Controllers are often underutilized, misused, and abused at small companies. Owners of small businesses regularly regard controllers as bookkeepers, reducing their function to that of a scribe posting transactions. Others, particularly those of growing companies, hire a controller but essentially want a bookkeeper with a title. Perhaps the misuse of controllers in smaller companies explains the short life span typically experienced by them at these firms. It is not unusual to see six to twelve different controllers over as many years at these companies, playing out a sort of musical chairs of controllers, one following another. Owners summarily dismiss the demise of each controller as lacking some indefinable and intangible quality, or the proverbial (my personal favorite), “not being a good fit”, and continue ad infinitum their search for the perfect controller, as if they were Sir Gawains, Percevals, or Lancelots in quest of the Holy Grail, with little, if any, idea of what they truly want or need. But why does this occur so often at so many smaller companies, filling the coffers of professional recruiters with expensive finders’ fees?
First of all, most owners have never seen, no less read, a position description of a controller. At large organizations, controllers are in charge of coordinating, planning, and reporting on the financial activities of the company. They set financial policies and explain them to people who work in their organizations. Often they are in charge of the accounting, bookkeeping, and auditing departments, supervising record keeping and setting up controls to ensure efficiency and honesty. They sometimes choose the accounting method a company employs. All financial and governmental reports, including tax returns, made within a company are subject to the review and supervision of the controller, who ordinarily reports directly to the president or board of directors of a company or organization, if one exists. Controllers also plan budgets as well as set limits on the amount of money to be spent by their firms each year. Sometimes they borrow money from banks to be used by their companies to build new factories or offices. Often they are responsible for assets and investments, including being in charge of planning purchases of new equipment.
At smaller organizations, the description of a controller becomes murkier. Although an outside consultant’s position description of a controller may have been dearly paid for by the owners of a small business, it is rarely adhered to, if read at all. Small business owners, in their ever-maddening, egomaniacal desire to be in complete control, control the controller, often reducing him to a whipping boy. How dare anyone want any authority, especially over finances, in their company, since they own the company and are the president, vice-president, secretary, and treasurer of the company! I personally know of a president of a company who paid thousands of dollars for an outside consultant to assist him and his vice-president with the management of their firm. The consultant recommended, among other proposals, the hiring of a controller, and provided a very detailed position description of that function. Because of the small size of the company, the accounting department consisted of only a controller and an administrative assistant, who was required in the position description to report directly to the controller, as is customary. The president, upon its receipt, amended the position description, requiring the administrative assistant to report directly to him, and not to the controller. Needless to say, mayhem ensued: like any other lowly employee wanting only one boss, and if possible, the boss highest in the food chain, she resisted any authority exerted over her by the controller. Of course, the controller was fingered as the culprit and is no longer with the company.
Unfortunately accounting systems at small companies evolve over time out of need without little, if any, forethought on the part of management. Consequently, a formal accounting system or structure has never been tailored designed at the company to accommodate or fit its unique requirements, personnel, and industry in which it operates. How often have I witnessed a very costly accounting software package whose modules had never been integrated into a cohesive, formal project management information system. In any such effective, efficient system, all members of the company's team must sign on and cooperate fully under the controller's direction. Yet at so many of the companies I observed, this never transpired. Estimators continued to work in their chosen software of comfort, such as an industry favorite or even Excel; thus, estimating items were rarely set up in the estimating module of the software, eliminating any possible follow up and reconciliation of estimated details to actual realized costs of those items. Moreover, project managers, largely field personnel who graduated from the labor ranks into office management, were often uncomfortable with computerized data entry, and continued to write out purchase orders on multi-page forms—rather than entering them in the purchase order module of the accounting software package—and composed change orders in Excel or Word, only entering, if anything and only after repeated exhortations from the controller, summarizations into the project accounting software, without the necessary detail to permit any reconciliation of estimates and purchase orders to realized costs. The result was repetitive entries, errors, omission of details and entire entries, lack of an integrated management information system, with little, if any, control over the estimating and purchasing functions.
Perhaps the main source of the accounting system deficiency stems from the owners themselves. This is not to imply that these owners are incompetent fools. Quite the contrary. As Genghis Khan was an exemplary conqueror of countries, these owners are competent manufacturers, contractors, retailers, etc.; they are expert masons, tool-and-die makers, attorneys, etc. But just because they possess an expertise in performing a particular service or in producing a particular product, this talent does not necessarily and automatically carry over into any ability to manage a business and its employees effectively and efficiently. Since their business grew literally from nothing from the ground up with their own hands doing everything, when its growth necessitates the hiring of employees to perform delegated functions within their business, they often fear losing any control of these duties, not an unnatural human characteristic, and typically resist the eventuality of their delegation until the last possible moment, if then. Often their outside certified public accountant, exasperated with their shabby accounting records and requisite time of cleaning them up, plants the seed into their brains to hire a controller, accompanied by the force of a big bill to provide more weight to his call to action.
In particular, since finances are so very personal and dear to the heart of every business owner, they especially fear relinquishing control over them—including the financial reporting of the company—to the recently hired “outsider”, typically regarded with suspicion and distrust. The end result is often a controller in name only, without any power or authority. I have even witnessed owners encouraging, if not enlisting or recruiting, the cooperation and involvement of other office personnel to spy and report on every movement of the controller.
Needless to say, in such an atmosphere, a controller is doomed from day one. Other office personnel, ferociously guarding their hierarchy in the company, and the owners, fearing and resisting any delegation of control or authority to the controller, set the stage for a saga of office tension filled with the thrill of discontentment and endless complaints and suspicion, the eventual tragic climax, the denouement, and ultimately the final concluding scene, the controller's exit. His repeated appeals to integrate the accounting system, to have payables, payroll, or receivables clerks reporting directly to him, to have project management enter the data directly into the computer, to have estimators use the accounting software’s estimating module, go unheeded by the owner. Inefficiency of repetitive entries, errors, omissions culminate in a crescendo of chaos. The administrative assistant, estimators, project managers, et al, unite in their final showdown of resistance, including a bit of sabotage thrown in for additional intrigue. Battle lines are drawn; fire is exchanged; the controller is wasted. He becomes the ever-mythical scapegoat and sacrificial lamb. The owners retain their lordship over the remaining staff, and all is well once again, the entire script written and directed, no less, by the owners of the company themselves. Now without a controller, the search for a replacement begins anew. And the saga is destined to be repeated again and again in never-ending, predictable fashion like an all-day marathon of Monk reruns....
This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.
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