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The new controller - with five redefined chores.

You ask what it takes to make a great controller today? Here's a job description you can add to your manual.

James D. Willson

Former Senior Vice President-Finance

Northrup Corporation

James P. Colford

Former Director of Accounting Practices

IBM Corporation


Establish and maintain an integrated plan of operation consistent with the company's goals and objectives, both short and long term, analyzed and revised as required, communicated to all levels of management, with appropriate systems and procedures installed.

What do you expect from the financial executives working for you? Odds are that your picture of the perfect financial sidekick changed over the last few years as the economy surges and recedes. Many companies fumble with job descriptions for their top people, because either the executives take on extra responsibilities or they siphon duties to specialists.

At Financial Executive, we're getting more than the usual number of requests for formal definitions of the roles of different financial executives. That tells us that many firms want guidance. They want something in writing that they can use to size up prospective employees or to evaluate existing ones.

One of the more frequent requests is for a clear description of the job of the controller, maybe because the controller can wear so many bats, depending on the size of the company and the attitude of the person in the controller seat. Here, two businessmen who worked closely with controllers define that job.

Who is today's controller?

Although the scope of the position varies from company to company, one concept is common. In the representative company, the controller is thought of simply as the chief accountant who supervises and maintains the formal corporate financial records. He or she is regarded as the executive concerned with general accounting, cost accounting, auditing, taxes, and perhaps insurance and statistics. But that viewpoint is backward looking.

It's true that the controller must engage in accounting activities; yet he or she shouldn't restrict the role to the recording function. The controller is expected to extend the accounting function to its management applications, to have an attitude that energizes and vitalizes the financial data by applying it to future company activities. It's a forward-looking concept-a trained analytical approach that brings balance to the management planning and control system. The controller's viewpoint should be the management viewpoint-one that guides management's thinking to the most profitable combination of operations.

What does the controller do? Many comprehensive definitions of the controllership function have been developed over the years. The basic functional responsibilities and activities may be divided into five categories: planning, control, reporting, accounting, and other primary responsibilities. Establishing and maintaining an integrated plan of operation has been described as a major function of the controller. The business objective is profit, and planning is necessary to fulfill it, for profits do not "just happen." Visualize, then, the role of the modern controller in business planning.

First, he or she has a responsibility to see that a plan exists and that it is supported by all levels of management. The implication of an integrated plan is that all parts will mesh and support the business objective. For this reason, all members of management must participate willingly. It must be the company plan and not the controller's plan. The controller will act as coordinator in the various stages, in translating the base to monetary terms and in putting the plan together in financial terms-finally expressed as a statement of forecast income and expense and a statement of estimated financial condition, together with supporting schedules.

Assuming the recognition of the need for a plan, and the desire by all in management to participate, then the controller has a responsibility to determine that the parts in and of themselves are sound and that they fit together. For example, the controller should, as a staff executive, ascertain that the sales plan or forecast supports known corporate policies and objectives (market areas, types of product, etc.); the sales plan appears realistic; the production plan or schedule supports the sales program; the production plan is within facility capabilities; and the cost and expense levels and relationships are proper.

When the total plan is put together, the controller should test or appraise its adequacy and report to the chief executive on the findings. The plan must be judged on an overall basis in terms of these concerns:

* In the light of past experience, is the plan realistic?

* Does it reflect economic conditions that are expected to prevail in the period of the plan?

* In terms of management policy, have lines designated to be discontinued been discontinued on a practical basis with regard to inventory disposal considerations and so forth?

* Does the plan meet requirements of return on investment and such other broad tests as may be applicable?

Some of the testing and analysis will be accomplished as preliminary plans are formulated, and the rest will await the total picture. But, however and whenever the testing and analysis are done, the controller is counselor and coordinator. He or she advises and suggests. Final responsibility for the overall program rests with the chief executive, of course, while responsibility for each operating function is that of the applicable officer. For example, the vice president for sales is responsible for the sales program. But this staff relationship should not deter the controller from making considered observations.


Devolop and revise standards against which to measure performance and provide guidance and assistance to other members of management in insuring conformance of actual results to the standards.

The management function of control is the measurement and correction of performance so that business objectives and plans are accomplished. Management control seeks to compel conformance to plan or standard. in this function, the controller assists-not by enforcing control, except in his or her own department, but by providing information the functional executive is expected to use to achieve the required performance.

Activities in this control area absorb a great deal of time of the controller's staff. Some information is provided from hour to hour or from day to day; other data are prepared from week to week or from month to month, as circumstances require. For example, in larger companies hourly or daily information on labor performance may be helpful, or weekly manufacturing expense figures may be needed.

In approaching problems relative to the control function, a broad view usually is helpful. The result of the control function is not merely a report on performance. Rather, it should involve assisting in setting standards for control; evaluating standards, including related analysis; reporting short-term actual and standard performance; developing trends and relationships to assist the operating executives; and ascertaining, through constant review, that the systems and procedures are providing the required, most helpful data on the most practical and economic basis.

A little reflection will indicate that a manager cannot control the past. He or she may study past action to determine the place and cause of deviation. But here, as in planning, the best kind of control is forward looking. This the controller must keep in mind while participating in the control function, giving constant thought to steps that might be taken before the operating action to assure "on-standard" or "desired" performance. This might be called preventive control.


Prepare, analyze, and interpret financial results for utilization by management in the decision-making process; evaluate the data with reference to company and unit objectives; prepare and file external reports as required to satisfy government regulatory bodies, shareholders, financial institutions, customers, and the general public.

Insofar as it concerns internal management, the reporting function is closely related to both the planning and the control functions. Reporting is essential to make planning and control effective. Yet the reporting function is not merely one of presenting tabulations; nor is it wholly routine. Moreover, the management that makes decisions often cannot be kept adequately informed solely from periodic statements, regardless of how well designed they may be. The reporting function encompasses interpreting the figures, and the controller's duty is not discharged until management understands the facts.

As a part of his or her management reporting role, the controller will be called on to furnish financial or statistical data to such groups as these: shareholders of the company (in annual and quarterly reports); creditors-banks, suppliers, other financing institutions; stock exchanges; employees and the general public; customers; the U.S, government and its agencies, including the SEC, IRS, Department of Commerce, Department of Labor, and FTC; and state and local governments and their agencies.


Design, establish, and maintain general and cost accounting systems at all company levels, including corporate, divisional, plant, and unit to properly record all financial transactions in the books of accounts and records in accordance with sound accounting principles with adequate internal control.

Many people think of the systematic recording of financial transactions as the principal function of the controller. As important as this is, the management aspects of accounting are more important. In fact, the controller may well take the viewpoint of the businessperson first and then that of the accountant.

The pure accounting considerations are well known. The controller is expected to apply, in a practical manner, sound accounting principles and practices within the company. He or she is expected to keep abreast of technology to provide management with information in the most economical and feasible way. He or she also is expected to develop and maintain records and procedures, including adequate internal control, so that reports properly reflect the financial condition of the company and the operating results.

In many companies, the accounting function includes maintenance of the property, plant, and equipment records.


Manage and supervise such functions as Federal, state, local, and international taxes, including interface with the respective taxing authorities and agents; maintain appropriate relationship with internal and external auditors; institute insurance programs, coverage, record-keeping, and provision; develop and maintain systems and procedures; develop record retention programs; supervise assigned treasury functions; institute investor and financial public relations programs; perform office management; and direct other assigned functions.

In addition to planning, control, reporting, and accounting, the other primary responsibilities of the controller are typical functions, some or all of which may be assigned. Factors that ordinarily influence the assignment are the size of the business entity, competence and personality of the controller, time demands of the four principal duties (planning, control, reporting, and accounting), personal interests of the controller, availability of other knowledgeable executives to supervise the duties, and the opinions of the chief executive and the CFO (if the latter position exists).

Because of the close relationship with the accounting records, among other reasons, the tax function usually is under the cognizance of the controller. With respect to audit activities, the controller must maintain an appropriate relationship with the independent auditors. The controller and the internal auditor will have rather frequent contact, although sometimes the internal auditor will report to the CFO or the CEO. Ordinarily, the controller is responsible for record retention and, to a greater degree than before, may participate in activities associated with investor relations or financial public relations. In smaller businesses, the chief accounting officer often has the responsibility for risk management (insurance) and perhaps the remaining enumerated functions.

Finally, because the controller (or the accounting department) is often the largest user of computer output, he or she often assumes responsibility for this function. However, with the changes in information technology, and the realization by senior management that it must remain competitive in this field, companies are paying more attention to the management of information resources. This sometimes results in changes in the organizational structure, such as adding a chief information officer.

Where the controller stands

As you can see, the controller's responsibilities cover a broad scope. As in all management positions, the proper environment must be present for the company to achieve its planned growth and profitability. The status of the controller-regardless of the title-must allow the function to operate unimpeded. There is a real need in every business for a fact-finding function with the capability to analyze the facts and make appropriate recommendations. This function could be performed by others, but the controller is better equipped to gather the needed information with his or her broad perspective and knowledge of the business. To accomplish the task effectively, the controller should have peer relationships with all other major functional executives. The fully qualified controller will have no difficulty maintaining the proper relationship with other executives and indeed may enjoy a position of importance near to that of the CEO, as evidenced by the increasing number who have been promoted to positions of more responsibility.

This article was adapted from a chapter in Controllership: The Work of the Managerial Accountant by James D. Willson and James P. Colford (1990, John Wiley & Sons, Inc.).

A job description for the complete controller

Job title: Controller Department: Accounting

Purpose of position:

What are some of the higher-level responsibilities of today's controller? To where can his or her authority stretch? Authors Willson and Colford propose this definition of the complete controller's duties:

* Develop and publish, through authorized management, policies and procedures on accounting, budgets, taxes, business planning and forecasting, and financial reporting and performance measurement.

* Provide policy guidance and representation for all contacts with government and industry organizations in his or her area of responsibility. Represent the company in establishing and maintaining contacts with and reporting to regulative government agencies relative to accounting and financial data. 11 Conduct an effective tax management program that includes and is applicable to all segments of the company. Insure that policies and procedures provide for compliance with all applicable laws, rules, and regulations pertaining to taxes.

* Control, coordinate, and integrate the annual and long-range financial business plans related to overall corporate objectives, including projections of sales, costs, net income, cash position, facility, and capital requirements. Analyze the plans and make recommendations for executive action to insure a realistic viable business plan from a financial viewpoint.

* Develop and implement a comprehensive system of financial reports to provide corporate management with pertinent information concerning operating results of each segment of the company.

* Review for concurrence the financial aspects of the acquisition or disposal of property or investments.

* Consolidate and review long-range plans for concurrence from a financial viewpoint.

* Review the financial progress of the company, comparing results with approved plans. Submit reports and recommendations for corrective action to appropriate executives.

* Direct the maintenance of the formal corporate financial records and books of accounts and prepare appropriate financial statements for use by management and presentation to shareholders, financial institutions, the government, and others.

* Direct the preparation, reporting, and analysis of the corporate operating budgets.

* Review for concurrence the organization of segment financial groups and the selection, transfer, or termination of key financial personnel.

* Maintain relations with professional organizations related to reporting financial results to investors and government agencies.

* Direct, coordinate, and monitor the activities of the company's independent accountants.

What makes a good controller?

Just what do you need in a controller today-both the tangibles and the intangibles? According to authors Willson and Colford, the qualifications of an effective controller include:

* An excellent technical foundation in accounting and finance with an understanding and thorough knowledge of accounting principles.

* An understanding of the principles of planning, organizing, and control.

* A general understanding of the industry in which the company competes and the social, economic, and Political forces involved.

* A thorough understanding of the company, including its technologies, products, policies, objectives, history, organization, and environment.

* The ability to communicate with all levels of management and a basic understanding of the other functional problems related to engineering, production, procurement, industrial relations, and marketing.

* The ability to express ideas clearly in writing or in making informative presentations.

* The ability to motivate others to achieve positive action and results.

A controller may have the technical capability and be able to lay out the assigned tasks as well as supervise and direct personnel, but he or she must also have integrity and the ability to communicate. The controller must be fair, reasonable, and sincere with all concerned if he or she is to be recognized for the importance of the controllership function.

As in any executive position, the controller must be able to work with people at all levels, have respect for the ideas and opinions of others, and have the resourcefulness to meet all challenges.

The dynamic business world of today makes it essential that the controller keep current on all aspects of the business. This can be accomplished through refresher courses at various colleges and universities and membership in trade associations or professional societies. Most of the organizations provide literature analyzing the issues and problems currently confronting business. And, for those problems requiring more in-depth review, the professional groups provide seminars for a broader understanding. In any event, the controller must keep involved with the issues of the day by association with other members of the profession.
COPYRIGHT 1991 Financial Executives International
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:includes related articles
Author:Colford, James P.
Publication:Financial Executive
Date:Mar 1, 1991
Previous Article:Meeting the tests of a new era.
Next Article:Environmental risks: paying for someone else's mistakes.

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