Part I (Information Management Today): Roughly 50 years ago, Russell Ackoff wrote about the importance, or lack of importance, of information that management needs in “Ackoff’s Management Information

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Part I (Information Management Today): Roughly 50 years ago, Russell Ackoff wrote about the importance, or lack of importance, of information that management needs in “Ackoff’s Management Information System” (see attachment). After reading the article, you will analyze how each assumption applies or does not apply to our society today. Treat each assumption separately in your analysis. As part of your response, provide a specific example for each assumption.

Part II (Information Management Revisited): After reading the Ackoff article, you will revise each of 5 assumptions to reflect a global, digital society. You will provide a summary (at least four sentences) that describe each revised assumption in detail and how they reflect our global, digital society.

Part III (Framework for Information Management): You will review the CPA Horizons Report (see attachment). After reviewing the report, you will describe how the CPA Horizons Report will help accountants to provide their managers with the right information at the right time in the right format. You will identify and describe three key skills that are not listed in the report that will allow accountants to produce the right information for their managers and their users. One of the skills you propose must be one that addresses the advances in technology. Finally, you will explain how your degree from UMGC and this class will help you to ‘embrace the future’ as noted in the report.

Page Length: Your response should not exceed eight pages (double-spaced) or four pages (single-spaced). Note that cover page, reference page, and appendix, if provided are excluded from the page count. References: You will need to include at least four literary references (one reference must be from the readings in our class) and at least two in-text citations to support your paper. These references must be related directly to the topics covered in the paper. References & citations must be properly formatted as noted below. Headings: You will need to use headings (short, brief, and centered) to separate each area of your paper. Your headings should have an appropriate title such as Information Management Today instead of Part I. Margins & Font Sizes: Use standard margins (minimum .5″; maximum 1.5″) and standard font size (minimum 10 point; maximum 12 point) in your paper. Writing Style: APA is the preferred writing style, but you can choose any appropriate writing style (e.g. MLA), except that all references are to be formatted via APA. Please consult the UMUC Effective Writing Center (http://www.umuc.edu/writingcenter/index.cfm) for assistance regarding the choice of styles and formatting of references via APA.

Part I (Information Management Today): Roughly 50 years ago, Russell Ackoff wrote about the importance, or lack of importance, of information that management needs in “Ackoff’s Management Information
Management Misinformation Systems Author(syf 5 X V V H O O / $ F N R I f Source: Management Science, Vol. 14, No. 4, Application Series (Dec., 1967yf S S % % 6 Published by: INFORMS Stable URL: http://www.jstor.org/stable/2628680 Accessed: 03-07-2018 01:02 UTC JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected] Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://about.jstor.org/terms INFORMS is collaborating with JSTOR to digitize, preserve and extend access to Management Science This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms MANAGEMENT SCIENCE Vol. 14, No. 4, December, 1967 Printed in U.S.A. MANAGEMENT MISINFORMATION SYSTEMS * RUSSELL L. ACKOFF University of Pennsylvania Five assumptions commonly made by designers of management information systems are identified. It is argued that these are not justified in many (if not mostyf F D V H V D Q G K H Q F H O H D G W R P D M R U G H I L F L H Q F L H V L Q W K H U H V X O W L Q J V V W H P V . These assumptions are: (1yf W K H F U L W L F D O G H I L F L H Q F X Q G H U Z K L F K P R V W P D Q D J H U s operate is the lack of relevant information, (2yf W K H P D Q D J H U Q H H G V W K H L Q I R U – mation he wants, (3yf L I D P D Q D J H U K D V W K H L Q I R U P D W L R Q K H Q H H G V K L V G H F L V L R n making will improve, (4yf E H W W H U F R P P X Q L F D W L R Q E H W Z H H Q P D Q D J H U V L P S U R Y H s organizational performance, and (5yf D P D Q D J H U G R H V Q R W K D Y H W R X Q G H U V W D Q d how his information system works, only how to use it. To overcome these assumptions and the deficiencies which result from them, a management information system should be imbedded in a management control system. A procedure for designing such a system is proposed and an example is given of the type of control system which it produces. The growing preoccupation of operations researchers and management scien- tists with Management Information Systems (MIS’syf L V D S S D U H Q W , Q I D F W I R r some the design of such systems has almost become synonymous with operations research or management science. Enthusiasm for such systems is understand- able: it involves the researcher in a romantic relationship with the most glamorous instrument of our time, the computer. Such enthusiasm is understandable but, nevertheless, some of the excesses to which it has led are not excusable. Contrary to the impression produced by the growing literature, few com- puterized management information systems have been put into operation. Of those I’ve seen that have been implemented, most have not matched expectations and some have been outright failures. I believe that these near- and far-misses could have been avoided if certain false (and usually implicityf D V V X P S W L R Q V R n which many such systems have been erected had not been made. There seem to be five common and erroneous assumptions underlying the design of most MIS’s, each of which I will consider. After doing so I will outline an MIS design procedure which avoids these assumptions. Give Them More Most MIS’s are designed on the assumption that the critical deficiency under which most managers operate is the lack of relevant information. I do not deny that most managers lack a good deal of information that they should have, but I do deny that this is the most important informational deficiency from which they suffer. It seems to me that they suffer more from an over abundance of irrelevant information. * Received June 1967. B-147 This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms B-148 RUSSELL L. ACKOFF This is not a play on words. The consequences of changing the emphasis of an MIS from supplying relevant information to eliminating irrelevant information is considerable. If one is preoccupied with supplying relevant information, attention is almost exclusively given to the generation, storage, and retrieval of information: hence emphasis is placed on constructing data banks, coding, indexing, updating files, access languages, and so on. The ideal which has emerged from this orientation is an infinite pool of data into which a manager can reach to pull out any information he wants. If, on the other hand, one sees the manager’s information problem primarily, but not exclusively, as one that arises out of an overabundance of irrelevant information, most of which was not asked for, then the two most important functions of an information system become filtration (or evaluationyf D Q G F R Q G H Q V D W L R Q 7 K H O L W H U D W X U H R Q 0 , 6 V V H O G R P U H I H U V W R W K H V e functions let alone considers how to carry them out. My experience indicates that most managers receive much more data (if not informationyf W K D Q W K H F D Q S R V V L E O D E V R U E H Y H Q L I W K H V S H Q G D O O R I W K H L U W L P e trying to do so. Hence they already suffer from an information overload. They must spend a great deal of time separating the relevant form the irrelevant and searching for the kernels in the relevant documents. For example, I have found that I receive an average of forty-three hours of unsolicited reading material each week. The solicited material is usually half again this amount. I have seen a daily stock status report that consists of approximately six hundred pages of computer print-out. The report is circulated daily across man- agers’ desks. I’ve also seen requests for major capital expenditures that come in book size, several of which are distributed to managers each week. It is not uncommon for many managers to receive an average of one journal a day or more. One could go on and on. Unless the information overload to which managers are subjected is reduced, any additional information made available by an MIS cannot be expected to be used effectively. Even relevant documents have too much redundancy. Most documents can be considerably condensed without loss of content. My point here is best made, perhaps, by describing briefly an experiment that a few of my colleagues and I conducted on the OR literature several years ago. By using a panel of well-known experts we identified four OR articles that all members of the panel considered to be “above average,” and four articles that were considered to be “below average.” The authors of the eight articles were asked to prepare “objective” examinations (duration thirty minutesyf S O X V D Q V Z H U V I R U J U D G X D W H V W X G H Q W V Z K o were to be assigned the articles for reading. (The authors were not informed about the experiment.yf 7 K H Q V H Y H U D O H [ S H U L H Q F H G Z U L W H U V Z H U H D V N H G W R U H G X F H H D F h article to 2 and 3 of its original length only by eliminating words. They also prepared a brief abstract of each article. Those who did the condensing did not see the examinations to be given to the students. A group of graduate students who had not previously read the articles were then selected. Each one was given four articles randomly selected, each of which This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms MANAGEMENT MISINFORMATION SYSTEMS B-149 was in one of its four versions: 100yb b, 33 yb R U D E V W U D F W ( D F K Y H U V L R Q R f each article was read by two students. All were given the same examinations. The average scores on the examinations were then compared. For the above-average articles there was no significant difference between average test scores for the 100yb b, and 33 yb Y H U V L R Q V E X W W K H U H Z D V a significant decrease in average test scores for those who had read only the abstract. For the below-average articles there was no difference in average test scores among those who had read the 100 yb b, and 33 yb Y H U V L R Q V E X W W K H U e was a significant increase in average test scores of those who had read only the abstract. The sample used was obviously too small for general conclusions but the results strongly indicate the extent to which even good writing can be condensed without loss of information. I refrain from drawing the obvious conclusion about bad writing. It seems clear that condensation as well as filtration, performed mechanically or otherwise, should be an essential part of an MIS, and that such a system should be capable of handling much, if not all, of the unsolicited as well as solicited information that a manager receives. The Manager Needs the Information That He Wants Most MIS designers “determine” what information is needed by asking managers what information they would like to have. This is based on the as- sumption that managers know what information they need and want it. For a manager to know what information he needs he must be aware of each type of decision he should make (as well as doesyf D Q G K H P X V W K D Y H D Q D G H T X D W e model of each. These conditions are seldom satisfied. Most managers have some conception of at least some of the types of decisions they must make. Their conceptions, however, are likely to be deficient in a very critical way, a way that follows from an important principle of scientific economy: the less we under- stand a phenomenon, the more variables we require to explain it. Hence, the manager who does not understand the phenomenon he controls plays it “safe” and, with respect to information, wants “everything.” The MIS designer, who has even less understanding of the relevant phenomenon than the manager, tries to provide even more than everything. He thereby increases what is already an overload of irrelevant information. For example, market researchers in a major oil company once asked their marketing managers what variables they thought were relevant in estimating the sales volume of future service stations. Almost seventy variables were identified. The market researchers then added about half again this many variables and performed a large multiple linear regression analysis of sales of existing stations against these variables and found about thirty-five to be statis- tically significant. A forecasting equation was based on this analysis. An OR team subsequently constructed a model based on only one of these variables, traffic flow, which predicted sales better than the thirty-five variable regression equation. The team went on to explain sales at service stations in terms of the This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms B-150 RUSSELL L. ACKOFF customers’ perception of the amount of time lost by stoppong for service. The relevance of all but a few of the variables used by the market researchers could be explained by their effect on such perception. The moral is simple: one cannot specify what information is required for decision making until an explanatory model of the decision process and the system involved has been constructed and tested. Information systems are subsystems of control systems. They cannot be designed adequately without taking control in account. Furthermore, whatever else regression analyses can yield, they cannot yield understanding and explanation of phenomena. They describe and, at best, predict. Give a Manager the Information He Needs and His Decision Making Will Improve It is frequently assumed that if a manager is provided with the information he needs, he will then have no problem in using it effectively. The history of OR stands to the contrary. For example, give most managers an initial tableau of a typical “real” mathematical programming, sequencing, or network problem and see how close they come to an optimal solution. If their experience and judgment have any value they may not do badly, but they will seldom do very well. In most management problems there are too many possibilities to expect experience, judgement, or intuition to provide good guesses, even with perfect information. Furthermore, when several probabilities are involved in a problem the un- guided mind of even a manager has difficulty in aggregating them in a valid way. We all know many simple problems in probability in which untutored intuition usually does very badly (e.g., What are the correct odds that 2 of 25 people selected at random will have their birthdays on the same day of the year?yf . For example, very few of the results obtained by queuing theory, when arrivals and service are probabilistic, are obvious to managers; nor are the results of risk analysis where the managers’ own subjective estimates of probabilities are used. The moral: it is necessary to determine how well managers can use needed information. When, because of the complexity of the decision process, they can’t use it well, they should be provided with either decision rules or perform- ance feed-back so that they can identify and learn from their mistakes. More on this point later. More Communication Means Better Performance One characteristic of most MIS’s which I have seen is that they provide managers with better current information about what other managers and their departments and divisions are doing. Underlying this provision is the belief that better interdepartmental communication enables managers to coordinate their decisions more effectively and hence improves the organization’s overall performance. Not only is this not necessarily so, but it seldom is so. One would hardly expect two competing companies to become more cooperative because This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms MANAGEMENT MISINFORMATION SYSTEMS B-151 the information each acquires about the other is improved. This analogy is not as far fetched as one might first suppose. For example, consider the following very much simplified version of a situation I once ran into. The simplification of the case does not affect any of its essential characteristics. A department store has two “line” operations: buying and selling. Each function is performed by a separate department. The Purchasing Department primarily controls one variable: how much of each item is bought. The Merchan- dising Department controls the price at which it is sold. Typically, the measure of performance applied to the Purchasing Department was the turnover rate of inventory. The measure applied to the Merchandising Department was gross sales; this department sought to maximize the number of items sold times their price. Now by examining a single item let us consider what happens in this system. The merchandising manager, using his knowledge of competition and con- sumption, set a price which he judged would maximize gross sales. In doing so he utilized price-demand curves for each type of item. For each price the curves show the expected sales and values on an upper and lower confidence band as well. (See Figure 1.yf : K H Q L Q V W U X F W L Q J W K H 3 X U F K D V L Q J ‘ H S D U W P H Q W K R Z P D Q y items to make available, the merchandising manager quite naturally used the value on the upper confidence curve. This minimized the chances of his running short which, if it occurred, would hurt his performance. It also maximized the chances of being over-stocked but this was not his concern, only the purchasing manager’s. Say, therefore, that the merchandising manager initially selected price P1 and requested that amount Q, be made available by the Purchasing Department. In this company the purchasing manager also had access to the price-demand curves. He knew the merchandising manager always ordered optimistically. Z o I E Q2 –u- 03 0 1 I E~SS4IM IC Pt P2 P3 PRICE FIGURE, 1. Price-demand curve This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms B-152 RUSSELL L. ACKOFF Therefore, using the same curve he read over from Qi to the upper limit and down to the expected value from which he obtained Q2, the quantity he actually intended to make available. He did not intend to pay for the merchandising manager’s optimism. If merchandising ran out of stock, it was not his worry. Now the merchandising manager was informed about what the purchasing manager had done so he adjusted his price to P2. The purchasing manager in turn was told that the merchandising manager had made this readjustment so he planned to make only Q3 available. If this process-made possible only by perfect communication between departments-had been allowed to continue, nothing would have been bought and nothing would have been sold. This out- come was avoided by prohibiting communication between the two departments and forcing each to guess what the other was doing. I have obviously caricatured the situation in order to make the point clear: when organizational units have inappropriate measures of performance which put them in conflict with each other, as is often the case, communication be- tween them may hurt organizational performance, not help it. Organizational structure and performance measurement must be taken into account before opening the flood gates and permitting the free flow of information between parts of the organization. (A more rigorous discussion of organizational structure and the relationship of communication to it can be found in [1].yf A Manager Does Not Have to Understand How an Information System Works, Only How to Use It Most MIS designers seek to make their systems as innocuous and unobtrusive as possible to managers lest they become frightened. The designers try to provide managers with very easy access to the system and assure them that they need to know nothing more about it. The designers usually succeed in keeping man- agers ignorant in this regard. This leaves managers unable to evaluate the MIS as a whole. It often makes them afraid to even try to do so lest they display their ignorance publicly. In failing to evaluate their MIS, managers delegate much of the control of the organization to the system’s designers and operators who may have many virtues, but managerial competence is seldom among them. Let me cite a case in point. A Chairman of a Board of a medium-size company asked for help on the following problem. One of his larger (decentralizedyf G L Y L – sions had installed a computerized production-inventory control and manu- facturing-manager information system about a year earlier. It had acquired about $2,000,000 worth of equipment to do so. The Board Chairman had just received a request from the Division for permission to replace the original equipment with newly announced equipment which would cost several times the original amount. An extensive “justification” for so doing was provided with the request. The Chairman wanted to know whether the request was really justified. He admitted to complete incompetence in this connection. A meeting was arranged at the Division at which I was subjected to an ex- tended and detailed briefing. The system was large but relatively simple. At the heart of it was a reorder point for each item and a maximum allowable This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms MANAGEMENT MISINFORMATION SYSTEMS B-153 stock level. Reorder quantities took lead-time as well as the allowable maximum into account. The computer kept track of stock, ordered items when required and generated numerous reports on both the state of the system it controlled and its own “actions.” When the briefing was over I was asked if I had any questions. I did. First I asked if, when the system had been installed, there had been many parts whose stock level exceeded the maximum amount possible under the new system. I was told there were many. I asked for a list of about thirty and for some graph paper. Both were provided. With the help of the system designer and volumes of old daily reports I began to plot the stock level of the first listed item over time. When this item reached the maximum “allowable” stock level it had been reordered. The system designer was surprised and said that by sheer “luck” I had found one of the few errors made by the system. Continued plotting showed that because of repeated premature reordering the item had never gone much below the maximum stock level. Clearly the program was confusing the maximum allowable stock level and the reorder point. This turned out to be the case in more than half of the items on the list. Next I asked if they had many paired parts, ones that were only used with each other; for example, matched nuts and bolts. They had many. A list was pro- duced and we began checking the previous day’s withdrawals. For more than half of the pairs the differences in the numbers recorded as withdrawn were very large. No explanation was provided. Before the day was out it was possible to show by some quick and dirty calculations that the new computerized system was costing the company almost $150,000 per month more than the hand system which it had replaced, most of this in excess inventories. The recommendation was that the system be redesigned as quickly as pos- sible and that the new equipment not be authorized for the time being. The questions asked of the system had been obvious and simple ones. Man- agers should have been able to ask them but-and this is the point-they felt themselves incompetent to do so. They would not have allowed a handoperated system to get so far out of their control. No MIS should ever be installed unless the managers for whom it is intended are trained to evaluate and hence control it rather than be controlled by it. A Suggested Procedure for Designing an MIS The erroneous assumptions I have tried to reveal in the preceding discussion can, I believe, be avoided by an appropriate design procedure. One is briefly outlined here. 1. Analysis Of The Decision System Each (or at least each importantyf W S H R I P D Q D J H U L D O G H F L V L R Q U H T X L U H G E W K e organization under study should be identified and the relationships between them should be determined and flow-charted. Note that this is not necessarily the same thing as determining what decisions are made. For example, in one com- This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms B-154 RUSSELL L. ACKOFF pany I found that make-or-buy decisions concerning parts were made only at the time when a part was introduced into stock and was never subsequently reviewed. For some items this decision had gone unreviewed for as many as twenty years. Obviously, such decisions should be made more often; in some cases, every time an order is placed in order to take account of current shop loading, underused shifts, delivery times from suppliers, and so on. Decision-flow analyses are usually self-justifying. They often reveal important decisions that are being made by default (e.g., the make-buy decision referred to aboveyf D Q G W K H G L V F O R V H L Q W H U G H S H Q G H Q W G H F L V L R Q V W K D W D U H E H L Q J P D G H L Q – dependently. Decision-flow charts frequently suggest changes in managerial responsibility, organizational structure, and measure of performance which can correct the types of deficiencies cited. Decision analyses can be conducted with varying degrees of detail, that is, they may be anywhere from coarse to fine grained. How much detail one should become involved with depends on the amount of time and resources that are available for the analysis. Although practical considerations frequently restrict initial analyses to a particular organizational function, it is preferable to perform a coarse analysis of all of an organization’s managerial functions rather than a fine analysis of one or a subset of functions. It is easier to introduce finer in- formation into an integrated information system than it is to combine fine sub- systems into one integrated system. 2. An Analysis Of Information Requirements Managerial decisions can be classified into three types: (ayf ‘ H F L V L R Q V I R U Z K L F K D G H T X D W H P R G H O V D U H D Y D L O D E O H R U F D Q E H F R Q V W U X F W H d and from which optimal (or near optimalyf V R O X W L R Q V F D Q E H G H U L Y H G , Q V X F h cases the decision process itself should be incorporated into the information system thereby converting it (at least partiallyyf W R D F R Q W U R O V V W H P $ G H F L V L R n model identifies what information is required and hence what information is relevant. (byf ‘ H F L V L R Q V I R U Z K L F K D G H T X D W H P R G H O V F D Q E H F R Q V W U X F W H G E X W I U R P Z K L F h optimal solutions cannot be extracted. Here some kind of heuristic or search procedure should be provided even if it consists of no more than computerized trial and error. A simulation of the model will, as a minimum, permit comparison of proposed alternative solutions. Here too the model specifies what information is required. (cyf ‘ H F L V L R Q V I R U Z K L F K D G H T X D W H P R G H O V F D Q Q R W E H F R Q V W U X F W H G 5 H V H D U F K L s required here to determine what information is relevant. If decision making cannot be delayed for the completion of such research or the decision’s effect is not large enough to justify the cost of research, then judgment must be used to “guess” what information is relevant. It may be possible to make explicit the implicit model used by the decision maker and treat it as a model of type (byf . In each of these three types of situation it is necessary to provide feedback by comparing actual decision outcomes with those predicted by the model or decision maker. Each decision that is made, along with its predicted outcome, This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms MANAGEMENT MISINFORMATION SYSTEMS B-155 should be an essential input to a management control system. I shall return to this point below. S. Aggregation Of Decisions Decisions with the same or largely overlapping informational requirements should be grouped together as a single manager’s task. This will reduce the information a manager requires to do his job and is likely to increase his under- standing of it. This may require a reorganization of the system. Even if such a reorganization cannot be implemented completely what can be done is likely to improve performance significantly and reduce the information loaded on man- agers. 4. Design Of Information Processing Now the procedure for collecting, storing, retrieving, and treating information can be designed. Since there is a voluminous literature on this subject I shall leave it at this except for one point. Such a system must not only be able to answer questions addressed to it; it should also be able to answer questions that have not been asked by reporting any deviations from expectations. An extensive exception-reporting system is required. 5. Design Of Control Of The Control System It must be assumed that the system that is being designed will be deficient in many and significant ways. Therefore it is necessary to identify the ways in which it may be deficient, to design procedures for detecting its deficiencies, and for correcting the system so as to remove or reduce them. Hence the system should be designed to be flexible and adaptive. This is little more than a platitude, but it has a not-so-obvious implication. No completely computerized system can be as flexible and adaptive as can a man-machine system. This is illustrated by a concluding example of a system that is being developed and is partially in operation. (See Figure 2.yf The company involved has its market divided into approximately two hundred marketing areas. A model for each has been constructed as is “in” the computer. On the basis of competivive intelligence supplied to the service marketing manager by marketing researchers and information specialists he and his staff make policy decisions for each area each month. Their tentative decisions are fed into the computer which yields a forecast of expected performance. Changes are made until the expectations match what is desired. In this way they arrive at “final” decisions. At the end of the month the computer compares the actual performance of each area with what was predicted. If a deviation exceeds what could be expected by chance, the company’s OR Group then seeks the reason for the deviation, performing as much research as is required to find it. If the cause is found to be permanent the computerized model is adjusted appropriately. The result is an adaptive man-machine system whose precision and generality is continuously increasing with use. Finally it should be noted that in carrying out the design steps enumerated This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms B-156 RUSSELL L. ACKOFF PROPOSED POLICIES MARKETING EVALUATED PROPOSALS MARKET AREA MEMORY a MODELS COM PARATOR MANAGEMENT SELECTED POLICY (COMPUTERyf 3 5 ( ‘ , & 7 ( ‘ & 2 0 3 8 7 ( 5 f OUTCOME 2 Ui INFORMATION F INQUIRIES Z -j2 <~~~~~~~~~~~ o~~~~~~~~~~~~~~~~~~~ UJ oz DATA D FIELD _MOTHERA SOURCES MARKET DATA OPERATIONS DEVIANT AREAS INFORMATION INFORMATION RESEARCH SYSTEM GROUP M ~~~~~~DATA oz 1 FIELD DATA ACTUAL PERFORMANCE MARKET SELLINGARS FORCEARS FIGURE 2. Simplified diagram of a market-area control system above, three groups should collaborate: information systems specialists, oper- ations researchers, and managers. The participation of managers in the design of a system that is to serve them, assures their ability to evaluate its performance by comparing its output with what was predicted. Managers who are not willing to invest some of their time in this process are not likely to use a management control system well, and their system, in turn, is likely to abuse them. Reference 1. SENGUPTA, S. S., AND ACKOFF, R. L., “Systems Theory from an Operations Research Point of View,” IEEE Transactions on Systems Science and Cybernetics, Vol. 1 (Nov. 1965yf S S . This content downloaded from 54.84.104.155 on Tue, 03 Jul 2018 01:02:59 UTC All use subject to http://about.jstor.org/terms
Part I (Information Management Today): Roughly 50 years ago, Russell Ackoff wrote about the importance, or lack of importance, of information that management needs in “Ackoff’s Management Information
The Association ofr A cco untan ts an d F inancial Pr ofessionals in fusiness ima Sta te m ent on Managem ent Acc oun tin g IMA Management Accrounting Competencyr Framefork About IMA ® (Institute of Management Accountants) IMA, named 2017 and 2018 Professional Body of the Year by The Accountant/International Accounting Bulletin, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA ® (Certified Management Accountant) program, continuing education, networking, and advocacy of the highest ethical bu siness practices. IMA has a global network of more than 100,000 members in 140 countries and 300 professional and student chapters. Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe, and Middle East/India. For more information about IMA, please visit www.imanet.org. Statements on Management Accounting SMAs present IMA’s position on best practices in management accounting. These authoritative monographs cover the broad range of issues encountered in practice. © April 2019 Institute of Management Accountants 10 Paragon Drive, Suite 1 Montvale, NJ, 07645 www.imanet.org/thought_leadership Contents Introduction ……………………………………………………………… … 4 Competency by Domain ………………………………………………. 5 Competencies Mapped to the 2020 CMA Exam …………….. 7 Select Learning Resources by Domain …………………………… 8 Strategy, Planning & Performance …………………………………. 9 Strategic and Tactical Planning ………………………………. 10 Decision Analysis …………………………………………………. 11 Strategic Cost Management ………………………………….. 12 Capital Investment Decisions …………………………………. 13 Enterprise Risk Management …………………………………. 14 Budgeting and Forecasting …………………………………… 15 Corporate Finance ……………………………………………….. 16 Performance Management ……………………………………. 17 Reporting & Control ………………………………………………….. 18 Internal Control ……………………………………………………. 19 Financial Recordkeeping ……………………………………….. 20 Cost Accounting ………………………………………………….. 21 Financial Statement Preparation …………………………….. 22 Financial Statement Analysis ………………………………….. 23 Tax Compliance and Planning ………………………………… 24 Integrated Reporting ……………………………………………. 25 Technology & Analytics ………………………………………………. 26 Information Systems …………………………………………….. 27 Data Governance …………………………………………………. 28 Data Analytics ……………………………………………………… 29 Data Visualization …………………………………………………. 30 Business Acumen & Operations ………………………………….. 31 Industry-specific Knowledge ………………………………….. 32 Operational Knowledge ………………………………………… 33 Quality Management and Continuous Improvement … 34 Project Management …………………………………………….. 35 Leadership ……………………………………………………………… … 36 Communication Skills ……………………………………………. 37 Motivating and Inspiring Others …………………………….. 38 Collaboration, Teamwork, and Relationship Management ……………………………….. 39 Change Management …………………………………………… 40 Conflict Management …………………………………………… 41 Negotiation …………………………………………………………. 42 Talent Management ……………………………………………… 43 Professional Ethics & Values ……………………………………….. 44 Professional Ethical Behavior …………………………………. 45 Recognizing and Resolving Unethical Behavior ………… 46 Legal and Regulatory Requirements ……………………….. 47 Conclusion ……………………………………………………………… … 48 THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 3 THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 43 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. IMA MANAGEMENT ACCOUNTINGCOMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS BUSINESS ACUMEN & OPERATIONS CATA LY ST PARTNER LEADERSHIP CHAMPION REPORTING & CONTROL STEWARD STRATEGY, PLANNING & PERFORMANCE VISIONARY PROFESSIONAL ETHICS & VALUES GUIDE IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK Management accounting is a profession encompassing finance and accounting professionals working inside organizations. Their role involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to formulate and implement an organization’s strategy. Technology is redefining the role of the management accountant while also significantly changing the business landscape and the management accounting profession at an unprecedented speed. To keep pace with the changing business environment and advances in technology, IMA has analyzed the emerging competencies needed by management accountants and has updated the IMA Management Accounting Competency Framework. This enhanced Framework identifies six domains of core knowledge, skills, and abilities that finance and accounting professionals need to remain relevant in the Digital Age and perform their current and future roles effectively. The Framework and associated materials are offered as guidance for skills assessment, career development, and talent management within the profession. THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 54 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. COMPETENCIES BY DOMAINDOMAIN COMPETENCIES The competencies required to envision the future, lead the strategic planning process, guide decisions, manage risk, and monitor performance. The competencies required to manage technology and analyze data to enhance organizational success. The competencies required to measure and report an organization’s performance in compliance with relevant standards and regulations. • Strategic and T actical Planning • Decision Analysis • Strategic Cost Management • Capital Investment Decisions • Enterprise Risk Management • Budgeting and Forecasting • Corporate Finance • Performance Management • Internal Control • Financial Recordkeeping • Cost Accounting • Financial Statement Preparation • Financial Statement Analysis • Tax Compliance and Planning • Integrated Reporting • Information Systems • Data Governance • Data Analytics • Data Visualization REPORTING & CONTROL STRATEGY, PLANNING & PERFORMANCE TECHNOLOGY & ANALYTICS 5 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. COMPETENCIES BY DOMAINDOMAIN COMPETENCIES The competencies required to contribute as a cross-functional business partner to transform company-wide operations. The competencies required to collaborate with others and inspire teams to achieve organizational goals. The competencies required to demonstrate the professional values, ethical behavior, and legal compliance essential to a sustainable business model. • Industry-Specific Knowledge • Operational Knowledge • Quality Management and Continuous Improvement • Project Management • Communication Skills • Motivating and Inspiring Others • Collaboration, Teamwork, and Relationship Management • Change Management • Conflict Management • Negotiation • Talent Management • Professional Ethical Behavior • Recognizing and Resolving Unethical Behavior • Legal and Regulatory Requirements BUSINESS ACUMEN & OPERATIONS LEADERSHIP PROFESSIONAL ETHICS & VALUES THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 6 THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 76 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. COMPETENCIES MAPPED TO THE 2020 CMA EXAM This chart illustrates how the CMA exam aligns with the broader body of knowledge specified in IMA’s Competency Framework for finance and accounting pr ofessionals. Domain 2020 CMA Exam* Competencies Strategy, Planning & Performance Reporting & Control Technology & Analytics * CMA Part 1: Financial Planning, Performance, and Analytics | CMA Part 2: Strategic Financial Management • Strategic and Tactical Planning……………………. • Decision Analysis………………………………………. • Strategic Cost Management……………………….. • Capital Investment Decisions……………………… • Enterprise Risk Management………………………. • Budgeting and Forecasting………………………… • Corporate Finance…………………………………….. • Performance Management…………………………. Part 1 Part 2 Part 1 Part 2 Part 2 Part 1 Part 2 Part 1 • Internal Control…………………………………………. • Financial Recordkeeping……………………………. • Cost Accounting……………………………………….. • Financial Statement Preparation………………….. • Financial Statement Analysis………………………. • Tax Compliance and Planning…………………….. • Integrated Reporting…………………………………. Part 1 Part 1 Part 1 Part 1 Part 2 N/A Part 1 • Information Systems………………………………….. • Data Governance……………………………………… • Data Analytics…………………………………………… • Data Visualization……………………………………… Part 1 Part 1 Part 1 Part 1 Domain 2020 CMA Exam* Competencies Business Acumen & Operations Leadership Professional Ethics & Values • Communication Skills………………………………….. • Motivating and Inspiring Others……………………. • Collaboration, Teamwork, and Relationship Management……………………………………………… • Change Management………………………………….. • Conflict Management………………………………….. • Negotiation………………………………………………… • Talent Management…………………………………….. • Industry-Specific Knowledge………………………. • Operational Knowledge…………………………….. • Quality Management and Continuous Improvement……………………………………………. • Project Management…………………………………. N/A N/A Part 1 N/A N/A N/A N/A N/A N/A N/A N/A • Professional Ethical Behavior………………………. • Recognizing and Resolving Unethical Behavior…………………………………………………… • Legal and Regulatory Requirements……………. Part 2 Part 2 N/A THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 87 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. SELECT LEARNING RESOURCES BY DOMAIN REPORTING & CONTROL STRATEGY, PLANNING & PERFORMANCE TECHNOLOGY & ANALYTICS BUSINESS ACUMEN & OPERATIONS LEADERSHIP PROFESSIONAL ETHICS & VALUES IMA Strategy and Competitive Analysis Learning Series ® (Online Courses) FP&A Certificate (Online Courses) Strategic Management Webinar Series COSO ERM Certificate Program (Online Courses and Live Workshops) IMA Thought Leadership (Research) IMA Thought Leadership (Research) Strategic Finance Technology Articles IMA Excel Series (Online Courses) Inside Talk: Tech-Talk Webinar Series IMA Educational Case Journal (IECJ ®) The Master Guide to Controllers’ Best Practices (Book) COSO Internal Control Certificate Program (Online Courses and Live Workshops) IMA Knowledge Exchange- Advantage Combo (Online Subscription Package) Statements on Management Accounting (SMAs) IMA Thought Leadership (Research) Statements on Management Accounting (SMAs) IMA Educational Case Journal (IECJ ®) Management Accounting Quarterly (MAQ) Strategic Finance Articles IMA Live! (Online Subscription Package) IMA Statement of Ethical Professional Practice IMA Educational Case Journal (IECJ ®) IMA Ethics Series (Online Courses and Live Workshops) Statements on Management Accounting (SMAs) Strategic Finance Ethics Column IMA’s Leadership Academy (Webinars and Live Workshops) Strategic Finance Leadership Column and Articles IMA CPEdge™ (Online Subscription Package) Statements on Management Accounting (SMAs) Management Accounting Quarterly (MAQ) T o see a complete listing of 1,000+ learning resources, including thought leadership research, articles, webinars, online courses, and on-the-job activities, visit CareerDriver ® at www.imanet.org/CareerDriver. IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 9 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK The competencies required to envision the future, lead the strategic planning process, guide decisions, manage risk, and monitor performance. 9 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT STRATEGIC AND TACTICAL PLANNING Assess key business factors, and drive value through strategy and operating plan development and execution Limited knowledge, skills, and/or experience with strategic and tactical planning Demonstrate an understanding of how individual goals support organizational strategy Perform analyses that support the strategic planning process Recognize the value and importance of thinking long term for the organization Demonstrate an understanding of the importance of pursuing strategies aligned with organizational mission, vision, and core values Implement annual and/or short-term departmental goals linked to strategy Explain how tactical plans link to organization-wide strategy Identify critical success factors (CSFs) and related key performance indicators (KPIs) necessary for successful strategy implementation Communicate organizational strategy effectively Consider limited resources and necessary trade-offs when recommending business decisions Assess strengths, weaknesses, opportunities, and threats (SWOT) facing the organization (e.g., PESTEL (political, economic, social, technological, environmental, legal) analysis) Identify strategic issues and drivers of competitive advantage by employing industry analysis techniques, such as Porter’s Five Forces and scenario planning Introduce innovative programs and processes that enhance organizational corporate social responsibility (CSR) and environmental objectives Utilize business intelligence resources to identify strategic opportunities Oversee the implementation of strategic initiatives, including allocation of resources, while balancing long-term strategy and short- term objectives Communicate perceived strategy/organizational gaps and alignment issues Evaluate the impact of strategic decisions on the value chain Leverage strategic planning experience in multiple business environments to identify the key drivers of sustainable competitive advantage in a specific situation Develop strategy governance processes and measures for innovation effectiveness Define the organization’s sustainable value-creation model, and drive innovation Synthesize complementary and competing factors in a complex environment to determine trade-offs (e.g., resources, capital, technology, capabilities) when formulating the optimal strategy for the organization Drive CSR strategies and environmental sustainability strategies that advance the organization’s competitive advantage Use various data sources to identify leading indicators, predict competitors’ initiatives, and drive contingency plans Communicate the vision, strategy, and execution plan effectively, internally and externally, to gain support and compliance Recommend new methods and approaches (e.g., scenario planning, war gaming) for strategy development THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 10 10 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT DECISION ANALYSIS Evaluate decision alternatives using analytical techniques, and make recommendations Demonstrate an understanding of the basic types and purpose of decision-support tools (e.g., breakeven analysis, net present value) Demonstrate research skills Limited knowledge of decision analysis Perform cost-volume-profit (breakeven) analysis to support product decisions Evaluate data for decisions such as make or buy, lease or own, and sell or process further Perform scenario analysis Demonstrate critical thinking skills, including objective analysis, synthesis, and evaluation, to form evidence-based decisions Evaluate nonroutine projects (e.g., special orders, outsourcing, business segments) Identify the most important criteria for selecting the best alternative to support an organization’s strategic goals Evaluate potential profitability using external and internal data sets Evaluate and incorporate environmental (e.g., political, regulatory, market) and social factors when making strategic decisions Lead complex decisions involving high risk, ambiguity, and significant strategic consequences Develop a framework for decision making (e.g., identify specific decision-support methods to use in given situations) Employ innovative methodologies when approaching complex decisions (e.g., Monte Carlo simulation, real options) Implement revenue and cost models that reflect causal operational relationships to provide nonfinancial managers financial decision support information THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 11 11 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT STRATEGIC COST MANAGEMENT Identify cost drivers, and perform cost modeling to enhance organizational decision making Limited exposure to strategic cost management concepts Demonstrate an understanding of basic cost concepts Use inventory control tools within parameters to optimize stocking levels Use capacity planning, utilization, and costing tools and techniques Analyze costs across the value chain to support cost- effective global sourcing decisions Trace costs to analyze and improve customer profitability Analyze the profitability of products and services by tracing costs throughout the value chain Incorporate life-cycle costs in product and service profitability projections Calculate costs using various costing methodologies (e.g., standard, activity-based, throughput costing) Conduct basic product and service costing including incremental analyses for special orders Implement managerial costing models and processes to improve decision support beyond basic cost accounting Recommend the appropriate costing approach to use in a given business situation Analyze and make recommendations regarding optimal capacity utilization to support the business plan, addressing idle and excess capacity Utilize causal activity and resource management techniques, lean and agile principles, and other value chain improvement methodologies to optimize operations Determine optimal sourcing based on comprehensive operational and cost analysis of the value chain Implement sophisticated cost management techniques (e.g., activity-based costing, Theory of Constraints, resource consumption accounting) Leverage managerial costing knowledge, models, and analytics to recommend cost reduction strategies/tactics as part of a long-term strategy Deploy causal, decision- oriented managerial costing models and strategic cost management throughout the organization’s value chain Reconcile managerial cost calculations for decision support with cost accounting calculations for external financial reporting, and explain the differences THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 12 12 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT CAPITAL INVESTMENT DECISIONS Analyze long-term investment alternatives using quantitative and qualitative techniques, and make recommendations Limited exposure to capital investment decisions Identify basic investment decision terms and techniques and their use in decision support (e.g., net present value, internal rate of return) Evaluate capital investment projects using common quantitative techniques (e.g., net present value, internal rate of return) Identify nonquantitative factors (e.g., social, safety, moral, aesthetic) that affect investment decisions Evaluate relevant cash flows for capital budgeting decisions, and estimate future return on capital Prepare capital expenditure plans, and determine funding requirements Evaluate alternative scenarios using sensitivity analysis Analyze quantitative and qualitative data for merger, acquisition, and divestiture opportunities Develop cost-of-capital hurdle rate/weighted average cost of capital Identify and calculate future opportunities and choices (real options) Recommend potential new business ventures (e.g., new products, new services, new markets) based on quantitative and qualitative factors Conduct mergers and acquisitions (M&A) analysis for complex transactions, and make recommendations to senior management and the board THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 13 13 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT ENTERPRISE RISK MANAGEMENT Identify, assess, and manage risks within an organization Limited knowledge of enterprise risk management Demonstrate an understanding of the need for organizational risk management and its relationship to internal controls Identify types of risk within an organization (e.g., financial, competitive, reputational) Analyze operational risk (e.g., internal processes, people, and systems or external factors such as legal, fraud, security), and implement mitigation strategies Analyze financial risk (e.g., interest rate, credit, foreign exchange, capital structure), and implement mitigation strategies Manage contractual relationships, policies, and coverage for insurable risks Assist operational managers with identifying and quantifying risks and opportunities Implement appropriate risk management systems based on a widely recognized framework (e.g., Committee of Sponsoring Organizations of the Treadway Commission (COSO)) Recommend financial risk management strategies (e.g., portfolio diversification and hedging, options, other derivatives) Perform an environmental scan using tools such as PEST (political, economic, societal, technology) analysis Evaluate risk concerning the competitive landscape Prepare risk communications required by regulatory agencies Analyze strategic risk, including competition and reputation/brand Develop and report metrics that provide leading/early indicators of emerging risks Develop and recommend strategic risk mitigation and risk response strategies (e.g., to address competitive risk, technology risk) Implement enterprise risk management with overall organizational strategic plans and governance Lead the development of responses to high-impact and high-probability scenarios Analyze environmental, social, and governance risks, and implement mitigation strategies THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 14 14 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT BUDGETING AND FORECASTING Project financial and operational resources necessary to develop a financial plan aligned with the organization’s strategic goals Limited exposure to budgeting and forecasting Perform data collection or data-entry tasks in support of the budget or forecast Demonstrate an understanding of the basics of the forecasting and budgeting process, including purpose and use Use basic tools and techniques of forecasting, such as moving averages and extrapolation Project short-term sales, cash flows, inventory requirements, or other financial data in support of operations within limited parameters Analyze historical revenues and expenses to determine seasonal patterns and anticipate annual requirements Analyze fixed and variable operational and financial relationships as part of the budgeting process Identify and analyze the relationship between different resources and requirements of a comprehensive financial or operational forecast Synthesize and interpret data from multiple sources Anticipate capital requirements to support growth initiatives and optimization Demonstrate and understand linkages between budget lines, and perform appropriate planning (e.g., if sales go up, commissions should also go up) Validate assumptions made by departments Develop a master budget to support the goals of a small to midsize organization or department/division of a large organization Prepare the projected income statement, balance sheet, and cash flow statement Evaluate capacity constraints for budgeted activity levels Forecast in an environment of uncertainty using sensitivity analysis Use statistical techniques such as regression, exponential smoothing, and confidence levels Analyze and synthesize data from external sources to recognize patterns and predict customer behavior Enhance the forecasting accuracy through the discovery of key and relevant trends by exploring large data sets using data analytics and data mining techniques Recommend an appropriate budgeting methodology (e.g., flexible, continuous, rolling, zero-based) to use in a given business situation Link the budgeting process to the strategic planning process Integrate and consolidate information from multiple departments Perform long-term analysis in periods of uncertainty using advanced statistical techniques Lead collaborative forecasting efforts incorporating information from multiple internal and external expert sources and sophisticated modeling techniques Communicate complex forecasts and budgets to others Design and lead the budget and financial planning process across multiple business units in a complex organization using advanced software tools THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 15 THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 1615 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT CORPORATE FINANCE Manage a company’s short-term and long-term financing needs Limited knowledge of corporate finance Demonstrate an understanding of the concepts related to managing organizational liquidity Demonstrate an understanding of basic financial instruments Distinguish between short- term and long-term financing needs Measure the performance of financial investments Perform valuation calculations of financial instruments Forecast cash requirements, analyze receivables quality, and perform investment of short-term cash Calculate financial ratios related to loan covenants and liquidity levels Evaluate and/or implement specific financing strategies (e.g., funding sources, short- term or long-term uses of surplus cash) Analyze alternative means of raising capital (e.g., common stock, bonds, preferred stock, factoring, venture capital) Develop and implement working capital policies (e.g., cash, accounts payable, accounts receivable, inventory management) Ensure compliance with loan covenants Ensure short- and long-term financing plans support and align with the strategic plan Recommend appropriate financing in complex environments considering both traditional and nontraditional financial instruments Maintain relationships with banks and other sources of funds (e.g., investment banks, venture capitalists) Develop working capital policies in complex situations (e.g., multinational corporations, rolling up multiple divisions, subsidiaries) Recommend dividend and/ or stock repurchase policies and plans THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE 1716 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK STRATEGY, PLANNING & PERFORMANCE VISIONARY Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT PERFORMANCE MANAGEMENT Design performance management systems, evaluate the success of strategic and tactical initiatives, and recommend corrective actions where appropriate Limited exposure to performance management Demonstrate an understanding of the purpose of performance management processes and their use in supporting the strategy (e.g., achieving goals, incentives, governance) Perform isolated and/or simple variance analysis Calculate traditional performance measures in alignment with organizational strategy Calculate transfer prices under existing methodology Perform a comprehensive variance analysis, and interpret drivers of performance variances Analyze the impact of transfer pricing on business unit performance beyond tax consequences Develop and implement a performance measurement process aligned with the overall strategic goal-setting process Optimize performance management and financial reporting processes to provide useful and timely management information (e.g., use of key performance indicators (KPIs), balanced scorecards, dashboards) Assess the robustness, reliability, and rigor of performance measurement systems Transform variance analysis into actionable insights Develop transfer-pricing strategy to optimize organizational performance Define and communicate an effective performance management system in a complex environment (e.g., public, global, multientities, complicated corporate structures) Ensure that performance measurement processes, compensation programs, and systems are closely aligned with the organization’s value- creation model and support the board’s decision-making role Utilize insights gained from performance management system to effect organizational change IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 18 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPOR TING & CONTROL The competencies required to measure and report an organization’s performance in compliance with relevant standards and regulations. THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL 1918 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL STEWARD Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT INTERNAL CONTROL Implement procedures and processes that ensure data security, protect an organization’s assets, and meet legal and reporting requirements Demonstrate an understanding of the purpose of internal controls for use in financial reporting, compliance, and operations Identify basic internal controls (e.g., segregation of duties, physical controls, audit trails, limits of authorization) Limited knowledge of internal control processes Verify accuracy of general ledger and subledgers through various accounting procedures and controls Implement and/or test a system of internal controls under management direction Ensure compliance with applicable policies and procedures, including those mandated by the Sarbanes-Oxley Act of 2002 Prepare internal audit reports (i.e., compliance, operational, financial) Perform internal control risk assessment using frameworks such as the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Design an effective internal control system, including technology controls, that is responsive to the specific risks of the organization Develop processes to monitor the effectiveness of risk management and internal controls processes, and remediate as necessary Develop an internal audit plan for the organization Provide assurance to management and other stakeholders regarding internal controls (e.g., Sarbanes-Oxley Act compliance) over financial reporting and nonfinancial reporting Design and implement internal controls in complex environments (e.g., public, global, multientities, complicated corporate structures) Integrate internal controls with the enterprise risk management system THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL 2019 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL STEWARD Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT FINANCIAL RECORDKEEPING Leverage financial accounting skills to record and analyze financial transactions and balances Understanding limited to a specific function (e.g., accounts receivable, accounts payable, payroll transactions) Perform transactional/ operational accounting functions, including journal entries, accruals, and reversals Perform account reconciliations, and prepare schedules to support the preparation and/or audit of financial statements Analyze special accounts (e.g., deferred tax asset/ liability), and prepare related journal entries Manage fulfillment of internal and external audit requirements including checklists and schedules Evaluate efficiency and effectiveness of accounting processes, and make recommendations to optimize them Analyze complex financial transactions, and ensure they are recorded properly in accordance with accounting standards Analyze proposed transactions to determine the potential impact on financial statements Design appropriate recordkeeping procedures in complex situations (e.g., derivatives, hedging) Design appropriate recordkeeping procedures for multinational organizations, including consolidations across segments and industries THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL 2120 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL STEWARD Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT COST ACCOUNTING Support external financial reporting by compiling and analyzing costs incurred by an organization Limited exposure to costing concepts and methods Identify basic cost classifications (e.g., fixed, variable, direct, indirect) and their use for financial reporting and inventory valuation Calculate basic product/ service costs Coordinate cost collection efforts Calculate costs using an efficient methodology and practice for your industry in accordance with accounting standards Prepare cost reports and variance analysis for management Demonstrate an understanding of the difference between absorption costing and variable costing Calculate joint product costs and by-product costs Implement cost accounting processes and systems appropriate for your industry’s financial reporting Recommend the appropriate cost accounting approach to use for a business’s external financial reporting requirements Analyze the projected impact on financial statements of major business decisions affected by costing methodologies Reconcile managerial cost calculations for decision support with cost accounting calculations for external financial reporting, and explain the differences THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL 2221 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL STEWARD Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT FINANCIAL STATEMENT PREPARATION Leverage financial accounting skills needed to prepare financial statements for internal and external stakeholders Limited exposure to financial statement preparation Identify basic financial statements, their purpose, and their elements Understand basic U.S. Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), and/or country-specific reporting frameworks Apply knowledge of more advanced financial accounting standards (e.g., leases, pensions, deferred taxes) Research, recommend, and apply appropriate accounting treatments Prepare basic financial statements for both internal and external stakeholders Prepare a comprehensive set of footnotes Analyze the impact of changing accounting standards on the financial statements Prepare Management Discussion & Analysis (MD&A) for a public company or a similar report for a private company Ensure compliance with all applicable regulatory requirements regarding financial reporting Implement efficiencies to continuously improve the quality and speed of the financial close process Prepare complex financial statements Reconcile financial statements prepared using various reporting standards (e.g., IFRS and U.S. GAAP) Prepare applicable quarterly and annual regulatory filings THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL 2322 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL STEWARD Copyright © 2019 IMA (Institute of Management Accountants). 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LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT FINANCIAL STATEMENT ANALYSIS Analyze a company’s financial statements to assess performance Limited exposure beyond understanding basic financial statements Demonstrate an understanding of the interrelationship among basic financial statements Calculate financial ratios Analyze financial statements and financial data to guide decision making Interpret the meaning of financial ratios Analyze the impact of changes in reporting standards or accounting methods on financial statements Analyze loan covenants, and report on compliance Perform comparisons of two entities or an entity to industry average using common-size financial statements Perform trend analysis by comparing performance over time Design a system of financial ratios and other performance indicators appropriate for a specific financial situation Analyze the impact of foreign operations on reported financial results, including foreign exchange transactions Analyze the potential impact of macroeconomic, social, political, and environmental factors on the organization’s financial results Coordinate and integrate a comparison of financial statement ratios across the organization Perform and interpret business unit and intercompany trend analysis Analyze the impact on financial ratios from complex financial transactions (e.g., mergers and acquisitions (M&A), divestitures) Analyze the financial statements of competitors, customers, and suppliers, and interpret trends to provide input to the planning and forecasting processes THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL 2423 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL STEWARD Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT TAX COMPLIANCE AND PLANNING Implement procedures and processes to ensure accurate and timely tax filings and effective tax strategies Limited exposure to tax compliance and planning Demonstrate an understanding of business taxation general concepts and rules Demonstrate an understanding of book vs. tax differences in financial statements Gather data and provide input to tax returns, and understand the relationship of various tax schedules to each other Ensure the recordkeeping system supports tax reporting and reflects the tax environment of the organization Prepare accurate and timely tax filings Analyze the tax impact of alternative business decisions Provide tax advice for business decisions Manage fulfillment of government tax auditors’ information requests Research and advise on international tax issues Develop and implement appropriate policies and procedures to ensure tax efficiency and compliance Manage taxation responsibilities in multiple jurisdictions and multiple industries Formulate tax strategy for multinational corporations Evaluate the risk and impact of changes in tax laws, and recommend mitigation strategies Use effective tax strategies to improve cash flows Lead tax strategy and planning for a complex organization Work with tax authorities within country-specific regulatory frameworks to finalize tax liability in complex situations THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL 2524 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK REPORTING & CONTROL STEWARD Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT INTEGRATED REPORTING Report organizational value created over time for stakeholders and society, including financial and nonfinancial information Limited exposure to integrated reporting Demonstrate an understanding of the elements of sustainability reporting Compile and summarize data to measure various forms of capital—for example, financial, manufactured, intellectual, human, social and relationship, and natural Prepare reports to providers of financial capital, regulators, and other stakeholders in response to their multicapital information needs Demonstrate a systems approach to integrated reporting, and identify barriers Design systems to efficiently collect information on relevant capitals over time Develop a balanced set of leading and lagging performance metrics based on the different forms of capital and other value-relevant frameworks Design reports to present the value the organization creates, recognizing different perspectives and incorporating material financial and nonfinancial sustainability measures Assess and report on the relationship among the different capitals Ensure integrated reports are prepared in accordance with suitable criteria, including relevance, completeness, reliability, neutrality, and understandability Develop and communicate an integrated strategy for the organization around the different forms of capital Lead through integrated thinking the development of future-oriented reports to benefit all stakeholders, including employees, customers, suppliers, business partners, communities, governmental bodies, regulators, and policy makers IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 26 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY& ANAL YTICS The competencies required to manage technology and analyze data to enhance organizational success. 26 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS CATALYST Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT INFORMATION SYSTEMS Use technology to effectively support operational and financial processes, solve problems, analyze data, and enhance business performance Minimal exposure to data and information systems beyond data input Demonstrate an understanding of processes related to a single module in a financial system (e.g., accounts payable module in an enterprise resource planning (ERP) system) Demonstrate competence in using basic hardware and software tools Identify different types of data (e.g., structured, unstructured, numeric, text, sensor) Prepare basic business process flowcharts (e.g., inventory control) with information gained from relevant stakeholders Demonstrate an understanding of the potential applications of emerging technologies (e.g., cloud computing, blockchain, robotic process automation, artificial intelligence) Manage the general ledger (GL) module (e.g., chart of accounts, journal entries, trial balance) Control and manage how and when data enters the financial systems from other modules Work closely with the Information Technology department to implement solutions to business issues and leverage opportunities Document business requirements for information system design Demonstrate an understanding of elements in relational databases Utilize relational database concepts, including primary and secondary keys, when designing reports Design relational database tables Design ERP workflows, multi- level charts of accounts, and system integration for sound financial control Manage implementation of emerging technologies to improve financial processes Use and train others in how to use multiple modules within an enterprise-wide system (e.g., material requirements planning (MRP), purchasing, warehouse management, customer relationship management (CRM)) Identify data sources, and define acceptance tests for integration of information into performance management systems Recognize and address the cascading impact of changes in an integrated systems environment Automate data collection, validation, and reporting using software tools Design and implement new data models as the business and environment evolve Identify data flow weaknesses, and recommend potential improvements Design systems structure to optimize operational and financial performance Evaluate, recommend, and implement the appropriate ERP system in a complex environment Design data marts and data warehouses to provide access to information throughout an organization THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS 27 27 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS CATALYST Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT DATA GOVERNANCE Ensure the availability, utility, integrity, and security of data Limited knowledge of data governance Limited knowledge of the life cycle of data (creation, retention, storage, obsolescence, deletion) Exercise sound data stewardship by complying with all data policies and documenting procedures followed Comply with data retention, archival, and disposal policies as part of the data life-cycle process Demonstrate an under- standing of the business and reputational impact of making decisions with incorrect, poor-quality, invalid, and/or incomplete data Demonstrate an understanding of the need to protect the security and privacy of stakeholder data Demonstrate an understanding of the basic principles of data security Communicate potential data errors and weaknesses in procedures Implement controls such as penetration and vulnerability testing to detect and thwart cyberattacks Implement an effective financial systems environment to support internal controls Demonstrate an understanding of data governance frameworks such as the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and Control Objectives for Information and Related Technologies (COBIT) Implement processes to protect the privacy of stakeholder data Implement sound data retention, archival, and disposal policies Identify and correct incomplete or inaccurate data Improve processes for preventing and correcting issues with data Balance risk and materiality when determining the level of security Evaluate costs and benefits when recommending strategies for data management Use data process validation and security tests such as unit testing, penetration testing, and acceptance testing criteria Develop early warning systems and other risk mitigation data strategies Manage the flow of data throughout its life cycle (e.g., risk of stale data or incomplete emerging data) Participate as part of a cross- functional team to evaluate available technologies and platforms to meet business needs Design and implement data governance systems in accordance with established frameworks such as COSO and COBIT Design governance implementation processes, including the creation of appropriate unit, integration, penetration, and acceptance testing criteria Set policies for data retention and storage processes in accordance with legal requirements Automate data cleansing processes THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS 28 THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS 2928 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS CATALYST Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT DATA ANALYTICS Extract, transform, and analyze data to gain insights, improve predictions, and support decision making Limited knowledge of data analytics Create spreadsheets and manipulate data using basic functions and formulas such as graphs, filtering and sorting data, and importing data Calculate basic descriptive statistics such as ratios and basic averages to reveal trends Demonstrate an understanding of the importance of using data to make business decisions Demonstrate an understanding of business intelligence and data mining Extract, transform, and query data using appropriate tools such as Structured Query Language (SQL) Interpret information needs and translate into actionable requests for data analysis Use descriptive analytics to evaluate efficiency and effectiveness of business initiatives Use simple linear regression to predict business outcomes and interpret results Determine and report cause and effect using diagnostic techniques Perform ad hoc exploratory data analysis using query languages Utilize specialized reporting tools (e.g., eXtensible Business Reporting Language (XBRL)), and interpret results Design organizational templates for use by others Mine large data sets to reveal patterns and provide insights Use predictive analytics techniques to interpret results, draw insights, and make recommendations Apply statistics to a data set using specialized statistical software and/or business intelligence software Use multiple regression for predictive and prescriptive purposes, and interpret results Transform raw, unstructured data into a form more appropriate for analysis (e.g., data wrangling) Implement solutions using multiple query, scripted, or interpreted languages (e.g., SQL, Python, R) Build prescriptive models to optimize organizational performance (e.g., goal seeking) Use advanced statistical tools for exploratory data analysis to reveal patterns and discover insights to achieve business outcomes (e.g., cluster analysis, time-series analysis, Monte Carlo analysis) THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS 3029 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK TECHNOLOGY & ANALYTICS CATALYST Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT DATA VISUALIZATION Present data visually to better explain key patterns, trends, and correlations Limited knowledge of data visualization Create simple charts and graphs using visualization tools (e.g., Excel, Tableau) or prebuilt visualization code packages Demonstrate an understanding of how to best communicate results with basic visualizations (e.g., line, bar, pie, scatter plots) Utilize table and graph design best practices to avoid distortion in the communication of complex information Demonstrate an understanding of how to best communicate results with intermediate visualizations (e.g., histograms, area charts, heat maps) Evaluate data visualization options, and select the best presentation approach for the intended audience Demonstrate an understanding of how to best communicate results with advanced visualizations (e.g., Sankey plots, bubble charts, network diagrams) Accelerate decision making using visualization tools and/or code packages to construct multivisual dashboards combining relevant visualizations Utilize simplicity of design techniques to present results of complex data analysis in an understandable manner Utilize advanced features of visualization applications Interpret and communicate complex analyses to stakeholders using advanced data visualization techniques at an audience-appropriate level Construct custom visualizations using JavaScript—either in website or with business intelligence platforms Demonstrate expertise in all three aspects of data visualization: substantive, statistical, and artistic IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 31 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK BUSINESS ACUMEN& OPERA TIONS The competencies required to contribute as a cross-functional business partner to transform company-wide operations. 31 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORKBUSINESS ACUMEN & OPERATIONS PARTNER Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT INDUSTRY-SPECIFIC KNOWLEDGE Understand and master dynamics and drivers of business success in a specific industry Limited knowledge of the industry in which the company operates Demonstrate an understanding of the industry based on limited work experience or exposur e to reports in the business media Evaluate the supply chain, and identify risks related to specific vendors and customers Keep pace with industry developments pr oactively Monitor the activities of competitors Identify sources of competitive intelligence Perform a financial ratio analysis of competitors Prepare the discussion of risk for external reporting (e.g., the Management Discussion and Analysis (MD&A) section in the annual report) Analyze the annual reports of customers, competitors, and suppliers Analyze the industry competitive structure, including the level of competitive rivalry Master industry-specific accounting and tax requirements Serve as an expert on the specific industry, including value chain, competitive issues, r egulatory matters, and customer perspectives Serve as an expert speaker and/or advisor on industry matters Formulate ways to increase competitive advantage and/or identify new sources of value cr eation Lead an organization’s competitive analysis team Evaluate an organization’s strategic risk (i.e., determining if the strategy is aligned with market and industry conditions) THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK BUSINESS ACUMEN & OPERATIONS 32 THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK BUSINESS ACUMEN & OPERATIONS 3332 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORKBUSINESS ACUMEN & OPERATIONS PARTNER Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT OPERATIONAL KNOWLEDGE Serve as a valuable business partner to operational units outside the accounting/finance department Limited exposure to business operations beyond the accounting/finance department Demonstrate an understanding of the flow of information and materials thr ough the organization Work closely with other functions including Pr ocurement, Materials Management, Production, Research, Marketing, Information Technology, Human Resources, Legal, Facilities, Customer Service, and across business units Participate in the formulation of solutions to operational issues beyond the finance department W ork on cross-functional teams as a business partner to implement multidepartment change Demonstrate operational knowledge through job r otation and/or participation in cross-functional projects Serve as an expert leading manufacturing, production, distribution, or service delivery as a result of experience gained through job rotations or previous career positions Develop creative solutions to optimize performance across the value chain Serve as a business partner recognized by other teams and business areas as having operational expertise THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK BUSINESS ACUMEN & OPERATIONS 3433 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORKBUSINESS ACUMEN & OPERATIONS PARTNER Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT QUALITY MANAGEMENT AND CONTINUOUS IMPROVEMENT Use quality management and continuous improvement tools and techniques effectively Limited exposure to quality management and/or continuous improvement approaches Recognize quality improvement tools (e.g., process mapping, Kaizen, fishbone diagrams) Perform trend analysis of quality measures Demonstrate an understanding of quality improvement approaches (e.g., lean, Six Sigma, total quality management (TQM)) Calculate the cost of quality and expected savings from improvement efforts Use quality management tools and approaches to improve the accounting/finance operation Represent finance/accounting on operational quality impr ovement teams Lead cross-functional and departmental quality improvement efforts Use quality management tools and approaches to improve cross-functional operations Master one or more quality management methodologies such as Six Sigma Use quality management tools and approaches to optimize the operations of partners in the supply chain Serve as an expert and champion/sponsor of multiple, complex quality management initiatives Lead value stream mapping and analysis to optimize operations THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK BUSINESS ACUMEN & OPERATIONS 3534 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORKBUSINESS ACUMEN & OPERATIONS PARTNER Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT PROJECT MANAGEMENT Plan and organize resources, both people and financial, in order to complete a major undertaking or event Limited exposure to formal project management tools Demonstrate an understanding of basic project management tools (e.g., timelines, checklists, milestones) Participate on teams using project management tools (e.g., Gantt Charts and critical paths) and approaches (e.g., Waterfall, Agile, Scrum) Lead projects using project management tools, including scheduling of resources Champion/sponsor multiple simultaneous projects that have significant budgets using project management tools Instill a culture of project management professionalism that guides the organization with formalized approaches IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 36 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP The competencies required to collaborate with others and inspire teams to achieve organizational goals. THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP 3736 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP CHAMPION Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT COMMUNICATION SKILLS Listen effectively to others, and convey thoughts or ideas through various forms of communication including written, spoken, and nonverbal Limited knowledge, skills, and/or experience communicating in a professional setting Organize and present thoughts, information, and facts logically Understand verbal and nonverbal cues and their importance Prepare clear and concise written communications Listen effectively, ask questions, and express concerns Tailor communications to culturally diverse audiences Recognize differences in others’ communication styles, and adjust own as appropriate Communicate both positive and negative results effectively with sensitivity to the listener Make effective presentations (i.e., engaging, motivating, concise, well-prepared) Use technology (e.g., social media) tools effectively as a communication vehicle, taking into consideration recipients’ preferences Design communication programs, taking into consideration global diversity and local customs and norms Develop communication strategies to optimize messaging through tools, tone, and timing Answer difficult questions from key stakeholders (e.g., staff, board members, auditors, investment analysts, the media) effectively, providing persuasive and credible responses Coach others on how to communicate effectively and build consensus Excel at the use of technology tools to expand leadership presence THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP 3837 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP CHAMPION Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT MOTIVATING AND INSPIRING OTHERS Influence, motivate, and gain support of others in order to achieve organizational goals through the use of emotional intelligence, accountability, and setting the “tone at the top” Limited knowledge, skills, and/or experience with motivating and inspiring others Recognize the importance of motivation Identify strengths and areas for growth of team members Recognize differences in personality style and preferences when motivating team members Provide effective advice and feedback to enable individual contributors to achieve goals and improve performance Consider the impact of emotions on communication and interactions with others Demonstrate the importance of continuously expanding professional knowledge, skills, and abilities for self and team in order to grow expertise and add value to the organization Identify and adopt appropriate leadership style for a given situation Provide positive feedback to staff as appropriate, and communicate recognition to the team and others Build effective teams, and implement innovative ways to motivate team members Anticipate emotional reactions, and respond effectively in guiding and leading others Inspire others to perform to their full potential and exceed expectations Motivate teams across the organization to overcome challenging situations Coach others on how to motivate individuals/teams effectively Lead managers to inspire and motivate their teams Lead by example, especially in difficult times THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP 3938 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP CHAMPION Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT COLLABORATION, TEAMWORK, AND RELATIONSHIP MANAGEMENT Work effectively with others in order to achieve a trusting relationship that yields positive results Limited knowledge, skills, and/or experience with collaboration and teamwork Communicate with team members in a respectful and consistent manner Contribute to team achievements by taking responsibility for own efforts and seeking input/assistance when needed Work across departmental boundaries, and contribute beyond individual responsibilities to achieve team goals Listen proactively to others, encourage collaboration, and help build consensus among team members Give credit to members of the team for their contributions Collaborate with partners in the value chain to achieve beneficial working relationships and positive outcomes Provide constructive feedback and assistance to others in addressing issues or conflicts Seize opportunities to team with others to achieve positive results Encourage an integrated approach to performance management, and discourage functional silos Collaborate on innovative products, services, and/or processes that will help the organization succeed Consider the importance of corporate culture when assessing opportunities to enter into partnerships with other organizations Serve as a role model in thinking outside the silo/ business area to identify opportunities for innovation THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP 4039 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP CHAMPION Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT CHANGE MANAGEMENT Lead an organization, team, or individuals through transition toward a desired vision or goal Limited knowledge, skills, and/or experience with change management Understand the importance of change as a critical element of continuous improvement Seek to understand change and to accept implementation Participate in change initiatives, and encourage acceptance of change by coaching with empathy and patience Develop plans to support change initiatives effectively with an appropriate degree of urgency Communicate reasons for change and associated plans to make the change Collaborate with other leaders in evaluating and executing change initiatives Encourage continuous improvement, and coach staff on how to maximize resulting benefits Identify barriers or resistance to change initiatives, seek ways to overcome them, and gain commitment Champion change by leading the organization through a major transition to achieve strategic goals Promote the vision for change, and lead major organizational change efforts effectively Create an organizational culture that seeks innovation and embraces change Make innovation a clear priority, and communicate that every function has the opportunity and ability to contribute to this goal THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP 4140 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP CHAMPION Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT CONFLICT MANAGEMENT Resolve issues using appropriate influencing skills and tools to achieve successful business goals and arrive at the best organizational outcomes Limited knowledge, skills, and/or experience with conflict management Understand that conflict is inevitable and that avoidance is not a solution Address conflict in a timely manner, and seek appropriate solutions Anticipate others’ reactions, and consider others’ viewpoints to promote mutual understanding Analyze the causes and components of conflict, including stakeholder viewpoints, competing priorities, and limited resources Raise issues to appropriate management when resolution is not achieved Deal effectively with difficult situations by asking clarifying questions, exploring solutions, and establishing boundaries for all parties Intervene to defuse tension with tactful and assertive approaches Engage in respectful debate regarding issues of importance Develop and disseminate techniques and tools to guide conflict resolution Engage effectively in crucial and difficult conversations Encourage passionate debate about issues and ideas to move the organization forward Create a culture where constructive conflict leads to continuous improvement 41 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP CHAMPION Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT NEGOTIATION Reach agreement between two or more parties to achieve the best outcome for the organization and an acceptable solution to negotiating parties Limited knowledge, skills, and/or experience with negotiation Recognize the importance of positive business relationships in successful negotiations Present a clear and concise point of view using relevant data Anticipate probable points of disagreement to be negotiated Follow a defined process for negotiations, ensuring that risks are identified and mitigated and that corporate goals are achieved Utilize a tactful and creative approach to solving problems, and reach consensus where all parties feel a win was achieved Understand the impact of diversity and cultural differences on negotiations Document contractual terms and decisions about roles and responsibilities to promote lasting agreement and positive outcomes Achieve timely and positive results through negotiation skills Serve as a successful go-to negotiator or arbitrator Gain consensus consistently from all parties in order to achieve win-win organizational solutions Demonstrate sensitivity to the impact of global political and economic issues on cross- border negotiations THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP 42 42 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP CHAMPION Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT TALENT MANAGEMENT Select, develop, retain, and reward people to ensure a strong workforce and successful business performance Limited knowledge, skills, and/or experience with performance and talent management Recognize the desired levels of performance for self and team Understand the importance of team dynamics, approaches, and output Understand the importance of talent selection and ongoing performance management for organization success Interview and select team members effectively, aligning skills with responsibilities and assignments Delegate responsibility, promote independence, and solicit feedback from the team Recognize excellent team performance, and reward positive results Prepare annual performance appraisals, and use relevant and specific examples to ensure feedback is meaningful to employees regarding goals and performance Recommend professional development resources for career advancement and closing skills gaps Develop effective staff recruitment and retention practices Develop key performance indicators (KPIs) that align with overall business objectives Create a trusting environment for team members to ask questions and offer ideas freely Coach and develop staff on achieving performance goals Engage in career path discussions and succession planning for the team Hold managers accountable for the performance of their teams Promote talent management and the importance of diversity across the organization Establish succession plans for key roles in the organization Promote a culture of performance by communicating a clear vision and shared values Inspire others by demonstrating the importance of teaming to achieve successful business results Develop performance reward/ incentive systems to drive behavior aligned with the organization’s strategic initiatives THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK LEADERSHIP 43 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 44 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK PROFESSIONAL ETHIC S & VA LUES The competencies required to demonstrate the professional values, ethical behavior, and legal compliance essential to a sustainable business model. 44 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK PROFESSIONAL ETHICS & VALUES GUIDE Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT PROFESSIONAL ETHICAL BEHAVIOR Comply with a set of guiding principles that govern a person’s behavior in the workplace Recognize that professional standards and organizational policies exist Act in an ethical manner in accordance with societal norms, values, and laws Demonstrate an understanding of the need for professional ethics in business situations (e.g., confidentiality, competence, integrity, credibility) Act in accordance with the standards and principles outlined in the IMA Statement of Ethical Professional Practice or other relevant standards Recognize potential ethical conflicts in one’s responsibilities based on organizational and/or professional guidelines Recognize the importance of an organization’s core values and how they promote ethical behavior Foster a culture of ethical behavior and accountability within the organization Design, implement, and strive to continuously improve a company-wide ethics program Advise and train others on how the organization’s ethics code applies to questionable situations they may encounter Lead in establishing and maintaining the appropriate ethical tone throughout the organization Provide expertise and serve as a role model regarding complex ethical conflicts faced by organizations Foster an ethical supply chain by establishing and enforcing relevant organizational policies and ethical standards THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK PROFESSIONAL ETHICS & VALUES 45 45 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK PROFESSIONAL ETHICS & VALUES GUIDE Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT RECOGNIZING AND RESOLVING UNETHICAL BEHAVIOR Identify ethical conflicts and lapses in the workplace, and take appropriate action Be aware of the potential existence of unethical behavior or fraudulent activity in the workplace Understand the importance of trustworthy behavior Recognize ethical conflicts such as conflicts of interest or situations susceptible to fraud Follow appropriate reporting protocols when unethical behavior is suspected Help identify and resolve business situations that include ethical dilemmas (e.g., sales targets, incentive compensation, travel and entertainment expenses) Apply critical thinking, an objective mind-set, and professional skepticism in business situations Recognize differences in cultural norms that could interfere with ethical decision making Apply organizational policies and the IMA Statement of Ethical Professional Practice to potential ethical conflicts Train others in the organization’s ethics policy, the concepts of the fraud triangle, the IMA Statement of Ethical Professional Practice, and/or other ethical constructs Apply professional judgment, knowledge of strategies, and best practices to resolve complex ethical conflicts Recognize “red flags” and risks in complex situations that may indicate purposeful misrepresentation Assist others to resolve ethical conflicts Apply internal control expertise to design procedures that reduce the likelihood of fraud and ethical conflicts Design an ethics and compliance program that includes training, supply chain communication, and vendor/ customer qualifications Be recognized as an ethics thought leader promoting the management accounting profession and values Champion the spirit of ethical behavior within the organization and across the supply chain THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK PROFESSIONAL ETHICS & VALUES 46 46 IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK PROFESSIONAL ETHICS & VALUES GUIDE Copyright © 2019 IMA (Institute of Management Accountants). All rights reserved. LIMITED KNOWLEDGE BASIC KNOWLEDGE APPLIED KNOWLEDGE SKILLED EXPERT LEGAL AND REGULATORY REQUIREMENTS Execute the organization’s strategy with integrity, complying with the law, regulations, and standards Comply with the organization’s legal and regulatory environment Understand the necessity for legal requirements and the linkage to protecting the public interest Provide guidance to staff on identifying legal and regulatory conflicts Manage compliance with employment, safety, and other business regulations in the spirit and the letter of the law Manage compliance with industry-specific laws, regulations, and reporting requirements Design and implement programs, policies, and procedures to ensure compliance with laws and regulations When laws and/or regulations conflict or are unclear, make ethical decisions consistent with fiduciary responsibilities Lead compliance efforts with complex and sometimes contradictory business regulations in the spirit of protecting the public interest (e.g., tax codes, U.K. Bribery Act, U.S. Foreign Corrupt Practices Act, E.U. General Data Protection Regulation, anti- money laundering/combating terrorist financing regulations) THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK PROFESSIONAL ETHICS & VALUES 47 Conclusion The business world is rapidly changing, with new technologies changing t he skills needed by accounting and finance professionals for career success. Management accountants will need new and enhanced competencies in areas ranging from technology and analytics, to strategic management, business acumen, and professional values and ethics. The Competency Framework contained in this SMA is based on a job analysi s conducted by ICMA ® (Institute of Certified Management Accountants) and validated by su bject matter experts. It forms the basis for the content of the CMA exam. It covers the competencies in six domains needed by today’s management accountant: Strategy, Planning & Performance, Reporting & Control, Technology & Analytics, Business Acumen & Operations, Leadership, and Professional Ethics & Values. Each skill area comprises specific knowledge and skills, which are organized by increasing levels from “limited knowledge” up to “expert.” Management accountants can use this framework as a guide to keep their s kill sets relevant for today’s business environment. Providing the foundation for IMA’s CareerDriver ® Assessment Tool, it provides a pathway for finance and accounting professionals looking to advance their careers as well as serving as a valuable tool for employers looking to enha nce the capabilities of their finance and accounting teams. THE FUTURE OF MANAGEMENT ACCOUNTING IMA MANAGEMENT ACCOUNTING COMPETENCY FRAMEWORK 48
Part I (Information Management Today): Roughly 50 years ago, Russell Ackoff wrote about the importance, or lack of importance, of information that management needs in “Ackoff’s Management Information
2019 Angela Carrington Vice President IBM Global Business Services Ira Gebler Partner IBM Global Business Services Financial Management for The Future: How Government Can Evolve to Meet the Demands of a Digital World 2 CO-CONTRIBUTORS TO THIS REPORT INCLUDE: • Phil Howe • Karin O’Leary with additional support from: • Mark Fisk • Susan Kann • Mike Libutti • Howard Osborne • Jason Prow • Claude Yusti 3 TABLE OF CONTENTS Introduction ……………………………………………………………… ….. 4 Shared Services …………………………………………………………….. 6 Robotic Process Automation …………………………………………… 10 Blockchain ……………………………………………………………… ….. 12 Artificial Intelligence ……………………………………………………… 15 Conclusion ……………………………………………………………… ….. 17 4 ANGELA CARRINGTON IRA GEBLER The Federal Financial Management community has made significant progress in improving the cost, quality, and performance of its systems. Initiatives directed and sponsored by Office of Management and Budget (OMB), General Services Administration (GSA), and the Treasury Department have provided the incentives and guidance necessary to build upon that progress. However, many agencies continue to face chal – lenges meeting certain standards for accounting and reporting, and continue to use outdated finan – cial systems that minimally support their financial performance and accountability. Moreover, some agencies still use legacy financial systems that feed their core Enterprise Resource Planning (ERP) system. Many of these systems are old, outdated, and costly to maintain. Additional efforts to improve financial systems through upgrades or replacement of legacy technology in an effective, efficient, and transparent manner will help agen – cies realize the full value of their investment in ERP systems. In 2010, the IBM Center for The Business of Government published What We Know Now: A Look into Lessons Learned Implementing Federal Financial Systems Projects . That special report presented ten principles designed to provide insight into how to best deploy financial manage – ment systems, with a focus on optimizing resources and information. The principles were based upon lessons learned from multiple financial management system deployments throughout the public sector and remain relevant today: • Engage stakeholders; • Simplify processes; • Plan acquisitions; • Tighten scope; • Commit resources; INTRODUCTION IMPROVING FEDERAL FINANCIAL SYSTEMS: PROGRESS MADE, MORE TO DO • Manage proactively; • Work together; • Guide change; • Conduct reviews; and • Test thoroughly. 5 ANGELA CARRINGTON IRA GEBLER Since that publication, new opportunities and technologies have rapidly appeared. Cloud computing and shared services are becoming common – place in the public sector. ERP vendors are beginning to encourage clients to move to the cloud by adding higher-end capabilities and announcing end-dates for on-premises systems support. In addition, new technologies and capabilities, including robotic process automation (RPA), blockchain, and artificial intelligence (AI), promise to enable significant gains in pro – ductivity. The automation of RPA, the trust and security enabled by block – chain, and the cost savings provided by shared services can all deliver significant business value. We hope that this special report, Financial Management for The Future: How Government Can Evolve to Meet the Demands of a Digital World, will help government leaders and stakeholders capitalize on the promise of new technologies and business practices to increase the value of govern – ment financial systems. Angela Carrington Vice President IBM Global Business Services [email protected] Ira Gebler Partner IBM Global Business Services [email protected] 6 FINANCIAL MANAGEMENT FOR THE FUTURE: HOW GOVERNMENT CAN EVOLVE TO MEET THE DEMANDS OF A DIGITAL WORLD This special report identifies and describes new opportunities that Chief Financial Officers (CFOs), Chief Information Officers (CIOs), and their colleagues and stakeholders can leverage to better position their agencies for: • Shared services; • Robotic process automation; • Blockchain; and • Artificial intelligence. SHARED SERVICES Federal shared services efforts have advanced for several decades. These efforts moved forward significantly with the release of OMB’s March 2013 Memorandum M-13-08, Improving Financial Systems through Shared Ser vices, and the designation of certain Federal agencies as approved shared service providers for Financial Management across the Federal government. In October 2015, OMB and GSA announced the first govern – ment-wide operating model for shared services, including the estab – lishment of the Shared Services Governance Board (SSGB) and the Unified Shared Services Management (USSM) office (now part of the GSA Office of Shared Solutions and Performance Improvement OSSPI). This model was intended to facilitate the delivery of high-quality shared services to improve performance and efficiency throughout the government, with the SSGB driving strategic direction and the USSM responsible for execution. Ongoing initiatives and progress OMB’s May 2016 Memorandum M-16-11, Improving Financial Systems through Shared Ser vices, institutionalized many ongoing initiatives and progress, including: • Establishing the Federal Integrated Business Framework (FIBF), which serves as a model that enables the Federal government to better coordinate and document common business needs across agencies, and to focus on outcomes, data, processes, and performance. The FIBF is the essential first step towards standards that will drive economies of scale, simplify processes, and leverage the government’s buying power. More information about FIBF initiatives may be found here: https://www.ussm.gov/ fibf/. • Introducing an investment review process for Financial Manage – ment (FM), Human Resources (HR), and acquisitions utilizing shared services. • Collaborating with the Office of Federal Procurement Policy to 7 develop a governmentwide management and acquisition strategy for shared solutions. • Promoting increased accountability for shared service delivery by managing the new ProviderStat process, a data-driven and ongoing review process used to assess cost, quality, and perfor – mance metrics and ultimately drive agency budget development. • Publishing an implementation playbook of best practices and lessons learned from across government. • Aligning investment reviews to the Federal budget cycle. • Fostering greater collaboration among Federal agencies to prepare a demand analysis for FM and HR, allowing shared service providers to plan for increased demand. • Identifying requirements, assessment criteria, and a designation process for allowing new entrants into the supply marketplace. To date, many agencies have successfully moved their financial sys – tems to shared services providers. However, some implementations have faced challenges, and several agencies have even moved to other providers or brought their systems back in-house. The push to shared services continues Despite such challenges, the 2017 Executive Order on Cybersecurity (https://www.whitehouse.gov/presidential-actions/presidential-execu – tive-order-strengthening-cybersecurity-federal-networks-critical-infra – structure) and the 2018 Modernizing Government Technology Act (Public Law No. 115-91, Subtitle G, Secs 1076-1078) both reiter – ated the push for Federal agencies to adopt the use of shared ser – vices. In December 2018, OMB refreshed its shared service strategy outlined in the most recent President’s Management Agenda (https:// www.whitehouse.gov/omb/management/pma) . Along with the strategy update, agencies are now encouraged to become more involved in the development of standards in order to drive future shared services capabilities and solutions. Sharing quality services is identified as a cross-agency priority (CAP) goal, targeting those areas where multiple agencies must collaborate to effect change and report progress in a 8manner the public can easily track. The sharing quality services CAP goal states, “The federal government will establish a strategic govern- ment-wide framework for improving the effectiveness and efficiency of administrative services by 2020, leading to continual improvements in performance and operational cost savings of 20 percent annually at scale—or an estimated $2 billion over the next 10 years.” On April 26, 2019, OMB issued a new directive ordering significant realignment in shared services, M-19-26 Centralized Mission Support Capabilities for the Federal Government (https://www.white- house.gov/wp-content/uploads/2019/04/M-19-16.pdf). The memo designated the following agencies as Quality Services Management Offices (QSMOs) to lead broad categories of shared services: GSA (HR), the Department of Health and Human Service (HHS) (Grants Management), the Department of Homeland Security (DHS) (Cybersecurity), and Treasury (FM). Each QSMO agency has a senior agency point of contact (SAPOC), drives standards, and develops a five-year plan. In the future, other agencies will not be permitted to pursue stand-alone modernizations in those areas without approval from the QSMO . Federal agencies can accelerate progress by building on prior govern- ment efforts while also taking bold new steps. Bold steps include accelerating implementation of shared services within and across departments, where economies of scale can be leveraged to perform common financial management and IT activities. Moreover, Federal CIOs and CFOs where agencies or divisions share a common ERP system have an opportunity to re-shape their workforce assumptions; as shared services providers have demonstrated the ability to drive savings for the U.S. taxpayer, Federal workforces can focus more effort on mission support and analytic tasks. Also in the HR arena, the government’s modernization progress in shared services has been built on decades of work to define governance structures and busi – ness needs and to establish a marketplace and rules of competition. Through these and similar efforts, agencies can transform the status quo of legacy IT systems that are expensive to maintain and nearly impossible to modernize. A major challenge to accelerating the “as a service” model is change management. Several factors have contributed to antiquated agency financial systems—from project funding and scale, to having leader – ship aligned and willing to drive the charge. Yet the comfort of exist – ing business processes and customization often limits agencies in modernizing their financial systems. This makes continuous stake- holder engagement critical to guiding the change. As agencies embrace the “as-a-service” model and/or consolidate routine or stan- dard operations to a small number of organizations, savings can be redirected to core mission areas. Moreover, the path to an “as-a-ser – vice” model might include an agency moving its technology and peo – ple into a central services office, and planning for further modernizations and transformation. While this delivers proven effi- ciencies and savings, long-term benefits will emerge from establishing a future state financial services vision, and proactively leading people and managing solutions to achieve that vision. Another key consider – ation for successful change management is making sure the right resources are committed and the scope of the effort is well defined. 9 Financial Management Line of Business establishes standards The government has made significant progress in FM through the Financial Management Line of Business (FM LoB) by establishing standards in the following areas: • Federal business lifecycles, service areas, functions, and activi – ties, which serve as the basis for a common understanding of what services agencies need and what the solutions should offer. • Business capabilities, which are the outcome-based business needs mapped to federal government authoritative references, forms, and data standards. • Business use cases, which offer a set of agency “stories” that document the key activities, inputs, outputs, and other LoB intersections to describe how the government operates. In addition, the FM LoB is continuing FM Federal Integrated Business Framework (FIBF) efforts in the following areas: • Standard data elements, which identify the minimum data fields required to support the inputs and outputs noted in the use cases and capabilities. • Performance metrics to define how the government measures successful delivery of outcomes based on timeliness, efficiency, and accuracy targets. These standards and tools make action imperative in considering FM shared services. Agencies can leverage processes used to create the FIBF business requirements and functional areas, in order to assess the capabilities of providers to deliver services required by customer agencies (“what” is delivered), not on the software the provider offers (the “how”). This gives agencies the ability to define services needed, and offers providers flexibility to differentiate their offerings while complying with established standards. This standardized model of technology and business process support constitutes one of the most important factors for successful implementation of shared services, and will help the government accelerate its transformation. Moreover, by emphasizing the “as a service” approach, agencies can buy dynamic cloud-based services and not static IT systems. Cloud strategies are a key consideration for agencies to consider when assessing not only the demands but also the opportunities of a digital world. A well-defined cloud strategy has proven to be more successful when jointly developed by all department leaders working, collaborat – ing, and engaging together. To assist with the process of moving to “as-a-service” solutions, agen – cies should consider utilizing not just FMLoB assets like templates or process models, but also staff who have successfully built out a LoB and demonstrated real progress (e.g., number of agencies migrated) over the long term. 10 ROBOTIC PROCESS AUTOMATION RPA is a popular topic among today’s government agencies, and for good reason—the digital worker can deliver real business value via improved productivity, compliance, and accuracy, while reducing the cost of public service. In August 2018, OMB encouraged agencies to introduce new technologies, like RPA, to reduce repetitive administra – tive tasks in Memorandum M-18-23, Shifting from Low-Value to High-Value Work (https://www.whitehouse.gov/wp-content/ uploads/2018/08/M-18-23.pdf ). RPA processes rules-based, structured data through a user interface of robotic software—supporting for instance, repetitive data entry functions and ERP downloads and uploads. While its benefits are real, RPA software generally executes steps for expected, default sce – narios or process flows, and does not always handle exceptions, make decisions, and adapt. RPA provides the foundation on which to build the digital employee. When integrated with cognitive capabilities like advanced analytics and artificial intelligence, advanced RPA implementations can enable intelligent automation with the potential to enhance digital workforce productivity. This intelligent automation evolves the digital workforce from a simple, process-driven team of task executers, to an orches – trated team capable of decision-making, evaluating, and self-healing to continuously improve. Examples of RPA in action • Reducing backlogs in the validation and reconciliation process. A defense agency identified and removed manual backlogs in the validation and reconciliation process for its annual cost analysis update. With an eye on discovery, transparency, and improve – ment, the agency determined that 80 percent of the process steps could be automated. An RPA prototype was developed to reconcile and validate data to improve cleanliness, reduce complexity and manual review time, and increase audit readiness through the creation of audit files and data governance. This 11 automation can be developed in less than a week, reconciles and validates 12 of 20 data provider files, follows 40 different business rules, supports multiple data formats, and completes a previous 30-60 minute manual process in less than one minute. The automation represents the first step for users interacting with the data in an SAP analytics system, and is expected to expand into additional functional and mission-oriented ERP actions. • Automating manual testing process. Another defense agency implemented a pilot program to automate manual testing process. Digital assistants were created to work alongside humans in end-to-end ERP and business intelligence testing and data validation. The digital assistants reduce individual test cycle times from 30-60 minutes to 2-3 minutes, while increasing test coverage, test quality, and positioning humans to perform critical job functions such as defect resolution, active debugging, and more advanced testing. The solution combines RPA with tradi – tional automation to execute test cases, including data entry and collection, analysis and reporting, and error identification for each case, laying the foundation for future ERP automation. How to get started? Processes best suited for RPA are high-volume, repetitive tasks that may involve multiple legacy systems and manual processes. They may also require a large number of staff, and have to address inaccuracies due to the rekeying of data. For example: • Extracting data from a source system or document and key – ing the data into a spreadsheet or second system; • Cumbersome processes requiring data capture from multiple sources (e.g., reconciliations and comparisons of financial data); • Matching data between two systems; and • Repetitive clerical processes (e.g., invoice matching or report generation and distribution). Implementing an RPA solution effectively necessitates a focus on several key considerations: • Begin with well-defined and fairly simple use cases; • Build upon early success and advance toward intelligent automation and systems cognitive; • Where the RPA platform and software bot provides the “hands” to increase productivity of a digital workforce, as described below a well-placed cognitive tool supplements the workforce’s “brain”; and • Features might include natural language processing and machine learning systems that train bots as they encounter new situations, and data analytics to diagnose issues and make recommendations. 12 BLOCKCHAIN As agencies continue to rely upon a combination of ERP solutions and legacy financial systems, they often encounter heavy customiza – tion to account for nuanced business processes and offer non-stan – dard (often proprietary) data distributions or transactions. End-to-end financial transactions involve a multitude of department and enter – prise level systems and multiple organizations. This complex business application ecosystem can lead to data silos, data duplication, mis – matched data, “vendor lock,” or incomplete transaction data. Similarly, an inability of organizations to record all financial transac – tions and supporting documentation—and to provide comprehensive traceability of transactions through planning, budgeting, and execu – tion—can hamper efforts towards achieving a clean audit. The advent of blockchain technology has helped commercial firms in the financial and other sectors address such challenges, and can reap similar ben – efits for government agencies. What is blockchain? Blockchain is a capability that allows for a centralized ledger that can track financial transactions end to end, enabling the level of traceabil – ity that agencies have long sought to achieve a clean audit opinion. Blockchain offers: Removal of data silos via a shared ledger —Blockchain provides a central ledger that can sit in between existing systems to allow for a single view into enterprise financial data, and the sharing of that data to inform important decisions. Assets can be tracked easily and the shared ledger becomes a single source of truth for financial transactions. Secure data —Blockchain supports data encryption and permission settings for participants, to ensure appropriate visibility and that transactions are secure, authenticated, and verifiable. Provenance of assets —Blockchain offers complete provenance details of each recorded asset to track what happened and when. All assets are secured to the blockchain ledger. Immutability —Nobody can change written data on the blockchain, not even a system administrator. This leads to trust in transactions and avoidance of fraud and abuse. How can blockchain reduce complexities and create integrity and traceability into the CFO’s financial management process? Though blockchain has the ability to maintain its own set of business logic and business rules as part of a “smart contract,” the most appropriate 13 Enterprise Systems ERP & Legacy Systems Smart Contract Blockchain Auditors implementation may be to leverage blockchain capability as a “shadow chain.” The shadow chain can sit over the top of existing systems and record transactions during each step in the financial pro – cess, according to the business rules defined in the blockchain smart contract; this creates an immutable record that can be reviewed through permissioned access. Such an implementation will take advantage of the investment already made to build out the complex logic of the FM process, and eliminate the need for governing bodies to further standardize data across the myriad of organizations, sys – tems, and transactions involved—focusing instead on the rules that define what data each player provides at each step in the process for ledger recording. The blockchain can connect with existing ERPs and legacy systems through use of APIs (Application Programming Interfaces), and these systems can pass records to be stored in the chain. With each piece of the end-to-end transaction stored in the block – chain, each organization can view each piece through secure access—a level of visibility not currently available. Agencies can leverage smart contracts that execute on the shared ledger based on a set of agreed upon business rules to drive consistency across the 14 network; the same rules apply for everyone using data on the shadow chain. Further, auditors have a place to view each transaction and a way to document traceability. Finally, the value of blockchain can pro – vide a trusted, more accurate, more actionable data set to feed AI, RPA, analytics, and other emerging technologies, value greater than than of a blockchain itself. Use cases Opportunities for blockchain in the Federal government are gaining traction. One agency is using blockchain to transmit and store data collected along borders and from airports and ports, while another is exploring how blockchain can be used to exchange medical informa – tion more securely and efficiently. How to get started? These resources can help agencies get started: • ACT-IAC Blockchain Primer: Enabling Blockchain Innovation in the U.S. Federal Government: https://www. actiac.org/act-iac-white-paper-enabling-blockchain-innova – tion-us-federal-government • ACT-IAC Blockchain Playbook: https://blockchain-work – ing-group.github.io/blockchain-playbook/intro • The Impact of Blockchain for Government: Insights on Identity, Payments, and Supply Chain: http://www.businessofgovernment.org/report/ impact-blockchain-government-insights-identity-pay – ments-and-supply-chain#overlay-context=blog/ how-can-blockchain-technology-help-government-drive-eco – nomic-activity-1 • Blockchain best practices guide The Founder’s Handbook, Your Guide to Getting Started with Blockchain Edition 2.0 discusses how to identify the business problem, build your ecosystem, business model design, gover – nance, and legal considerations. https://www-01. ibm.com/common/ssi/cgi-bin/ssialias?html – fid=28014128USEN . Key considerations To determine whether a use case is a good fit for blockchain, ask these questions: • Is a business network involved? • Is consensus used to validate transactions? • Is an audit trail, or provenance, required? 15 • Must the record of transactions be immutable, or tamper proof? • Should dispute resolution be final? If the answer is yes to the first question and to at least one other, then the case would benefit from blockchain technology. ARTIFICIAL INTELLIGENCE Cognitive capabilities involving AI will come to the Federal ERP mar – ketplace, but likely at a slower pace than in the commercial market. The information security requirements and process required for imple – mentation by federal agencies, particularly in the defense and intelli – gence space, will mean that adoption of widespread usage must be accompanied by a careful focus on compliance. For example, agen – cies must follow the Federal Risk and Authorization Management Program (FedRAMP) which enables secure cloud computing for the federal government. In addition to FedRAMP authorizations, U.S. Department of Defense (DoD) cloud solutions must achieve a provi – sional authorization from the Defense Information Systems Agency at impact level 5 (controlled, unclassified information) or 6 (for class ified information), as defined in DoD’s Cloud Computing Security Requirements Guide (SRG), Version 1, Release 3 (March 6, 2017). In October 2018, OMB released the Federal Data Strategy (https:// www.performance.gov/CAP/CAP_goal_2.html ) that serves as a foun – dation for how agencies can use AI, which has since been supple – mented by an AI Executive Order (https://www.whitehouse.gov/ presidential-actions/executive-order-maintaining-american-leader – ship-artificial-intelligence ). The Strategy identifies practices, princi – ples, and action steps designed to inform agency actions on an on-going basis, and the EO lays out a roadmap for agency implemen – tation and standards development. Example of AI in action The U.S. Transportation Security Administration’s Office of Acquisition Program Management experimented with a proof of concept of a Cognitive Object Detection Assistant (CODA). CODA demonstrated 16 early machine learning successes for X-ray baggage screening in the checkpoint environment, and the ability to improve threat object detection in comparison to traditional detection methods. CODA helped to augment the X-ray image for the operator by highlighting threats and prohibited items, identifying threat type, and providing a confidence score. CODA technology demonstrated a 99 percent detec – tion rate for handguns. Adoption of advanced capabilities will likely continue to occur first on the edges for the Federal financial ERP systems, where natural lan – guage processing may be implemented for help desk support (and blockchain use cases for asset management and supply chain). AI-enabled chat-bots have been successfully deployed on numerous ERP implementations to drive customer satisfaction, (e.g., by immedi – ate response to common questions) and reduce costs (e.g., off-shift support can be provided exclusively through AI). An application of AI in ERP can help agencies understand large amounts of historical, unstructured information, in order to identify patterns and improve performance. For example, a large civilian Federal agency is looking to improve its acquisition processes and redundancies in departmentwide contracting by putting emerging technologies behind data on the $24 billion it spends on goods and services each year through its “Buy Smarter ” initiative. This agency recently analyzed $23 billion in prior year purchase records from its procurement system. AI machine learning algorithms enabled more discrete category management and the identification of about $2 bil – lion a year in potential cost avoidance from consolidated purchases, reduction of vendors, reduction of models purchased, and similar steps. This analysis was not natively available in the procurement systems and too time consuming to be done manually. How to get started? These resources can help agencies get started: • Federal Data Strategy: Leveraging Data as a Strategic Asset, https://strategy.data.gov/ • Delivering Artificial Intelligence in Government: Challenges and Opportunities, http://www.businessofgovernment. org/sites/default/files/Delivering%20Artificial%20 Intelligence%20in%20Government.pdf • How Artificial Intelligence Can Transform Agencies, https://www.nextgov.com/ideas/2019/01/how-ar – tificial-intelligence-can-transform-govern – ment/154462/ 17 CONCLUSION Additional efforts are required to improve agency ERPs through upgrades, replacement of legacy financial systems, cloud strategies, and the adoption of cognitive technologies. The goal to operate an effective, efficient, and transparent CFO organization is ever changing as technology advances faster than most agencies can adapt, although many of the concepts discussed in the Center ’s 2010 paper remain relevant and apply to areas discussed in this special report. While most Federal ERPs have been relegated to the back office and CFO functions, the future of ERPs enabled with cognitive technolo – gies will allow migration to mission-oriented functions—adding value to the ERP investment. A key to success will involve agency under – standing of how to plan for and acquire new technologies and ser – vices. The following steps can help agencies move forward. Recommended Next Steps • Learn more about innovative solutions to help agencies become more efficient and transparent in Federal Financial Management by visiting the Bureau of the Fiscal Service’s Office of Financial Innovation & Transformation (FIT) at https://www.fiscal.treasury.gov/fit . • Attend training on these emerging technologies, such as free topic offerings at Massive Open Online Courses at www.MOOC.org . • Identify pain points in business processes, and consider a use case for one or more of these emerging technologies. • Pilot the use of an emerging technology for a business process pain point, and share the results of a pilot experience through FIT FM Innovation Program for information sharing purposes and lessons learned. About the IBM Center for The Business of Government Through research stipends and events, the IBM Center for The Business of Government stimulates research and facilitates discussion of new approaches to improving the effectiveness of government at the federal, state, local, and international levels. About IBM Global Business Services With consultants and professional staff in more than 160 countries globally, IBM Global Business Services is the world’s largest consulting services organization. IBM Global Business Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues, and the ability to design, build, and run those solutions in a way that delivers bottom- line value. To learn more visit ibm.com. For more information: Daniel J. Chenok Executive Director IBM Center for The Business of Government 600 14th Street NW Second Floor Washington, DC 20005 202-551-9342 website: www.businessofgovernment.org e-mail: businessofgovernmen[email protected] Social iconCircleOnly use blue and/or white. For mor e details check out our Brand Guidelines. Stay connected with the IBM Center on: or, send us your name and e-mail to receive our newsletters.

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