Accounting professionals are not often thought of as leadership material, at least until they build a strong background in finance or another discipline. They possess valuable skills, but those skills are viewed more as a staff function, nice to have but not essential to developing competitive advantage and building shareholder value.
The accounting skill sets include the ability to monitor and manage costs; in-depth knowledge of the regulatory environment; and the ability to deconstruct the firm's operations down in order to better identify areas of weakness.
Cost control is critical because profit depends on margins, and keeping fixed costs low. Without adequate cost control, sales gains are eroded, and can even be damaging. The accounting function is vital to maintaining profitability.
The accountants are able to deconstruct the firm's operations in order to not only control costs, but to increase efficiency. Each firm has areas where their performance is relatively weak. Proper accounting can help management better understand these areas of weakness, so that strategies and tactics can be devised in order to make improvements. Unprofitable products or markets can be dropped, and product mixes altered on the basis of the accounting function.
Understanding of the regulatory environment has become more important in the past decade. The accounting scandals at the end of the 90s and the beginning of the 00s have highlighted the need for top executives to have an acute understanding of the regulatory environment. While the risks are relatively low compared with other damaging potentialities, the costs be high. Enron is a prime example where poor accounting practice can erode shareholder value entirely. The response to such scandals has been an increase in legislation, in particular the burdensome Sarbanes-Oxley Act. This increase in regulation, combined with the high cost in terms of shareholder value to adhere to such regulations, has made strong accounting knowledge a much more valuable feature in the executive chair in recent years.
The main drawback, however, is that aside from mitigating this rather significant risk, there are few advantages to having strong accounting acumen in a leadership position. While accounting is typically consulted, their findings are seldom the main basis for strategic decision-making.
Another key function is marketing and sales. This function's unique skill set includes the ability to identify and attract customers. This flows from a keen understanding of the product, and the needs that the product meets.
The marketing function also deconstructs the customer base, allowing the firm to gain a better understanding of the source of their income. This has a significant, if understated, positive affect on shareholder value.
These skills are valuable for a leader in that without an understanding of the marketplace a leader cannot effectively reach it. Profit is generated as much by the art of marketing as it is by any other means. For a leader, being tapped into the market also allows for the development of strategies that exploit new opportunities. It can be said that such new opportunities arise from the economic environment, but that is more to do with identifying them; exploiting them is the concern of marketing.
In this regard, the marketing function is much more of a line function than a staff one.
The drawback is that selling cannot be done at any cost. The cost controls of the accountant and the cost of capital utilized by the finance professional are key to extracting value in opportunities. The economic function identifies those opportunities. Marketing plays its role in exploiting the opportunity but it is not an all-encompassing discipline and as such has limited contribution to the overall strategic direction of the firm.
The functions listed above each have a distinct benefit to the organization. They all have their own way of contributing to the enhancement of shareholder value. Any leader should have a solid grounding in the basic concepts and principles of each. Yet in the course of evaluating each of them in terms of their value to an organizational leader, it becomes apparent that the nature...
They are able to view the future in terms of individual elements, and then bring these elements together to form a coherent vision. This vision must then be translated into strategies. Each strategy needs to take into account how each organizational function contributes to the strategy. This allows the leader to communicate to each functional executive the results that must be achieved, and how those results contribute to the overall strategic goals. The leader must therefore also understand how each component of the strategy, each aspect of its implementation, will affect the bottom line, shareholder value. The leader must also consider the impacts of non-strategic functions as well. Things unrelated to strategy, such as regulatory issues, can derail strategy entirely, and erode shareholder value rapidly.
Of the skills analyzed above, the one most congruent with leadership is the economics function. Understanding the economic environment provides the groundwork for the generation of vision. It constitutes an understand of the world surrounding the firm and the way that this world impacts every aspect of the firm.
Marketing helps to exploit this understanding of the world, but without that understanding marketing is of little value. It is a line function, but one without strong strategic orientation. Marketing's core tasks - deconstructing the market and devising ways to reach it, is an essential task, but not necessarily the one most essential to an organization's leader.
Accounting is important, especially for firms whose operations are primarily financial or that are subject to particularly stringent regulation. But while accounting mistakes can result is serious losses of shareholder value, such losses are uncommon. Moreover, firms seldom derive competitive advantage from the accounting function, and it is competitive advantage from which shareholder wealth ultimately flows.
The finance function is critical to strong leadership. it, along with the production function, is a core component of strategy implementation. Financial managers are valuable for their ability to determine which possible strategies will deliver the best shareholder value. A firm can even derive some competitive advantage as a result of the choices made on the basis of finance department recommendations. However, the role remains primarily one of implementation, and implementation is little without formulation.
For the strongest strategy formulation, you need vision. You need to view the complex world and all its constituents as both a whole, and individual pieces, and yet still be able to translate this into strategy for the organization. Economics approaches the world from this mindset.
Additionally, economic analysis provides critical insight into future developments that guide strategy and aid in the formulation of vision. The value of economics in leadership is somewhat understated, in part because it is not a primary functional discipline. Yet without it, the firm is at the mercy of the environment, subject to jarring shocks as economic variables change. Those variables, however, do not change without warning, and the ability of a firm to insulate the jarring shocks to make them less damaging is dependent on keen economic analysis.
Taub, Stephen. (2003). Now Playing: CFO as CEO. CFO.com. Retrieved July 17, 2008 at http://www.cfo.com/article.cfm/3007934
Moffat, David. (2008). Visionaries and Enablers:
CEO and CFO Leadership Styles. CEO Forum. Retrieved July 17, 2008 at http://www.ceoforum.com.au/article-detail.cfm?cid=6350
Cooper, Tim. (2008). CFO to CEO? I Don't Think So. CIMA Insight. Retrieved July 17, 2008 at http://www1.cimaglobal.com/cps/rde/xchg/SID-0AE7C4D1-9C10C71C/live/root.xsl/Insight054220_4303.htm
Gibbons, Fred. (no date). CEO Skills Inventory. Stanford University. Retrieved July 17, 2008 at http://www.stanford.edu/class/ee353/ceo.htm
Daniels, Joni. (2004). CEO Skills. CEO Success. Retrieved July 17, 2008 at http://www.stanford.edu/class/ee353/ceo.htm
Kaplan, Steve, Sorensen, Morten & Klebanov, Matt. (2007). Harvard: Hard Skills Trump Soft Skills. Business Week. Retrieved July 17, 2008 at http://www.businessweek.com/managing/content/dec2007/ca20071218_520897.htm?campaign_id=rss_null
Gitlow, Abraham L. (2004). Being the Boss: The Importance of Leadership and Power. Retrieved July 17, 2008 at http://books.google.com/books?id=ey25BTveRgsC&pg=PA6&lpg=PA6&dq=economic+environment+leadership&source=web&ots=TH_jNhVnXf&sig=W0mYeILFgtepi725mM3Pt0p0vtQ&hl=en&sa=X&oi=book_result&resnum=4&ct=result#PPA7,M1
Hines, Matt. (2004). Tech Leaders see CFO's Role Growing. CNet. Retrieved July 17, 2008 at http://news.cnet.com/Tech-leaders-see-the-CFOs-role-growing/2100-1022_3-5460352.html?tag=nw.7
Silverthorne, Sean. (2007). Fixing the Marketing-CEO Disconnect. Harvard Business School. Retrieved July 17, 2008 at http://hbswk.hbs.edu/item/5674.html
No author. (2008). FedEx Posts Loss; Lowers Forecast. Reuters. Retrieved July 17, 2008 at http://www.reuters.com/article/companyNews/idUKWNAS861120080618?symbol=FDX.N
Taub, Stephen. (2003). Now Playing: CFO as CEO. CFO.com.
Moffat, David. (2008). Visionaries and Enablers:
CEO and CFO Leadership Styles. CEO Forum.
No author. (2008). FedEx Posts Loss; Lowers Forecast. Reuters.
Gitlow, Abraham L. (2004). Being the Boss: The Importance of Leadership and Power.
Hines, Matt. (2004). Tech Leaders see CFO's Role Growing. CNet
Silverthorne, Sean. (2007). Fixing the Marketing-CEO Disconnect. Harvard Business School.
Daniels, Joni. (2004). CEO Skills. CEO Success.
Bill Gates: A Successful Business Leader A Successful Business Leader The business world has changed into an uncertain and competitive environment where business entities compete with each other on the basis of their distinctive competencies and strategies (Basefsky, Maxwell, Post, & Turner, 2004). Globalization, intensity of competition, and technological advancements has completely changed the way businesses operate and compete in their industries (Goldsmith & Hesselbein, 2006). The biggest role is played by
Business Plan INSIGNIA SYSTEMS Insignia Systems, Inc. Business Plan The Business Profile: Insignia Systems, Inc. Business Description "Insignia Systems, Inc. markets, sells and supports in-store advertising and promotional products, programs and services designed to provide retailers and consumer goods manufacturers with highly effective in-store programs and point-of-purchase display materials" (Insignia Systems, 2012) Insignia is engaged in advertising to customers in a retail environment who may otherwise not see the product advertised. One of the slogans that
Business How forces in and outside of business firms are changing the management task, altering business operations, and modifying stakeholder expectations? Business, particularly those heavily emphasizing technology, are constantly changing. In many instances these changes are occurring due to a combination of internal and external factors. These factors often modify stakeholder expectation because the fundamental business itself has shifted. A very dynamic force that is changing the management task is that of
Business Ethics Palmeri, C&Rupp, L 2013, May 3, Disney Bangladesh Exit Pressure on Clothes makers Who Stay, Retrieved from http://www.bloomberg.com/news/2013-05-03/disney-bangladesh-exit-puts-pressure-on-those-who-may-stay-1-.html The work of Palmeri and Rupp (2013) is focused on highlighting the issues faced by the multinational organizations while operating in developing markets. It is highly likely for large organizations to develop their overseas presence. However the economically developing markets a number of issues including environmental, infrastructural, and compliance with health and
Business Development Learning how to go about selling to the U.S. government which is the largest buyer of goods and services in the world is a very daunting task. The federal government is expected to reserve a fair proportion of its purchases and contracts for services and property for small businesses. The government achieve s this through setting aside some parts of its procurement to small businesses. Small businesses that have
Business Entities, Laws, And Regulations This paper will focus on the challenges faced by one start-up businesses and an established company with labor issues. For the start-up, a birth clinic, a case needs to be made for the type of business entity they should each use. The established company is a construction company whose business entity must be identified and employment law pertaining to the scenario will be discussed. For each