Contents

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Chapter 1 Introduction: How to Ensure Controllership
Success and Where It Matters . . . . . . . . . . . . . . . . . . . . 1
Chapter 2 Activities: What Successful Controllers Do . . . . . . . . . . 7
Chapter 3 People: Who Successful Controllers Are . . . . . . . . . . . . 23
Chapter 4 Interaction: How Successful Controllers Operate . . . . . 61
Chapter 5 Trends: What Currently Drives Controllership
Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Chapter 6 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

Appendix: Cases Illustrating Leading-Edge Practices . . . . . . . . . . . . . . 139

Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
 Preface
For us, it is surprising that this is the first book entitled “Drivers of Suc-
cessful Controllership.” Such a book should have been published much
earlier. In 1987, H. Thomas Johnson and Robert Kaplan triggered a “rel-
evance lost” debate regarding controllership, to which the response came
mostly in the form of searching for new fields of activity for controllers
(e.g., strategy). But the core question of whether controllership was suc-
cessful, and what drives such a success, was left mostly unaddressed at the
time. However, during the past few years, a collection of new academic
studies emerged that addressed this open question. The results reinforced
what could already have been observed in many companies: controllers
as “business partners” provided substantial value added, and, as a result,
staff counts of controllers began to increase, as did their responsibilities.
Despite this positive momentum, in some companies, old stereotypes of
the disliked “bean counter” or “corporate cop” continue to exist. From
our experience, we know how difficult and demanding the job of a con-
troller can be. Therefore, we felt it is high time to make more knowledge
public regarding the success of controllership and drivers of successful
controllership. This is where the idea to write this book was born.
This book represents one result of the many years we have spent
researching controllership issues, discussing with practicing controllers,
and consulting companies. We have reviewed the literature on control-
lership, explored the latest studies on the success of the controllership
function, and searched for best practices to inform a book that we believe
helps practicing controllers—as well as managers who understand con-
trollers—as enablers of their own performances, to do their jobs in the
best possible way. For us, writing this book has reinforced our enthusiasm
for controllership issues and has demonstrated, time and time again, just
how rich this field is.
We would like to thank some people who helped create this book:
Dr. Stefan Hesse (CFO Makro Cash & Carry UK, member of METRO
Group) and Veselin Bandev (Head of Controlling) for supporting us with
x PREFACE

a best-practice view, and Mark Deinert (EVP, Chief Controlling Offi-

cer SAP Group) and Dr. Christian Multerer (Assistant to the Executive
Management, Corporate Controlling SAP Group) for supplying us with
a state-of-the-art development at SAP, the global software company. We
would like to particularly thank Ken Merchant, our editor, for his con-
tinued and substantial support. Without his vast experience and intimate
knowledge of controllership issues, this book would be a different one.
 CHAPTER 1

Introduction
How to Ensure Controllership
Success and Where It Matters

Drivers and Impact of Successful Controllership

Controllers play a vital role in maximizing company performance. They
support management by supplying information, design management
control systems to improve the quality of management decisions, and—as
has been shown in empirical studies—significantly enhance firm adapt-
ability.1 But all of these positive influences are only experienced when
controllers themselves are successful. This book focuses on the drivers
that make controllers successful.
The core mission of controllers is to provide support to managers and
other employees to enable them to be efficient and effective, thus con-
tributing to overall firm performance.2 It is when they fulfill this mission
that they are most successful; however, in the past, not all controllers
achieved this goal. Many controllers were criticized as being irrelevant or,
even worse, as being a hindrance to innovation, opportunities, and pros-
perity.3 This, along with some other reasons, explains the emergence of
the “relevance lost”4 debate in the United States, in particular, in the late
1980s. At that time, many managers and academics believed that the per-
formance of controllers left much to be desired, while financial accoun-
tants, with their focus on external financial markets, were perceived to be
clearly superior. This manifested in a catastrophic consequence for the
whole profession of controllers, as the number of people working as con-
trollers dropped sharply during the last few decades.5
During the last few years, however, controllers have regained much
of their importance in many companies, as reflected in rising staff counts
2 DRIVERS OF SUCCESSFUL CONTROLLERSHIP

and management entrusting controllers with additional areas of responsi-

bility. One of the reasons for the newfound popularity is that the role of
controllers has changed during the last few years, evolving from that of a
“bean counter” to that of a full-fledged business partner6 who makes an
essential contribution to the company’s value. But not all controllers have
similarly evolved to be regarded as successful and respected, as some are
still associated with stereotypes of the past. This book highlights drivers
that enable controllers to become (more) successful.
Managers appreciate receiving objective internal information from
controllers who have a thorough understanding of the business and who
are intimately familiar with the internal information systems they them-
selves design and maintain. This is just the kind of reliable information
managers urgently need if they want to make the best operational deci-
sions in an environment that is becoming ever more competitive. Thus,
from this deep-reaching metamorphosis into a business partner, the con-
troller emerges as an indispensable resource within the company. At the
same time, controllers have also benefited from an external development:
The chief financial officer has gained importance and has almost become
an equal partner to the chief executive officer. Controllers have moved up
in the slipstream of this development.7
The evolution of controllers from a second-tier position in the com-
pany to a desirable partner for management was marked by many expe-
riences highlighting what controllers should do to be successful; other
experiences illustrated where they went wrong. We have collected and
structured information on both types of events in order to be able to
answer the following key question: What can controllers do to become
(more) successful?
Studies have shown that controller units themselves can significantly
improve their own performance by creating customized services produced
and presented by skilful and knowledgeable staff. They can also man-
age the drivers of the manager-controller relationship and benefit from
partnering with management that is willing to engage in a sustainable
collaboration. In the following four chapters, we present a rich collection
of drivers of successful controllership, organized into activities, people,
interaction, and trends. To the best of our knowledge, this is one of only a
handful of books that present such a comprehensive collection of relevant
 INTRODUCTION 3

drivers of the controller success. It builds on some seminal publications

that laid the early foundations of controllership research.8
Activities. In chapter 2, we highlight drivers (as well as factors that
turn out not to be drivers) that transform controllership activities into
successful controller services. We discuss the relevance of the selection of
activities and tools as well as the way these activities and tools are used to
satisfy customer (i.e., managers’) needs. It would be easy to assume that,
yes, of course, it matters what controllers do. From this, it would logi-
cally follow that some activities should be engaged in while others (the
less-efficient ones) should be avoided. This perspective underlies a wide
array of existing publications by both academics and practitioners that
praise the benefits of specific tools such as the Balanced Scorecard, activ-
ity-based costing (ABC), and target costing. Chapter 2 presents some sur-
prising findings on this viewpoint.
People. Chapter 3 focuses on the importance of highly qualified staff
for optimum controller performance. As in many other areas, the quality
of controller output depends on the quality of the inputs the controller
commands. Consequently, creating top controllership services depends
both on hiring employees with top skills and abilities as well as the moti-
vation to use them. More specifically, we discuss individual controller
skills, complementary team skills of controller units, skills specific to top
controllers, and, finally, some career paths leading to the very pinnacle of
the controller profession. Upon concluding the discussion of skills, we
move on to the motivation of controllers, focusing on why motivation
is necessary and what its drivers are. (And it is not more money—not
exclusively, at least.)
Interaction. Chapter 4 highlights that success for controllers also
depends on forging sustainable cooperation with both managers and
other internal service providers. Controllership services can only be suc-
cessful if they are created specifically for management (customer orien-
tation) and in cooperation with management (collaboration). But how
closely should managers and controllers work together? Should control-
lers follow the request to become intimately involved in decision pro-
cesses, even if such an involvement may threaten the effectiveness of
their core fiduciary role? We dedicate a specific section to discussing this
tension. As a result of increasing specialization in companies, controllers
cannot provide all the required competencies on their own—they need
4 DRIVERS OF SUCCESSFUL CONTROLLERSHIP

the support of other service providers. However, gaining such support is

more easily said than done, as potential partners may follow their own
agendas and—in the case of neighboring service providers such as finan-
cial accountants, auditors, and strategists—may see controllers as internal
competitors. On top of this, different mind-sets may also hinder effective
cooperation. We discuss these differences and present paths to success-
fully bringing both parties to the same table.
Trends. The discussion of trends in chapter 5 focuses on short-term
and long-term planning activities and changing roles of controllers as
core trends that impact the success of controllership activities. The
redesign of budgeting as one of the core activities of controllership and
the increasing involvement of controllers in strategic planning repre-
sent short-term and long-term planning issues of controllership activ-
ity. It is often not immediately apparent how controllers may catalyze
improved strategic planning activities, as controllers are often perceived
as the personification of hindering innovation and creativity, two cru-
cial characteristics of successful strategic activity. We deliver substantial
arguments to correct this stereotype. The section on the changing roles
of controllers in this chapter is especially important. There is no clearer
path than this to a successful future for controllers—a future that many
have already taken part in.
Familiarity with the drivers of successful controllership provides sev-
eral benefits. For instance, successful controllership activities help to
combat trends that threaten the status quo of controllers. More specifi-
cally, it helps in addressing stiff intercompany competition that does not
stop at the organizational gates and that creates pressure on every internal
organizational unit, including controller units. Successful controller units
also have the opportunity to engage in more rewarding activities, such
as strategic planning and other proactive management accounting tasks.
This is a development that both academics and practitioner organizations
such as the Institute of Management Accountants (IMA) have called for.9
As a result of these trends, controllers are gaining a more relevant position
within the company, and this book presents the drivers of such successful
controllership. Fortunately, controllers have the power to shape their own
destiny, and, in many companies, controllers have already realized this
potential. We are confident this book will help you, too, to create more
successful controllership in your own company.
 INTRODUCTION 5

Controllership, Controllers, and Financial Accountants

Throughout the book, we consistently use the term “controller” to refer
to an employee who predominantly engages in the “provision of informa-
tion and analysis to assist management in the running of the business”
and who holds a position within the finance function.10 This defini-
tion separates controllers from financial accountants and from financial
reporting aspects of the overall controllership role. The role of control-
lers, as the IMA puts it,

differs from that of public accounting, since controllers work

at the ‘beginning’ of the value chain, supporting decision mak-
ing, planning and control, while audit and tax functions involve
checking the work after the fact. [Controllers] are valued business
partners, directly supporting an organization’s strategic goals.11

More specifically, controllers assume a multitude of roles and perform

a host of activities, such as budgeting, planning, forecasting, reporting,
and investment appraisals.12 Their activities also include the enactment of
management control and supplying management with decision-relevant
information.13 Or, as the IMA states, “These professionals are involved in

• Looks at history • Looks primarily at the future

• Knows the law of the figures • Common sense approach

(GAAP) • Needs to know the business model
• Translates reality into figures • Evaluates reality
on GAAP rules

• Precise to the penny • Precise as necessary

• Introverted • Extroverted

• Repetitive • Explorative

• Limited relation to figures in • High relation to figures in

terms of economic success terms economic success

• Purely financial • Financial and nonfinancial figures

Figure 1.1. Comparison of the personality and characteristics of

financial accountants and controllers.
6 DRIVERS OF SUCCESSFUL CONTROLLERSHIP

designing and evaluating business processes, budgeting and forecasting,

implementing and monitoring internal controls, and analyzing, synthe-
sizing, and aggregating information—to help drive economic value.”14
Combined, these tasks represent controllership activities.
In practice, corporate diversity leads to the use of different terms for
persons that deal with controllership activities,15 including cost accoun-
tant, corporate or division planner, financial analyst, management accoun-
tant, manager decision support, business analyst, and—predominantly in
smaller companies—chief financial officer.16
To conclude, we view the drivers of successful controllership from the
perspective of a controller who (a) carries out the typical array of control-
lership activities, such as budgeting, reporting, planning, and supplying
management with decision-relevant information; and (b) works in the
finance function but does not carry out financial-reporting duties.