Controlling & Culture

Goal Orientation and the Power of the Better Argument

The tasks carried out by controllers are often described as being very tools-oriented.  It is true that tools help controllers to fulfill their function of assuring management rationality. However, the bigger – and in practice more frequently neglected – lever here is establishing a performance or  “controlling culture” in the company. In our view, this comprises three main elements: First, consistent goal alignment; second, transparency accompanied by an open exchange of information; and third, argumentation and constructive critique. We take a closer look at each of these below.

Goals are an indispensable part of controlling and are intended to guide the actions of managers: What is their overall purpose? What are the means used to achieve them? Does a particular measure pay off? However, goal orientation also involves ensuring that goals are implemented consistently. This addresses one of the controller’s key areas of activity. Support can be procedural, as in breaking down goals and regular monitoring, and structural, as in designing appropriate management control systems that provide a basis for the managers’ responsibility for their goals (“accountability“).

Goal orientation has become increasingly widespread in companies. It seems that the days are long gone, when vague strategic ideas were enough to invalidate profitability targets. Even medium-sized businesses rely more and more on calculations to show them the effect that specific measures would have on their company’s performance goals. Of course, managers can still enforce their own ideas, but nowadays they are more aware of how much they would lose as a result.

The second corner stone of a controlling culture, transparency, is concerned, on the one hand, with the stakeholders involved (Who should know what? Who has access to what data?) and, on the other hand, with the scope of the information (Can too much transparency be damaging?) The premise of transparency is tailor-made for controllers. They see themselves as being “responsible for transparency” for the company. Creating transparency  justifies investment in information systems as well as in extensive projects for defining and assuring the quality of performance met-rics and master data. New opportunities arising as a result of digitalization (e.g., self-service) break barriers hindering the distribution of information. Today, this is often referred to as the “democra-tization of information”. Finally, “big data” describes the vast and growing range of available content.
It is still unclear to what extent controllers are able to take this new mass of internal and external information – with its different formats, depth and scope – “under their wing” in the same way as they looked after the predominantly financial data  previously. Yet if controllers do not get actively involved with the transparency of this information, their perceived responsibility for transparency will shrink to a smaller and smaller portion of management information. This is where we see an urgent need for action, which very few controllers seem to sense so far!

The third cornerstone of a controlling culture concerns making the better argument heard and then following it. On the one hand, this involves using the power of analysis and making sure that deci-sions are not based purely on intuition. On the other hand, it is essential to discuss different arguments freely and openly and to weigh them against each other in order to achieve the best result. Meaningful arguments should in no way be suppressed or neglected.

Again, this is where controllers are in their element. On the one hand, they are used to doing calculations. On the other hand, the role of critical counterpart is one of their core activities. Controllers are used to questioning managers‘ ideas, deliberately adopting a risk-averse perspective, looking for arguments to explain why planned proposals might fail – and their place in the popularity rankings is not conducive to this (“brakeman”, … “objector“!) Nevertheless, this is precisely what in-creases the rationality of management.  Therefore, it is not surprising that – as the WHU Controller Panel  shows – controllers consider the ability to provide constructive critique to be the pinnacle of good controlling.

The role of critical counterpart must be present at both individual and organizational level, both “technically” and culturally. At an individual level, controllers have to adapt to their specific counterpart on the management side. Each manager responds to critical questions in a different way, each one must be individually convinced that it is significantly better for managers to avoid problems in the first place than to enforce their ideas, which may not be economically viable.

The collective anchoring of constructive critique takes place primarily at a cultural level. Let us take, for example, engineering companies such as those commonly found in the automotive industry. Here, criticism is complicated by the dominant “can do attitude” adopted by the engineers. The fact that this does not actually work for technical problems has been clearly demonstrated by the Volkswagen emissions scandal. It is even more problematic if you transfer the problem-solving culture from a technical to a business environment. Here, there are considerably more uncertainties involved, and it is even more important to integrate as many different viewpoints as possible when finding a solution. Business economists generally find it difficult in science and technology compa-nies, and this is even more true for controllers, who are seen as “professional whiners” that “torpedo” technical solutions.

In light of the above, what can controllers do about it? Each and every one can – and should – try to influence managers on an individual basis. This requires communication skills and a plan for how to handle specific managers. Some find that arguments help, while others make a point of stressing that other managers approve of their suggestion. They need to collect good examples and references. It may also be helpful to be proactive in creating data transparency, providing information not only as and when requested but making it generally available, thereby allowing managers to gain new perspectives from new information. At the same time, controllers must avoid flooding managers with too much information.
As far as the controlling function as a whole is concerned, it is important to present one face to the outside world, to close ranks, and to speak a common language within the community. Moreover, this close exchange and cohesion is particularly important when playing the “hierarchy card”, i.e. there is a problem to be solved at a higher hierarchical level.

The implementation of cultural change presents a much more difficult problem. An appropriate first step could be for the controlling community to define a concept for actively communicating the three elements of controlling culture: goal orientation, transparency, and constructive critique. An increasing number of examples of this can be found in practice. The next step should be familiar to most controllers: If goal orientation, transparency, and constructive critique are so important, then it is worth trying to translate them from a colloquial context to a more defined — or even measureable – theoretical framework. This process has to establish a common understanding on a number of questions. In the case of transparency, for example, it must be clarified which aspects (costs, revenues, payments, different facets of the competitive position, other non-financial information, characteristics and behavior of managers, interaction behavior, networks) refer to which metrics, and whether it involves subjectively perceived transparency and/or an objective transparency measure. If there is sufficiently broad understanding, a decision is required on whether transparency should be measured, which would mean developing appropriate measures to do so. At this point, at very latest, managers should agree to the measures and be aware of how important the topic is for the company.

It is essential that there is a solid basis of common understanding in order to agree and adopt the specific measures required for developing the three cultural cornerstones. For example, measures for promoting a culture of constructive critique may include training courses (e.g., to teach appropriate ways and tools for communicating criticism), specially designed recruiting processes, or standardized “escalation strategies  ”. Practical examples for achieving transparency could include easing access restrictions and actively marketing existing information, but also drawing attention to this in everyday management situations, so that any decisions reached are based on facts (evidence-based management).

The conception that the role of business partner is a desirable goal for all controllers is nothing more than a normative statement put forward by the professional associations. In the HR and IT professions mentioned previously, the business partner role was seen as a solution to the huge problems that both disciplines were experiencing regarding their standing within the company. In breaking new ground, they were actually taking preemptive measures. The question is whether there is a similar situation in controlling, or whether there are valid reasons that can explain such a development. Indeed, there are.

There are three important reasons behind the transformation from "master of numbers" to navigator: (1) Transparency on its own will not usually make a huge impact. In many authorities, for example, ef-fective cost and performance accounting has been introduced in recent years. This resulted in high costs. However, it was of no use because nobody was interested in the information provided. The best data is not worth a thing if it is not used to address a particular issue or problem. Yet there is still a high demand for traditional financial figures to facilitate the (operational) management of businesses.  This information is essential for planning and control. So it makes sense to connect the two. (2) In less dynamic businesses, past figures are more than adequate for planning purposes. Controllers are very familiar with historical data, which makes it easy for them to get involved in the planning process. (3) Controllers had time to expand the scope of their activities because technological systems (wider availability of ERP systems) became easier to use and the number of controllers remained the same.

There are (at least) three arguments that account for the transformation from navigator to business partner: (1) Managers have a growing workload. Moreover, an increasingly dynamic environment puts them under even more pressure. They need someone to ease the burden and provide comprehensive support. (2) Today’s controllers benefit from better systems; user-friendly BI systems, self-service, and real-time are the buzzwords here. Such a lot is possible at the push of a button. (3) Controllers learned a huge amount in their role as navigator, starting with company controlling at the operational level and then progressing to other planning levels. They also gained experience in other management tasks, for example, by working with HR on incentive schemes. As a result, they have developed a broad knowledge base, giving them a very good understanding of the business as a whole. It is only a small step to becoming a business partner from here.

The transformation through three stages has placed increasingly high demands on controllers. The business partner level comprises a combination of two groups of requirements: On the one hand, there is the financial expert who knows his way around operational systems, is competent in both cost accounting and financial reporting, can do investment appraisals blindfold, and is able to answer any question at all concerning the tools. On the other hand, there are the requirements relating to management activities: This requires someone who is pro-active, has business ideas, questions the status quo, can implement new ideas, is able to manage teams, understands leadership in specific fields of activity (e.g., assigned projects), and can work independently.

Can controllers really maintain this balancing act? We have two answers to this question. (1) The position of "controller" will be part of a manager’s typical career path. Even today, those employees aiming to reach general management must have spent time in a variety of functional areas, such as sales, production, and purchasing. They have to understand the different mindsets. Controlling is simply another one to add to the list. On that note, CEOs are often former CFOs who, in turn, were controllers before that. (2) Controlling will be divided. In addition to those colleagues who focus primarily on the role of business partner, there will be experts who possess the required depth of specialist knowledge in the long term. As far as controlling is concerned, they will act as partners to the business partners (see also our latest thinking on the "Controller as Business Partner".)

Professor Utz Schäffer & Professor Jürgen Weber

  • Weber, J., & Schäffer, U. (2013). Vom Erbsenzähler zum Business Partner. Weinheim: Wiley VHC.
  • Weber, J., & Schäffer, U. (2016). Einführung in das Controlling (15. ed.). Stuttgart: Schäffer-Poeschel.