“Scratch the surface of most cynics and you find a frustrated idealist–someone who made the mistake of converting his ideals into expectations.” -Peter M. Senge, “The Fifth Discipline” (p. 146)
A number of years ago I noticed a distressing pattern in my life. Despite my best efforts to “make things happen” in business settings, relationships, and other areas, I was continually disappointed. Nothing seemed to work out as I had hoped.
I have diligently searched for the secret of success and fulfillment. Ideally, as I’m sure many would agree, this should be a quick, fast-tracked way to skip all the hard work and drudgery.
Finally, I have solved the mystery. Are you ready? Here it is:
I once sent my resume to a potential employer who posted an “Accountant Wanted” ad. Specifically, the ad stated that the employer was looking for a Controller, which was a job I was interested in at the time. There were a few other details that caught my attention in the ad, and it looked like a good potential opportunity.
The owner of the business called me, and we set up a time to meet. The weather was cold and snowy, but I was excited to have the interview.
We have all heard of disappointing scenarios when leaders abuse trust, fail in their fiduciary responsibilities, and discredit themselves and their professions. Financial professionals who commit fraud certainly fall into this category. Other examples include religious leaders who deceive trusting and devoted followers through fraud or abuse. Doctors, lawyers, teachers, and other professionals are not exempt from abusing trust and discrediting themselves.
In circumstances that involve abuse of trust, it is appropriate for such professionals to reap the consequences of their actions (legal, financial, and otherwise) and to find other lines of work that don’t involve fiduciary responsibilities. It is one thing to “mess up” and to learn a lesson from mistakes due to incompetence. A professional career might be salvageable in this situation. It is another matter altogether to actively use deceit and manipulation to abuse the trust that others placed in you.
Particularly troubling in these abuse of trust situations, the fraud and deceit go beyond ordinary commercial transactions in which the buyer and seller are expected to beware as a matter of course (i.e., “caveat emptor” and “caveat venditor“). It’s one thing for a buyer to “pull the wool” over a seller’s eyes (or the other way around). However, professionals who deceive actively abuse trust that others formally place in them due to their positions.
Financial professionals are expected to be competent and trustworthy. Credentials such as the Certified Public Accountant (CPA), Certified Management Accountant (CMA), Certified Financial Analyst (CFA), and Certified Treasury Professional (CTP), require training and compliance in ethical codes of conduct.
The word “credential” implies credence or trust. A credible person, whether certified by a professional body or not, follows ethical standards and consistently performs competently to demonstrate reliability and gain trust.
Moreover, financial professionals have fiduciary responsibilities to their principals. This means that professionals must guard their principals’ interests and exercise due diligence as if the resources they are stewarding were their own.
CPAs are required to avoid “acts discreditable to the profession.” These include, but are not limited to, acts such as breaching confidentiality, illegally harassing or discriminating in employment practices, negligence in financial record keeping and reporting, and failing to follow proper accounting and tax standards. Additionally, fiduciaries are expected to avoid actual or perceived conflicts of interest.
Take your professional ethical and fiduciary responsibilities seriously. Many people are relying on you. You don’t want to give yourself and your profession a bad name by breaching this trust. Know the rules of ethics, and resolve to live by them. Be prepared in advance to appropriately and decisively respond if you ever receive pressure to diverge from the ethical high road.
Think about a time when you were disappointed. Someone promised but did not deliver. Perhaps you had even made plans around your expectation that the other person would keep a promise.
What did you think of that person afterwards? Obviously, you could no longer trust the person.
Timely and accurate communication is crucial toward developing and maintaining trust in business relationships. Conversely, misleading or nonexistent messages engender distrust.
I experienced both the good and the bad in a recent situation. A supplier promised to quickly provide documents once I made a payment. I needed to provide these documents to a customer. Upon receiving my payment, rather than fulfilling the promise, the supplier said he would wait a few more days. I communicated this clearly and promptly to the customer, and I said I would provide an update as soon as I had one.
This conveyed to the customer that I was “on it,” and the customer’s response was one of gratitude even though the message I had conveyed was negative.
On the flip side, I have no trust in that supplier because I know in hindsight that I was misled by someone who lacked integrity.
Building trust requires a long-term pattern of delivering on the promise. Conversely, destroying trust is as easy as promising and not delivering.
Most of all, if you want to build trust, you must manage expectations. Do not induce people to “play ball” with you by misleading them about what they can hope to accomplish from dealing with you.
Some people will see right through your empty promises. Less savvy people might initially be impressed, but once you disappoint them, they will start to spread the word that you cannot be trusted.
How do you manage expectations? Again, one of the keys is communication. Convey relevant information in a timely manner. Filter information before you pass it along to make sure it is reliable. For example, even though I had been “promised” that I would receive information from the supplier, I had to temper my “promise” to the customer because I did not know whether the supplier would make good on his promise.
Become a reliable person. Listen more than you speak. This will help you know what you can legitimately promise. Don’t promise unless you know you can perform. If you have done all you can but an unexpected contingency materializes, the bad news will get worse with age. Quickly communicate the relevant details you know, along with your action plan for fixing the problem.
Don’t be like the supplier who promised but had no intention of delivering. Also, even if you do have the intention of following through, make sure you really have the capability to do so before you make a promise. This means you have to honestly assess and come to terms with reality, not mere delusions or wishful thinking.
We are all familiar with examples of high level financial executives who landed in white collar prison due to their indiscretions. Think of Enron, WorldCom, and Madoff as just a few examples. How can these situations be prevented?
I wrote previously about the fraud triangle and followed up with a post about a model that expands this from three to five elements. Organizations can do their best to hire people who do not have the pressure to commit fraud or the desire to rationalize fraud. However, the bottom line factor that organizations can directly manage, largely through internal controls, is reducing the opportunity for theft, irregular financial reporting, and other frauds.
Although an organization’s management has the primary role of preventing opportunities for fraud, each employee can prevent the temptation of committing fraud by mitigating pressures and overcoming rationalizations.
Of course, one’s ultimate career goals, as well as ethical responsibilities, go well beyond staying out of white collar prison. So here are some tips for avoiding getting anywhere close to the line of unethical or illegal activity:
Again, go beyond the aspiration to avoid white collar prison. Maintain the highest levels of ethics and integrity. I will explore models of ethical decision making and behavior in future installments.
One of my favorite aspects of being a financial professional is knowing that others on the management team and in my organization are relying on me. I am expected to handle key functions within the business, and if I do my job well I can contribute integrally to the organization’s success. This can provide a constant sense of urgency but also a rewarding feel of satisfaction and significance.
Among the not so glamorous yet important features of an organization’s structure are internal controls. Accountants are expected to implement sound measures to safeguard assets and reasonably ensure that management’s objectives are achieved toward effective operations, reliable financial reporting, and legal and regulatory compliance.
Even if this sounds boring, take consolation in the fact that your organization’s survival and success depends on it.
The Committee of Sponsoring Organizations (COSO) first released its Internal Control-Integrated Framework in 1992. This document defined internal control and provided accompanying standards. Over twenty years later the framework is still highly relevant.
In May of 2013 changes were made that kept the core intact and added, among other things, seventeen principles to help with implementation of the framework in light of changes over the years. A recent article in The CPA Journal discusses these seventeen principles as organized under the five categories of internal control within the COSO framework.
1) Commit to integrity and ethical values – this largely entails setting an effective “tone at the top.”
2) The independent Board of Directors should oversee internal control – among other things, objectively evaluate managers and ask appropriate questions.
3) Establish appropriate authority, responsibility, and reporting structures.
4) Attract, develop, and retain the right talent to achieve objectives.
5) Hold employees individually accountable for fulfilling organizational objectives.
6) Be able to identify and assess risks by having first formulated objectives with sufficient clarity.
7) Identify and analyze risks throughout the organization to determine how they should be managed – choose whether to accept, avoid, reduce, or share risks.
8) Consider potential fraud risks, including misappropriation of assets and alteration of records, that could deter the organization from achieving its objectives.
9) Be ready for changes, including within the external environment, business model, or leadership, that could impact the internal control system.
10) Mitigate risks to acceptable levels by choosing and implementing appropriate control activities.
11) Technology is a special category of importance for implementing control activities that help enable the organization to achieve management’s objectives.
12) Policies establish expectations and procedures put these policies into action in order to deploy control activities.
13) Support internal control functions with relevant and timely information – capture data, transform it into information, and protect its availability and accessibility to appropriate parties.
14) Communicate internally regarding internal control objectives and responsibilities.
15) Communicate with appropriate external parties regarding internal control, carefully considering the timing, audience, and nature of the communication.
16) Have ongoing evaluations to determine whether internal controls are working effectively.
17) Communicate internal control deficiencies to senior management and the board of directors so that they can timely take corrective action.
In short, internal controls help management set a proper tone, define organizational objectives, and run the business effectively. A leadership-oriented financial professional who wants to be indispensably valuable within an organization should study and understand how to effectively choose, implement, and monitor internal controls on an ongoing basis.
We previously saw that principled negotiation differs from positional bargaining by separating people from issues and by focusing on interests rather than positions.
The third step in principled negotiation is to be creative and invent various options that could satisfy the interests of both sides. As a very simple example, recently I had two projects to complete — painting the walls of a room and thoroughly cleaning a floor that would later be painted. My wife asked which one I planned to complete first, and I told her the cleaning. She knew I would likely use a vacuum, which could potentially wake up the baby. When she calmly mentioned this, I knew we both had an interest in letting our baby take her nap, and I quickly invented the solution of painting while the baby slept — leaving the floor cleaning for later.
Negotiators lack creativity when they exercise premature judgment, try to find a single answer, assume that the pie is fixed (so the bigger one person’s piece is, the smaller the other’s piece), and “thinking that ‘solving their problem is their problem'” (p. 57). Instead, step back and use your imagination, try to broaden options, make the pie bigger rather than focusing on a “fixed-sum” game, and appeal to both sides’ interests.
To generate options, brainstorming is often quite effective and the authors describe potential rules and methods to use in the process, such as the no-criticism rule that encourages building upon participants’ openness and creativity.
A Key Gem to tuck away regarding creatively inventing options: “In almost every case, your satisfaction depends to a degree on making the other side sufficiently content with an agreement to want to live up to it” (p. 72).
The fourth and final step is to emphasize objective criteria in the negotiation. Basing the outcome of a negotiation on who has the stronger will is often costly in terms of time and relationship strain, and it cannot be expected to lead to a wise agreement. In contrast, objective criteria which is independent from the will of the parties involved can enhance the efficiency of the negotiation, lead to a wise agreement, and preserve the ongoing relationship between the counterparts.
Rather than yielding to pressure and threats, a principled negotiator bargains based on principle and reason. The objective standard should be legitimate and practical. One might think of the example of a dispute between young children over how to split a piece of pie. The time-tested solution is simple: One cuts, the other chooses.
In advocating objective criteria, one must avoid the subtle pitfall of using criteria solely to bolster one’s own position. Be truly flexible and open to reason and principle, even if the objective criteria differs from the standard you had initially proposed or works against the position you had originally sought to advocate. Negotiating on objective criteria provides a position of power because right makes might.
A Key Gem to tuck away regarding the difference between standards in positional and principled negotiation: “In positional bargaining, negotiators spend much of the time defending their positions and attacking the other side’s. People using objective criteria tend to use time more efficiently talking about possible standards and solutions” (p. 83).
We have seen that principled negotiation rests on four key ideas:
In the final installment of this review we will look at ways to deal with challenging negotiation situations.
Are you left or right brained? Analytical or emotional? A number cruncher or a poet?
Although it might run counter to our initial assumptions, CFOs are expected to go “beyond the numbers” and manage key aspects of the business as a whole. We have seen the importance of understanding technology and operations, among other factors not directly related to number crunching.
Very critical is the CFO’s role in dealing effectively with people and relationships. A CFO needs to be approachable. To become CFO material, a finance professional needs to develop habits of ambiguity tolerance, composure, empathy, energy, humility, and confidence.
On that note, the international accounting and finance firm Deloitte has published a poetic and artistic description of the CFO’s twelve elements, which encapsulates the expansive requirements and responsibilities of the CFO’s job:
“As CFOs grow in stature and importance, they keep coming back to the same issues that form their agenda. The elements of the CFO Agenda represent a powerful framework for one of the toughest jobs on earth. Year after year, quarter after quarter, they endure.”
Here are the twelve elements and my summation of the messages:
Don’t take my word for it. Take a look at the presentation for yourself. Reflect on the messages. Do you agree or disagree with each of the elements and how they’re presented? How can you apply these insights in your work as you develop your career?
What better way is there to build your confidence and increase your odds of success than by being prepared?
I took piano lessons when I was younger, and my teacher could usually tell how much I had practiced during the previous week simply by observing my progress (or lack thereof). My preparedness showed clearly through my performance and confidence.
Whether your task is a job interview, a negotiation, a job switch, or anything else that’s new or involves uncertainty; you can prepare by thinking through your scenario in advance.
For example, if you are preparing to negotiate, you need to be armed with the facts of the situation and demonstrate a thorough, confident, and conversant command of every relevant factor. You need to be able to immediately spot and correct errors of fact or perception before the conversation starts to be built upon faulty foundations.
Consider laying out various scenarios within the realm of reasonableness — from best case for you to best case for the other side. If you can demonstrate a command of the facts, you can be more confident and prepared for the tricks that the other side might throw at you.
Take some time beforehand and discipline yourself to think through what you might face:
Work through a systematic process of thoroughly considering these and other related questions. You will no doubt encounter surprises in any new or uncertain situation, and you might have to scrap all your plans in the midst of the process. The point of preparation is to start off with the confidence you need to carry you through the twists and turns, ups and downs.
I have found that confidence grounded in reality helps me stay focused. It is so easy to get thrown off track when unpreparedness leads to confusion and lack of confidence. I have never been one to easily “fake it until I make it” since that often borders on unethical conduct (i.e., lying or acting confident even when incompetent) and can easily lead to loss of credibility when the “faking” is exposed.
I can convert the challenge of not being able to “fake it” very well into the advantage of disciplining myself to be better prepared. In this way I can demonstrate a more a thorough, confident, and conversant command of every relevant factor as compared to my counterparts. And I can spot and correct errors of fact and perception by having mastered the big picture and details through preparation.
This doesn’t all happen by default; it takes time, thought, and work.
As with the teacher at a piano lesson, your business colleagues and counterparts can tell how much you “practiced” or prepared by observing your confidence and performance. The better prepared you are, the better you will be perceived as ethical, competent, confident, and reliable.