com T: +65 6535 6822 F: +65 6534 3992 n CIMA South Africa Physical: First Floor, South West Wing, 198 Oxford Road, Illovo, Johannesburg 2196 Postal: PO Box 745 Northlands 2116 E: johannesburg@ cimaglobal.com T: +27 (0)11 788 8723 or: 0861 CIMASA (0861 246272) F: +27 (0)11 788 8724 n Sri Lanka Division 356 Elvitigala Mawatha, Colombo 05 E: colombo@ cimaglobal.com T: + 94 (0)11 250 3880 F: + 94 (0)11 250 3881 n CIMA Zambia Physical: Plot Number 6053, Sibweni Road, Northmead, Lusaka Postal: Box 30640, Lusaka E: lusaka@ cimaglobal.com T: +260 1 290 219 F: +260 1 290 548 n CIMA Zimbabwe Physical: Sixth Floor, Michael House, 62 Nelson Mandela Avenue, Harare Postal: PO Box 3831, Harare E: harare@ cimaglobal.com T/F: +263 (0)4 708600/ 250475

financial management 49

>CEO’s notebook

Not necessarily, minister Attitudes must change in Whitehall if the public coffers are to be refilled, writes Charles Tilley, who sets out some of the key reforms needed.

A few weeks ago I was invited to give a talk to finance professionals at HM Treasury in Whitehall. Of all the civil service departments, it has a reputation for being populated by first-class minds, sharply focused on the nation’s finances, so it’s always slightly unnerving to face such an audience.

But on this occasion I was doubly confident that CIMA had something unique to contribute. The UK’s balance sheet is, of course, in poor shape and these are testing times for everyone in Whitehall. Where money was once plentiful, it is now in short supply – and things are going to get a lot tighter once the general election is over. My message was that the CIMA qualification is particularly valuable to the public sector, which needs financially skilled people not only to crunch the numbers but also to help shape policy, strategy and delivery in these straitened times.

As everyone knows, the next government will need to stimulate economic growth, thereby increasing the tax take, while cutting public expenditure. There will be a temptation to take a slash-and-burn approach to spending or impose a “salami-slicing” regime, but either option would be a backward step. Instead, thoughtful cost leadership is needed. This will be vital in the coming years, giving accountants in Whitehall and the wider public sector a key role. Management accountants are a lot better placed than economists, for example, to work out how to reduce costs while maintaining the quality of public services.

On the other side of the equation, accountants in

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central government need to make their voices heard better. It’s time for the middle ranks of financially qualified public servants to recognise their own value and be more assertive. For example, they need to ensure that ministers, keen to impress the media, don’t plump for new initiatives before existing ones have been given a chance to succeed. And they must also ensure that no one forgets the importance of value for money.

CIMA will shortly be publishing a report that sets out its detailed ideas about managing performance in the public sector. But the most important message is already clear: there needs to be absolute clarity about the next government’s objectives and its strategy for achieving them, along with powerful leadership and accountability. The Cabinet has a vital role in this. Only a united Cabinet can see through the requisite programme of change across government. An unequivocal demand from

The CIMA qualification is particularly valuable to the public sector, which needs financially skilled people not only to crunch the numbers but also to help shape policy, strategy and delivery in these straitened times ministers to achieve more for less will support public-sector managers who want to do the right thing. Opposition to reform in the public sector must end and government departments (and their ministers) need to stop fighting to defend their budgets.

This country has to invest for the future – its coffers won’t refill unless economic growth is stimulated. If the state of the public finances focuses minds in Whitehall to achieve clarity of purpose, end the silo mentality among government departments and instil cost leadership, then the crisis will have led to some important progress.

>instituteupdate Be prepared for Elections to change to Practising council 2010 certification regime At the end of 2009 council approved CIMA’s business plan for 2010. This includes a project to introduce a new practising certification and monitoring process. With effect from September 1, 2010, any member offering or providing accountancy services under the auspices of CIMA, as defined in council regulation 7.1.1, must be registered as a member in practice and must hold a current practising certificate. This will replace the existing two-tier system of provisional members in practice and practising certificate holders as described under council regulation 7.2.

The change is a response to recommendations by accountancy regulators on streamlining licensing arrangements for members working in practice. It will be effected via a new online “one-stop shop” for practising certificate registration and renewal, and for mandatory monitoring.

CIMA aims to ensure: that the institute continues to be recognised as demonstrating best practice through compliance and regulation in the public interest; that the public has confidence in the integrity and standards of its members; and that members’ exposure to risk is minimised.

More details will appear in subsequent issues of FM and Insight.

Visit www.cimaglobal.com/membershandbook for further information.

The following have been re-elected to serve for another term on council from the close of the annual general meeting on June 5, 2010 until the close of the AGM in 2003: A P Bainbridge Spring Area 1 (Central London and North Thames) S B Parsons Area 2 (South West England and South Wales) W A James Area 3 (East Midlands and East Anglia) D Barnes Area 4 (West Midlands) Professor T Hassall Area 5 (North East England) D Stanford Area 6 (North West England and North Wales) S McCue Area 8 (Northern Ireland) T O’Connor Area 9 (Republic of Ireland) M L Furber Area 10 (East, West, Central and Southern Africa) P J Adams Area 11 (Central Southern England) W F Rowlands Area 12 (South East England) K K C Chan Area 15 (North Asia) H M S Wickramasinghe Area 18 (The Americas) C Panditharatne Area 19 (Australasia)

The following have been elected for their first term as members of council, to serve from the close of the annual general meeting on June 5, 2010 until the close of the AGM in 2003: N Jayasinghe Area 14 (South Asia) Y C Lee Area 16 (South East Asia) H Parker Area 17 (Europe, North Africa and Middle East)

Investigation COMMITTEE The committee found a prima facie case for Peter Hans Michael Hillier ACMA to answer in relation to a complaint that he had: held an overpayment from a client to meet an invoice, not then rendered, for professional services to another company; breached his obligation of confidentiality to a client by discussing its business with another without authority; failed to treat two client companies as separate legal entities; was rude and unprofessional; and used an unacceptable tone in e-mails.

Pursuant to members’ regulation 6.3.5(v) and council regulation 16, the committee invited Hillier to consent to the imposition of the sanction of an admonishment by way of consent order, without further proceedings, to which Hillier agreed. A finding upholding the complaint was recorded and an order for the imposition of an admonishment was issued.

The committee found a prima facie case for Kurt Sickelmore, registered student, to answer in relation to a complaint that he

had stated on an employment application form that he was CIMA qualified when he was a registered student.

Pursuant to members’ regulation 6.3.5(v) and council regulation 16, the committee invited Sickelmore to consent

to the imposition of the sanction of a reprimand by way of consent order, without further proceedings, to which Sickelmore agreed. A finding upholding the complaint was recorded and an order for the imposition of a reprimand was issued.

Presidential engagements May 17 CIMA prestige lecture, Middlesbrough May 20 Executive committee meeting, London May 21 North West Midlands dinner, Telford

financial management

51

Past events

Coming events

Cima global events

Innovation experts take the stage “Creating the innovative enterprise” was the theme of this year’s CIMA Ireland annual conference, held at University College Dublin on March 2.

Among the speakers were Bettina von Stamn, founder of the Innovation Leadership Forum, and Shailendra Vyakarnam (pictured), director of the Centre for Entrepreneurial Learning at Judge Business School, University of Cambridge. They shared their insights on how to support a culture of innovation in organisations.

Joint seminar with StepStone China on “How to recruit the right candidate” March 4, Hong Kong Erik Schmit, managing director of StepStone China, explained how the best HR teams collect accurate data to aid effective recruitment, while Aidan Goddard, divisional council member of CIMA Hong Kong, shared his views on the transformation of the finance function.

Goddard also hosted a prize presentation ceremony for advanced management accounting students from the City University of Hong Kong.

Annual conference of the Karnataka State Chartered Accountants Association (KSCAA) March 6-7, Bangalore CIMA set up an information desk at the KSCAA’s 22nd annual conference, which was attended by part‑qualified and qualified chartered accountants.

CIMA global business challenge March 9, Bangalore Aubrey Joachim, CIMA’s president, inaugurated the second southern regional round of the institute’s student competition. Crisis Controllers from Christ University and CMS Consulting from Jain University were declared winners and runners-up respectively.

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Interaction with the Confederation of Indian Industry on higher education (CII) March 10, Delhi CIMA’s president, Aubrey Joachim, addressed members of the confederation with a speech entitled “Higher education in business and finance – making it more business-relevant”.

Round-table discussion with the Federation of Indian Chambers of Commerce and Industry March 10, Delhi CIMA’s president, Aubrey Joachim, attended the event along with senior business figures and educationalists, including Meleveetil Damodaran, chairman of the Securities and Exchange Board of India. The topic was “Professional education: building block for promoting corporate governance”.

Forum on international tax planning solutions March 11, Hong Kong CIMA’s Hong Kong Division was invited to become a supporting organisation at the event, run by the China Economic Review. An audience of 120 heard the views of tax experts from PricewaterhouseCoopers and Deloitte on tax planning strategies, transfer pricing and risk management.

Hong Kong Divisional AGM June 25 (time and venue tba) All members are welcome. Nomination forms for divisional council membership will be sent out soon. hongkong@ cimaglobal.com Ireland West of Ireland CPD event: “Female entrepreneurship” May 6 6.30 for 7pm, Clayton Hotel, Lynch Roundabout, Galway The event will feature a presentation by Margaret Heffernan, professor of entrepreneurship at Simmons College, Boston, and a participant in Channel 4’s TV series The Secret Millionaire. nicola.glynn@ cimaglobal.com Mid West branch golf outing June 11 Noon, Dromoland Castle Country and Golf Club, NewmarketOn-Fergus, Clare All comers are welcome.

A team will be selected to represent the branch at the all-Ireland golf outing in September. nicola.glynn@ cimaglobal.com

Malaysia The CIMA global business challenge June 26 8am to 1pm, Taylor’s University College,

Visit www.cimaglobal.com/events for updates and a full list of events.

CIMA Mastercourses – your catalyst for business change: www.cimamastercourses.com.

To submit an event for this page, e-mail michaela.lambert-beresford@cimaglobal.com.

47500 Subang Jaya, Selangor Darul Ehsan The winning team will represent its university and Malaysia at the global final, to be held in Malaysia in August.

Contact Zahidah on 03 77 230257

UK How to make a great first impression May 11 6.30 for 7pm, De Vere Wychwood Park Hotel, Weston, Crewe, Cheshire CW2 5GP region.four@ cimaglobal.com

Giffin golf challenge May 14 Noon, Wollaton Park Golf Club, Lime Tree Avenue, Wollaton Park, Nottingham NG8 1BT The event is open to any CIMA member, student or guest. You can enter as a team of two or four, or as an individual (partners will be arranged before the event).

Cost: £45 (includes food) cathy.mcgrath@ cimaglobal.com

Working capital optimisation May 12 9am to 5pm, London (venue tba) Cost: £580 plus VAT (£520 plus VAT for CIMA members) www.cimamastercourses. com/wcom

CIMA north-east England regional prestige lecture May 18 9 for 9.30am to 2pm, Teesside Business School and Teesside University, Borough Road, Middlesbrough TS1 3BA CIMA’s president, Aubrey Joachim, will deliver the keynote address.

Bryan Sanderson, former managing director of BP, and Adrian Evans, director of corporate programmes at Teesside University Business School, complete the line-up of speakers. A buffet lunch will be served. www.cimaglobal.com/ northeastengland

Information that influences May 13 9am to 5pm, London (venue tba) Cost: £580 plus VAT (£520 plus VAT for CIMA members) www.cimamastercourses. com/clsi

Skills for getting a job (in association with Robert Walters) May 18 6.30 for 7pm, City Inn, 1 Brunswick Square, Brindleyplace, Birmingham B1 2HW region.four@ cimaglobal.com

Is your marketing profitable?

May 11 9am to 4.30pm, CIMA, 26 Chapter Street, London SW1P 4NP Cost: £547 plus VAT www.cimaglobal.com/ marketing

Most of CIMA’s local events are free.

False peaks: how to keep a team motivated when it hits obstacles May 18 7.15 for 7.30pm, Village Hotel, 29 Pendwyallt Road, Coryton, Cardiff CF14 7EF www.cimaglobal.com/ southwestengland andsouthwales Summer ball – CIMA magic (in association with the Sellick Partnership) May 21 7 for 7.30pm, Telford Hotel, Golf and Spa, Great Hay Drive, Sutton Heights, Telford TF7 4DT The event will feature a drinks reception (including the chance to meet CIMA’s president), a three-course meal with wine, and entertainment.

Cost: £35 region.four@ cimaglobal.com Skills for getting a job (in association with Robert Walters) May 25 7 for 7.30pm, Holiday Inn Guildford Egerton Road, Guildford, Surrey GU2 7XZ www.cimaglobal.com/ centralsouthernengland VAT refresher and update May 27 9am to 5pm, London (venue tba) Cost: £580 plus VAT (£520 plus VAT for CIMA members) www.cimamastercourses. com/vrau

Bank of England – Mervyn King’s policy speech May 27 5.30 for 6pm, Bank of England, 11-15 Dix’s Field, Exeter EX1 1QA The Bank of England is opening its office in Exeter exclusively for CIMA members and students, who are invited to hear the Bank’s views on the financial world. region.two@ cimaglobal.com Fundamentals of transfer pricing June 9 9am to 5pm, London (venue tba) Cost: £580 plus VAT (£520 plus VAT for CIMA members) www.cimamastercourses. com/fotp

access to credit for all sectors of the economy.

This is a joint event with the ICAEW and ACCA. www.cimaglobal.com/ our-locations/uk/scotland/ scotland-events Accounting for carbon June 24 9am to 5pm Dublin (venue tba) Cost: £580 plus VAT (£520 plus VAT for CIMA members) www.cimamastercourses. com/acfc

Powering profitable growth June 11 9am to 5pm, London (venue tba) Cost: £580 plus VAT (£520 plus VAT for CIMA members) www.cimamastercourses. com/mrmg

Members in practice annual conference June 25 and 26 9am, Renaissance London Heathrow Hotel, Hounslow TW6 2AQ The 2010 conference will mark the 25th anniversary of CIMA members in practice. There will be a gala dinner on the first evening, featuring a disco and other entertainment.

Cost: £310 plus VAT for the full package (£465 for non-Mips). £150 for one day (£225 for non-Mips) www.cimaglobal.com/ our-locations/uk/ members-in-practice

The banking crisis: why and where next?

June 16 6 for 6.30pm to 8.30pm, The Banking Hall, Bank of Scotland Area Office, 110 St Vincent Street, Glasgow G2 5ER Bank of Scotland will present its perspective on the causes and effects of the crisis, focusing on the effects on liquidity and

Central London and north Thames student conference June 26 9am to 5pm, Chelsea Football Club, Stamford Bridge, Fulham Road, London SW6 1HS Cost: £20 (£15 for bookings before June 7) www.cimaglobal.com/ centrallondonand norththames

financial management

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>so you want to be‌

FP&A controller Jonathan Kitterhing explains what it takes to secure an attractive role with great potential for development.

Role: FP&A controller for a world-leading provider of information to the banking and finance industry Salary: £60,000 to £65,000 This US company is looking for a key member in its growing London-based UK finance team. The successful candidate will support the group’s strategic planning, budgeting and forecasting processes, and will be responsible for developing and leading the team’s revenue and P&L reporting procedures.

You will be technically excellent and CIMA-qualified (first-time exam passes are essential) and possess good general technical knowledge of IFRS and UK Gaap, strong analytical and reporting skills and exceptional systems knowledge covering SAP, Salesforce and MS Office. You will be an organised, hard-working, friendly and confident individual, with excellent communication and interpersonal skills that fit the company’s culture.

The role of FP&A controller is a natural step for all analysts looking to advance their careers – and, although there’s still a lot of competition for such jobs, there are now noticeably more roles available as companies start to focus again on growth.

But, while opportunities for these jobs are increasing, competition is fierce and employers can afford to be picky. The ability to thrive in a “business partner environment� – ie, explaining financial figures to business leaders in non-finance positions – is crucial.

Much of this role involves helping leaders to understand exactly what the numbers mean and their commercial impact on the organisation. Supporting business leaders in their plans for the future is vital, so an FP&A controller needs to be personable and must have strong communication skills.

Budgeting and forecasting are also key aspects of the role. CIMA members who can demonstrate the strongest blend of analytical and commercial skills will have an advantage here. Many people underestimate just how commercial these positions are. They tend to think the role is all about providing the numbers, but it is one of the most forwardlooking analysis roles. Controllers are essential to building five-year plans and setting key performance indicators, influencing change, making a business case for product launches and checking the viability of expanding into new territories.

This forward-looking element is also a key reason for the role’s popularity. So how do you make sure that you stand out in such a crowded marketplace? For a start, you need to tick all the boxes and have added extras.

The CIMA members who are successful in these roles generally have three to five years’ post-qualification experience along with good planning and analysis experience. This role only really exists at big blue-chip organisations, so experience in one of these businesses is essential. Although CIMA members have an advantage, you will also be competing against some ACAs, so you need to sell your achievements and focus on what value you have added to your business over and above the normal duties of your role. Experience on bids and pitches will help you to stand out.

Note also that our clients are seeking specific software experience: common requirements are Excel, Cognos, Hyperion and SAP. Successful FP&A controllers can look forward to a bright future: maybe three to four years in the role, before promotion to FP&A director. From there they could choose to manage a larger P&L account or to become a finance director or commercial FD before ultimately becoming a chief operating officer if all goes to plan.

Jonathan Kitterhing is manager of commerce recruitment at Robert Walters (www.robertwalters.co.uk).

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>...lastout

We rummage through in-box and postbag to bring you astonishing insights from the business world. If you’ve been on the receiving end of such wisdom and would like to pass it on, please send the most obvious and the most obscure in corporate communications to rp1@caspianpublishing.co.uk clearly labelled “Last out”.

Hair of the dog “Thirty-nine pubs close a week in the UK and the economy may be only crawling towards recovery, but the CEO of pub company Marston’s thinks this is just the right time to build bigger and better outlets.

“Last year his business, which employs 12,000 people, saw pre-tax profit fall 17.4 per cent to £70.3m per cent, while sales slipped 3.2 per cent to £645m.

But [Ralph] Findley believes that, rather than seeing new building, the pub industry will continue to suffer a raft of closures.

“He says: ‘There are around 55,000 pubs in the UK – and most commentators agree that we are overpubed.’”

City AM, March 22.

And we thought it would be a doddle “Britain’s Budget: chancellor faces an especially tricky task.”

FT online, March 22.

On the volley

“Conservatives use IR35 as political football.”

ClearSky Accounting.

Waving or drowning?

As the UK economy holds its head just above water, the AAT advises SMEs to keep their fingers on the pulse or risk going under Association of Accounting Technicians.

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financial management

Whatever happened to “grow your own”?

“Press information: new PwC appointments.

PwC has strengthened its forensics technology services and data analytics capabilities by poaching a team from KPMG.” PwC.

Does this mean that we can stop worrying about weapons-grade plutonium, then?

“In the week before Alcohol Awareness Month in April, the Narconon Drug Rehabilitation and Education Program reminds people that alcohol is probably the most dangerous substance in America.”

Narconon Drug Rehabilitation and Education Program.

Cleaning up on money-laundering “The French Grande Ecole, Telecom Business School has opened a financial trading room specialised in money-laundering.”

Noir sur Blanc.

And the banned played on “Prohibition doesn’t work, but it will be banned” The Observer, March 22.

If you can’t stand the heat, get out of the water “Many business owners and managers find themselves caught up in a constant round of firefighting, never managing (or only temporarily managing) to get their head above the ever-rising water.

“Hilary Briggs is a management consultant with over 20 years of industrial experience… So what is Hilary’s advice?

1 The first thing is to be aware of where you are on the continuum of firefight to calm. Think of it as a 0-10 scale and keep track of changes.

2 If you’re in the firefight side, the second action is to build a strong visualisation – including feelings – of what the ‘calm’ version would be like.

3 Then build a detailed plan of what’s required to deliver that. Identify where things are off track at the moment and why.

4 Identify specific actions and break them down into small pieces. Try to find five minutes today to make tomorrow better.

5 Take action to prevent the fires from happening in the first place. Involve all the relevant people and ensure that a continuous improvement loop is established.

6 Monitor the progress.

7 Look for signs of trouble – eg, if a customer or supplier becomes difficult to contact, it’s a sure sign that there’s a problem.

8 If you find yourself constantly uttering the ‘I don’t have any time’ excuse, then go back to your vision of the calm state and break the actions down into tiny pieces so at least some progress can be made.

9 Finally, establish a 100-day plan to help focus your activities on moving up the scale towards calmness.

Keep monitoring the data and adjust the plan as you go.

“Overall the key to help any business owner or manager move from firefight to calm is to take action to improve the situation.”

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