SF March 2023

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Contents /3.23

A Certified B Corp, King Arthur Baking Company balances funding sustainability initiatives and prioritizing ESG with staying in the black.

22/ 30/ 38/ 46/

PEOPLE, PLANET,

AND

PROFIT AT KING ARTHUR BAKING COMPANY

COVER STORY A Certified B Corp, the storied flour company measures success with a triple bottom line that balances its commitment to sustainability and corporate social responsibility with financial performance.

BY DANIEL BUTCHER

THE VALUE OF CIVILITY

This year’s Curt Verschoor Ethics Feature of the Year examines the impact of incivility in the workplace, from poor productivity and reduced job satisfaction to decreased performance and employee retention.

BY R. DOUGLAS PARKER, DBA, AND AMANDA S. MARCY, DBA, CPA

UNDERSTANDING BLOCKCHAIN

The use of blockchain technologies within finance and accounting continues to grow. Having access to the real-time, reliable data that blockchain provides can be a sea change for management accountants.

BY KELLY RICHMOND POPE, PH.D., CPA, AND LAMONT BLACK, PH.D.

INNOVATE WITH CREATIVE PROBLEM SOLVING

The four-step creative problem solving (CPS) process provides a framework that can help teams to quickly and thoroughly examine a particular challenge and develop unique, innovative solutions.

BY MARSHA HUBER, PH.D., CPA, AND LOREAL JILES

/3.23

BY JAMES W. RINIER, CPA, EA, AND

P. CURATOLA, PH.D.

BY SEAN STEIN SMITH,

BY PAUL MYERS, CMA, CSCA, CPA

WENHAO ZHU

BY AMY PILCHER, PH.D., CMA

BY BILL JELEN

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FINANCE EDITOR DANIEL BUTCHER daniel.butcher@imanet.org

STAFF WRITER/EDITOR LORI PARKS lori.parks@imanet.org

SENIOR DESIGNER JAMIE BARKER jamie.barker@imanet.org

EDITORIAL ADVISORY BOARD

Bruce R. Neumann, Ph.D. Academic Editor

Ann Dzuranin, Ph.D., CPA Associate Academic Editor

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For more information on the role of the Editorial Advisory Board and a complete list of reviewers, visit sfmag.link/reviewers

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Strategic Finance® (ISSN 1524-833X/USPS 327-160) Vol. 10 4, No. 9, March 202 3. Copyright © 202 3 by IMA. Published monthly by the Institute of Management Ac coun tants, 10 Paragon Drive, Suite 1, Montvale, NJ 07645. Phone: (201) 573-9000. Email: sfmag@imanet.org

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T Making Connections

BY GWEN VAN BERNE, CMA

Gwen van Berne, CMA, is director of finance and risk at Oikocredit and Chair of the IMA Global Board of Directors. She’s also a member of IMA’s Amsterdam Chapter. You can reach Gwen at gwen.vanberne @imanet.org or follow her on LinkedIn at bit.ly/3LVeRGM

HE PAST FEW YEARS HAVE taught us much about the value of human connection. That’s why I’m grateful for the opportunities to make connections as an IMA® member. Back in 2018, for example, I attended an IMA Women’s Accounting Leadership Series event in Amsterdam, where I was on a panel about “Strategies for Professional Success” with several remarkable women. The energy in the room was palpable and inspiring as we talked about the trials and triumphs of working in accounting and finance. All great conferences share this feature—connecting with people and being inspired by others facing similar challenges. You want to hear something new that speaks to the future of our profession, but you also want to hear something relevant that gives you ideas you can immediately apply to your job and career.

The most memorable conferences for me are the ones when a speaker makes a long-lasting impact on my thinking. Recently, I participated in an online session with Katrin Kaufer, a research fellow at the Massachusetts Institute of Technology (MIT) and director of the Just Money Program at the MIT Community Innovators Lab. Kaufer spoke about the future of finance, and I really enjoyed how she took her audience on a tour of mission-driven institutions. Her observation that we need to be more intentional with investing prompted me to think about where the financial services sector is going and to examine how I could amplify her message and apply her advice to my professional role. Another highlight was Lee White, executive director of the International

Financial Reporting Standards Foundation, who spoke to the IMA Global Board of Directors. He gave an inspiring speech on the critical role of sustainable reporting.

Although every community has its own fabric and way of communicating, I always love it when like-minded large groups fill hotels and public spaces with new ideas and spontaneous conversations and jointly create an energetic atmosphere to achieve progress that stays with you long after the event is over. After COVID-19, I’m very relieved that things are opening up again and we can create that vibe again for IMA.

That’s why I encourage members (and nonmembers) to attend IMA’s Accounting & Finance Conference (IMA23) this coming June 11-14. It will be the first time since 2019 that IMA will offer its annual conference fully in person.

IMA23 will be held in Minneapolis, Minn., an exciting metropolis known as “The City by Nature.” Under the theme “Step Up,” the conference will feature eight specialty tracks, providing incredible opportunities to extend your knowledge in areas like technology and analytics, reporting and control, leadership and professional development, and much more. These will be delivered by a slate of dynamic speakers and presenters, including keynotes from a former chair of the Financial Accounting Standards Board (FASB) and original member of the International Accounting Standards Board, a current FASB board member, the chief accounting officer of UPS, and a corporate strategist and best-selling author. Early bird rates are available through mid-April, so now is a great time to sign up at bit.ly/3Ru6yX0.

Do you have any vivid memories about your experiences at an IMA conference? I’d love to hear about it—and that you plan to join us this June. SF

«All great conferences share this feature— CONNECTING WITH PEOPLE AND BEING INSPIRED BY OTHERS.»

June

NOTICE OF TERMINATION

The ICMA® (Institute of Certified Management Accountants) Board of Regents voted earlier this year to expel several individuals from the CMA® (Certified Management Accountant) program for violation of ICMA policies. As a result, their IMA® (Institute of Management Accountants) memberships have also been terminated. The list of individuals can be found at sfmag.link/JH9Nf12

THE STATS

74%

IMA EXPANDS ELIGIBILITY FOR CSCA CERTIFICATION

IMA® has changed the eligibility requirements for the CSCA® (Certified in Strategy and Competitive Analysis) program. Where previously only those holding the CMA® (Certified Management Accountant) certification were eligible, now more than 50 other certifications—including the CPA (Certified Public Accountant), CFA (Chartered Financial Analyst), and CIA (Certified Internal Auditor)—can qualify individuals to sit for the CSCA exam. The list of newly eligible certifications is available at bit.ly/3E6zdvO

Launched in 2017, the CSCA aims to help professionals master the concepts and techniques required to drive strategic planning within their organizations. Srikrishna Mankal, chair of the ICMA® (Institute of Management Accountants) Board of Regents, said, “With routine tasks becoming automated, upskilling is essential for all professionals. Professionals need to learn on a continuous basis to be effective leaders, which is one of the reasons why we are opening the CSCA to select accounting and finance certification holders. The knowledge gained from the CSCA will foster career development for all those that earn the certification.”

The CSCA exam, which takes three hours, consists of 60 multiple-choice questions and one case study. Passing the exam qualifies an individual for 30 ICMA continuing professional education credits. The CSCA exam is available at Prometric test centers around the world in March and September every year.

For more information on the CSCA program, go to bit.ly/3jYPA6K

See “The Value of Civility” on p. 30.

—Lori Parks

IMA/

of surveyed accounting professionals experienced at least some form of incivility from a superior in the past year.

CALL FOR ETHICS PAPERS

The IMA® Committee on Ethics and Strategic Finance invite submissions for the 2024 Curt Verschoor Ethics Feature of the Year. The annual competition highlights a work that contributes to a greater understanding of ethics for management accounting and finance professionals in business, whether through new research, insightful analysis of a real-world event or scenario, practical advice based on ethical principles and standards, or solutions to the ethical challenges of the day.

Entries must follow the manuscript guidelines for Strategic Finance (bit.ly/2SqrcKE). A submission should be (1) approximately 2,500 to 3,000 words in length, (2) written in English, and (3) an original, unpublished work that isn’t available to other publishers.

The deadline for entries is September 1, 2023. All entries will undergo a double-blind review process for initial evaluation, followed by the final selection of the winner by the IMA Committee on Ethics in December 2023. The winning entry will be published in the March 2024 issue of Strategic Finance. In addition, the winning contributor(s) will have the opportunity to present their article on a Count Me In podcast (podcast.imanet.org).

Please send your submissions to sfmag@imanet.org, using the subject line “Curt Verschoor Ethics Feature,” and include a completed submission form (available at bit.ly/2SqrcKE).

Questions regarding the competition can be sent to sfmag@imanet.org.

Previous winning articles include “The Value of Trust” in 2020, which examined the importance and benefits of trust in the proper functioning and sustainability of an organization; “Why Good People Do Bad Things at Work” in 2021, which detailed a research study on the motivations and causes of unethical behavior in the workplace; and the 2022 winner, “How Ethics and Compliance Fight Corruption,” which examined how a comprehensive compliance program grounded in ethics is the best defense against corruption. See this year’s winner, “The Value of Civility” by R. Douglas Parker and Amanda S. Marcy, on p. 30. —Daniel Butcher

1,776 IMA members earned their CMA or CSCA certification in January 2023.

The names of all the new CMAs and CSCAs can be found on the Strategic Finance website at sfmagazine.com/issue /march-2023 .

For more information on the CMA, go to www.imanet.org /cma-certification . And visit www.imanet.org/csca -credential to learn about the CSCA.

LEAD WITH PURPOSE AND PASSION

Genevieve Piturro, author of Purpose, Passion, and Pajamas: How to Transform Your Life, Embrace the Human Connection, and Lead with Meaning, left a successful career in marketing to develop a program centered around her compassionate response to a need she identified and dedicated herself to changing. The passion she developed for her cause connected her with a new sense of purpose. In her book, Piturro encourages readers to develop the courage to find and dedicate themselves to their true purpose and also offers several helpful insights to develop leadership skills that can be used both personally and professionally at any career stage.

“You don’t need to see the whole path before you—you just need to take the first step and trust that the next ones will be revealed.” Piturro reminds us that every journey begins with one small step.

Each small step your team takes toward a goal builds confidence and trust as small “successes” begin to make the larger goals seem more possible.

“Oh, and remember, you will feel fear, but just do it anyway.” Overcoming initial doubts or insecurities can make that first step hard, but Piturro offers sage advice and instructs her readers to push through fear.

“Don’t wait until you’re falling off the ledge to ask for some advice. Forget pride, get over the embarrassment of asking for help.” The most inspiring leaders encourage their team members to ask for help when it’s needed. While many leaders struggle to ask for help themselves, the best means to encourage this behavior in others is to lead by example.

“Communication is the next step to the all-important feat of establishing trust where true camaraderie can occur.” Leaders who prioritize good communication develop teams who are more engaged and less resistant to changes within the organization when faced with obstacles or difficult goals.

“We need to feel respected and appreciated.” Good communication is an important part of helping every member of the team feel respected and appreciated. In environments where there’s poor communication, the team often feels disconnected and undervalued.

“Leadership is measured not by how much you advance, but by how much you advance others.” This is a big one. Servant leadership styles have become popular in recent years. Good leaders who make the effort to support their team may find it easier to motivate and inspire them.

“Leaders empower others to tell their stories. Lead with compassion; you will inspire others to do the same.” When you empower those around you to live and work with authenticity and transparency, the impact is exponential. The good is multiplied by each person under your influence who connects with those within their influence.

Piturro has shared her journey with us, and anyone who aspires to be a great leader should read her book to understand how small decisions and acts can lead to big results.

Yvonne Barber

CONTROLLER AND CFO SENTIMENTS

The Controllers Council surveyed nearly 300 controllers and CFOs in a variety of industries—with a majority of respondents from small and medium-sized businesses—to understand how current business and economic environments are impacting their financial planning, strategy, priorities, and outlooks. Among the results, the survey found that:

61 % of controllers and CFOs anticipate an increase in revenue in 2023.

47 % of respondents foresee an increase in their organization’s selling, general, and administrative expenses.

45 % anticipate that their organization will increase its overall head count.

33 % of organizations plan to reduce spending in the coming year.

The full report, Controller/CFO: Sentiment Study 2023, is available for download at bit.ly/3XRshdf .

ETHICS

MANAGING CONFLICTS OF INTEREST

Employees and volunteers must disclose anything that may be perceived as a conflict of interest and submit a plan to mitigate it.

BY JOLENE A. LAMPTON, PH.D., CPA, CFE, AND DEBORAH

C. MICHALOWSKI, CPA

CONFLICTS OF INTEREST (COIs) PUT PROFESSIONALS ON A SLIPPERY SLOPE that tarnishes the integrity and reputations of institutions and individuals, which can lead to tremendous distrust.

For this reason, management accountants must pay close attention to identifying, reporting, and resolving or mitigating possible conflicts of interest. The resulting investigation and implications can be complex and must be detail-driven and rooted in fact. Transparency is essential, as conflicts of interest are weeds in the garden that can prevent flowers from achieving full bloom—and may cause them to wilt.

A COI occurs when there’s a personal concern, aim, or benefit that interferes with your professional duty or ethical decision making because it isn’t aligned with the best interests of coworkers, customers, other stakeholders, your employer, or organizations for which you volunteer. A COI can cause other parties to question your intentions and integrity.

COIs can be either actual or perceived. An actual COI involves a direct conflict between an employee’s current duties and responsibilities and their private interests. Perceived COIs include situations where it could appear to a reasonable person that an employee’s personal interests improperly or unduly influence the performance of their duties and responsibilities for their organization.

BUSINESS CIOs

The IMA Statement of Ethical Professional Practice states that IMA® members must:

1. Mitigate actual COIs. Communicate with business associates to avoid apparent COIs. Advise all parties of any potential COIs.

2. Refrain from engaging in any conduct that would prejudice carrying out duties ethically.

3. Abstain from engaging in or supporting any activity that might discredit the profession.

4. Contribute to a positive ethical culture and place integrity above personal interests.

COIs arise when situations benefit the employee to the potential detriment of

ETHICS

the company. Let’s examine three common COIs.

1. Gifts. When giving or receiving gifts, the focus shouldn’t be only on their value but also on their appearance. Conversely, the focus shouldn’t be on the intention behind giving or receiving the gift. If a gift has even the appearance of garnering undue influence, it creates a COI. Take care to objectively evaluate the facts surrounding the gift (i.e., whom it’s from or given to, the value, the relationship of the giver and the receiver, etc.) and how the gift could be interpreted by others. Consider the monetary value of the gift, with the most common maximum threshold $75. The giver and receiver should ask, “Is this nominal in value?” If there’s a question about whether a gift is appropriate, seek out the opinion of a manager or compliance resource.

2. Serving on an outside board. Being on an outside board requires employees of public companies to evaluate potential COIs between themselves, their employer, and the organization whose board they’d be serving on, then present their findings to their company for approval before accepting the board seat. It also requires an annual review process as a safeguard to ensure that the board position is still without conflict with the company’s goals and requirements. If the employee becomes aware of a new COI before the next annual review, then they should immediately advise their manager. If an employee’s board seat no longer meets the company’s standard of review, then they must resign.

3. Moonlighting. These COIs involve working

another job to pursue a passion or supplement income. Moonlighting employees should be careful that the new job isn’t competing or at odds with their existing job.

VOLUNTEER COIs

Many professionals volunteer their time to support charities, professional associations, and not-for-profit organizations such as IMA. Being mindful of the situations that might arise for volunteers can help individuals and organizations avoid COIs.

1. Volunteers are like employees. Sometimes volunteers have jobs that could lead to a COI. Vendors or owners of companies that seek to do business with the employee’s organization must be aware of potential COIs.

2. Familial matters. Familial relationships have the potential to cause COIs within a volunteer organization. There could be a COI if an association board member’s son owns a web development company and is contracted to work on the volunteer organization’s website. It’s key in these situations to evaluate who receives the benefit from the association and why. If it’s an actual benefit that was given without proper due diligence and has monetary or other beneficial properties, then it could be perceived as a COI. Any such blending of family and business ties necessitates disclosure, proper due diligence, and a mitigation plan to ensure that there isn’t a problematic COI.

3. Working for course providers. If an IMA volunteer were to work for a certification or course provider, their employer’s business

IMA ETHICS HELPLINE

For clarification of how the IMA Statement of Ethical Professional Practice applies to your ethical dilemma, contact the IMA Ethics Helpline.

In the U.S. or Canada, dial (800) 245-1383. In other countries, dial the AT&T USA Direct Access Number from www.business.att.com /collateral/access.html, then the above number.

The IMA Helpline is designed to provide clarification of provisions in the IMA Statement of Ethical Professional Practice, which contains suggestions on how to resolve ethical conflicts. The helpline cannot be considered a hotline to report specific suspected ethical violations.

could conflict with IMA’s line of business of promoting the CMA® (Certified Management Accountant) certification. In that case, the volunteer working for such an entity would be obligated to disclose and mitigate this COI.

MITIGATING A COI

A COI can call into question employees’ or volunteers’ intentions and ability to remain unbiased in their thoughts, ideas, and decisions. A COI policy could include restrictions that ban nepotism, creating a process to manage potential and perceived COIs, specifying situations that require a recusal agreement, and training members on the methods needed to follow and disclose COIs. Failure to have a COI mitigation plan can lead the organization down a path toward distrust and tarnished reputation. SF

The information and opinions expressed in this article are solely the authors’ and don’t represent their employers.

Jolene A. Lampton, Ph.D., CPA, CFE, is a professor of management accounting and area coordinator of accounting MBA programs at Park University’s School of Business and a member of IMA’s Committee on Ethics. You can reach her at jolene .lampton@park.edu

Deborah C. Michalowski, CPA, is manager of global tax reporting, Sarbanes-Oxley Act compliance, and business process management at Intel and a member of IMA’s Global Board of Directors and AZ Valley of the Sun Chapter. You can reach her at debmichalowski@gmail .com

SECURE 2.0 AND SMALL BUSINESSES

The SECURE 2.0 Act of 2022 modifies and enhances several sections of the Internal Revenue Code pertaining to employer-sponsored retirement plans. BY JAMES W. RINIER, CPA, EA, AND ANTHONY P. CURATOLA, PH.D.

WITH BIPARTISAN SUPPORT DURING the lame duck session of Congress, the Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act of 2022 was passed and then signed into law by President

Joe Biden on December 29, 2022. This legislation makes changes to more than 90 sections of retirement law in the Internal Revenue Code (IRC), but it didn’t extend any of the expiring tax provisions. Some changes are retroactive, while others won’t be effective until 2024 or later. Let’s take a look at the changes relevant to small businesses.

Small business pension plan start-up tax credit. A few favorable modifications are made to this tax credit (§102) beginning in 2023. The tax credit for the pension plan start-up costs increased from 50% to 100% for those employers with up to 50 employees and remains at 50% for those employers with between 51 and 100 employees. Also, employers contributing to the plan on behalf of their employees are eligible to take additional tax credits.

The maximum contribution is limited to $1,000 per employee for employers with 50 or fewer employees, and the amount is phased out for employers with between 51 and 100 employees in the preceding tax year. Furthermore, no contributions can be made for employees with wages that are more than $100,000 (indexed for inflation after 2023). Finally, the additional credit is phased out over a five-year period.

Automatic enrollment starter 401(k) and 403(b) deferral-only plans. For employers with no retirement plans, a starter or safe harbor plan is permitted for plan years beginning after December 31, 2023 (§121). These plans treat each employee as having elected to have the employer make elective contributions by the employee, and no matching contributions by the employer are permitted.

The minimum annual contribution is 3% and can’t exceed 15%. The maximum annual contribution can’t exceed $6,000 adjusted for inflation or exceed $7,000 adjusted for inflation with a catch-up contribution in

THE SECURE 2.0 ACT MAKES CHANGES TO MORE THAN 90 SECTIONS OF RETIREMENT LAW IN THE INTERNAL REVENUE CODE.

restrictions don’t apply to SIMPLE IRA and Simplified Employee Pension (SEP) plans.

Matching and nonelective contributions. Plans may permit a participant in non-SIMPLE and 457 plans to designate some or all matching and nonelective contributions of the employer as designated Roth contributions. This provision (§604) is effective beginning with contributions made after the date of enactment, which is December 29, 2022.

the case of an employee aged 50 or older. Employees have the option to elect out of the plan.

Retroactive first-year elective deferrals for sole proprietors. A special rule is available for sole proprietors adopting a 401(k) plan (§317). Sole proprietors can make an employee contribution (on behalf of themselves) up to the time for filing their individual tax return (usually April 15), without regard to any extensions.

In addition, the sole proprietor must be the only employee in the company and must own the entire unincorporated trade or business. This contribution, however, is limited to the first year, and therefore contributions by the employee in future years must be made by December 31.

Higher catch-up limits to qualified retirement plans. Beginning in 2025, there’s a new higher catch-up limit (indexed for inflation) for participants who are aged 60 to 63 (§109). The catch-up contribution limits for those employees in non-SIMPLE plans—retirement plans such as pensions, 401(k),

and 403(b) plans—and 457 plans—retirement plans for government employees—is tentatively set at $10,000, which is 50% more than the regular catch-up amount set for 2024.

For SIMPLE plan participants (retirement plans for companies with no more than 100 employees), the catch-up contribution amount is $5,000, or 50% more than the regular catch-up amount set for 2025. (The year 2025 is possibly a typo in the law as it should be 2024 to be consistent with the other retirement plans.)

There’s a further restriction on the higher catch-up limits beginning in 2024 (§603). That is, the catch-up contribution is a mandatory Roth IRA contribution if the participant had wages in the preceding year more than $145,000 (indexed for inflation). The implementation of these restrictions falls on the employer. One question that arises is, what happens with an employee who worked elsewhere in the preceding year? Since this restriction is based on the participant, it seems reasonable to assume that spouses are treated independently. Finally, these

SIMPLE plan contributions. Section 117 introduces new higher contribution limits for participants in a SIMPLE plan. These new contribution amounts are effective for tax year 2024 and are dependent on the number of employees. SECURE 2.0 increases the annual deferral limit and the catch-up contribution at age 50 by 10%. This change is effective for an employer with no more than 25 employees. For an employer with 26 to 100 employees, the change is effective if the employer either provides a 4% matching contribution or a 3% employer contribution.

Section 116 permits an employer to make additional contributions to each employee participating in the SIMPLE plan if the contributions are made in a uniform manner and don’t exceed the lesser of up to 10% of compensation or $5,000 (indexed for inflation). This rule becomes effective for taxable years beginning after December 31, 2023.

Matching and student loan payments. Pursuant to the Senate Finance Committee report, this change is intended to assist

employees who aren’t contributing to their retirement plan and thereby losing out on matching contributions from their employer because they’re overwhelmed with student debt. Therefore, §110 of the SECURE Act permits an employer to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA plan with respect to qualified student loan payments, which are broadly defined by the Senate Finance Committee as any indebtedness incurred by the employee solely to pay qualified higher education expenses of the employee. This provision also applies to governmental employers that are making matching contributions in a 457(b) plan or another plan with respect to such repayments.

The SECURE 2.0 Act makes several modifications to various IRC sections pertaining to employer-sponsored retirement plans. In addition to the changes discussed, the legislation also made numerous modifications to employees’ participation in these plans. SF

James W. Rinier, CPA, EA, is a former assistant clinical professor of accounting at Drexel University. He can be reached at jwr29@dragons.drexel.edu.

Anthony P. Curatola, Ph.D., is editor of the Taxes column for Strategic Finance, the Joseph F. Ford Professor of Accounting at Drexel University, and a member of IMA’s Greater Philadelphia Chapter. You can reach Tony at (215) 895-1453 or curatola @drexel.edu

© 2023 A.P. Curatola

MAKING THE BUSINESS CASE FOR DE&I

New research highlights additional factors that companies can consider in their DE&I efforts that can also help improve financial performance.

BY PAUL MYERS, CMA, CSCA, CPA

FOR A NUMBER OF YEARS, studies have shown the benefits of focusing on diversity, equity, and inclusion (DE&I), including increased employee satisfaction and productivity. When sharing the successes of such programs, it’s just as important to focus on the positive qualitative impacts along with any favorable economic impact. As human capital continues to play an increasing role in our economy and organizations, we may need to evaluate if our current accounting processes properly capture and report the costs, benefits, and impact of our workforce and its diversity.

In “Moving Beyond Culture Fit” (Strategic Finance, March 2022, bit .ly/3XoTbsI), I discussed the benefits of hiring diverse talent and some of the steps an organization can take to better accomplish that goal. Recent data substantiates that those organizations that commit to DE&I initiatives in hiring and employee development gain an edge in improved value creation.

According to Diversity wins: How inclusion matters by McKinsey & Company (2020, bit.ly/3jFISmb), this relationship is also evident at the leadership level. Following hundreds of companies in several countries, this analysis showed that companies with gender diversity in their executive teams were 25% more likely to have financial outperformance. Those companies that had ethnic diversity were 36% more likely to experience financial outperformance.

Comparing these results to McKinsey’s previous two similar studies shows that the relationship between gender diversity on executive teams and the likelihood of financial outperformance has strengthened over time. “Why diversity matters” (2015, bit.ly/3XaU1sM) showed that companies with gender diversity in their executive teams were 15% more likely to have financial outperformance; this number increased to 21% in Delivering through diversity (2018, bit.ly/3JSPLuV).

While efforts focused on improving DE&I within an organization provide a return on investment, it can be challenging enough to attract talent in a tight labor

market, let alone diverse talent. To assist in attracting diverse talent, organizations should consider what tone they use in promoting their DE&I efforts.

COMMUNICATING DE&I PRACTICES

A study by Oriane Georgeac and Aneeta Rattan published in Harvard Business Review (2022, bit .ly/3RLY9hD) showed that how an organization talks about diversity can have a major impact on attracting and retaining diverse talent. Approximately 80% of the organizations in the study used a business case to justify the importance of diversity, with 5% using a fairness or moral case. But focusing on the business case when promoting DE&I efforts may not have the intended effect. In fact, Georgeac and Rattan showed that, when a company does so, candidates— particularly those from underrepresented groups— question a company’s motives, fearing that they will be stereotyped, resulting in a lower anticipation of a sense of belonging.

Because of this perception, it may be worth evaluating how an organization’s efforts regarding DE&I are communicated, in addition to evaluating the return or payback on an investment in DE&I. Georgeac and Rattan explained that if organizations don’t typically need an explanation for other core values such as integrity and innovation, there probably isn’t a need to justify DE&I initiatives, either.

HUMAN CAPITAL

An additional area of interest in the consideration of

value creation from DE&I efforts is understanding the value of human capital, which is a measure of the education, capacity, skill, and other attributes an employee brings to the table that influences their productivity capacity. The higher the knowledge and skill level of the workforce, the more the organization should experience increased productivity and a higher economic value. Human capital and its related value can grow in relation to the investment made.

While human capital has always been important in organizations, its role, along with other intangibles, has become increasingly important over the last 50 years. Large industries that rely heavily on human capital, such as healthcare and technology, account for a much larger share of market capitalization. Colleen Honigsberg and Shivaram Rajgopal, in “Disclosure of the Extent to which Firms Invest in their Workforce” (2022, bit .ly/3RHcNqF) said the case for evaluating changes in the accounting for investments in human capital may need to be more like those of investments we make in areas of capital expenditure. If some of the expenditures are for long-term human capital development, maybe they could be amortized over a longer period rather than being treated as a onetime expense.

Honigsberg and Rajgopal also discussed the need for better disclosure of expenses related to workforce development. There’s a reasonable comparison made to the treatment of research and develop-

ment costs and the use of both quantitative as well as qualitative disclosures. Investing in human capital is likely to make employees more eager to go the extra mile and create value when they feel supported. These considerations of revisions to current accounting policies could lead us to conclude that maybe the increased value through DE&I initiatives is likely to be underreported.

HELP FOR DE&I EFFORTS

Despite the positive performance data due to DE&I highlighted in Diversity wins: How inclusion matters, the analysis also showed that a sizable percentage of the companies studied have made minimal progress in DE&I initiatives. Those organizations that are struggling to make more progress with DE&I can look to how successful organizations implement their DE&I efforts. McKinsey found that the most successful organizations were those that took bold steps in five areas:

1. Ensuring the representation of diverse talent.

2. Strengthening leadership accountability and capabilities for DE&I.

3. Enabling quality of opportunity through fairness and transparency.

4. Promoting openness and tackling microaggressions (bullying and harassment).

5. Fostering belonging through unequivocal support for multivariate diversity (beyond gender and ethnicity).

By researching some of the most recent developments to understand the business case for D&I, we have learned some additional points of information that can be useful in reviewing the continuing efforts of supporting and promoting DE&I efforts. First, studies still show that diversity in leadership improves the likelihood of financial outperformance. Second, those organizations that utilize a business case approach to substantiate investment in DE&I programs, like many other programs, don’t need to feel called to share that information with all potential stakeholders since this can cause more harm than good. Lastly, the shift in the importance of human capital due to the changes of the mix of global industries may require changes in the accounting processes and reporting methods used in reporting related expenses and investments. SF

Paul Myers, CMA, CSCA, CPA, is a client services associate at Vantage Point Financial Services, LLC; a member of IMA’s Diversity, Equity, and Inclusion Committee; and a member of IMA’s Dayton Chapter. He can be reached at myersp70@gmail.com

ORGANIZATIONS SHOULD CONSIDER WHAT TONE THEY USE IN PROMOTING THEIR DE&I EFFORTS.

THE POWER OF REFLECTION

It’s difficult for leaders to honestly assess their own shortcomings and missteps and reflect on how to improve their skills.

BY AMY PILCHER, PH.D., CMA

WHEN PREPARING TO TEACH LEADERSHIP COURSES FOR undergraduate and graduate programs at Wartburg College, I always include multiple assignments, readings, videos, and activities related to self-awareness and reflection. A former student commented, “If I had to summarize this leadership course into one word, it wouldn’t be hard to do—reflection.” The best leaders are able to look at themselves in the mirror and assess their own strengths and weaknesses honestly.

As a professor, I can require students to participate in reflection as part of homework assignments, even when they remark that it’s their least favorite activity. In the workplace, however, how many of us are taking the time to reflect unless we’re forced to do so?

Team development specialist Jennifer Porter stated that resistance to self-reflection occurs for a variety of reasons (bit .ly/3X8J8aZ):

■ We feel that we may be doing it wrong.

■ We don’t want to slow down and take the time.

■ We don’t like what we discover when we self-analyze our actions.

■ It can create uncomfortable feelings.

Leaders who don’t reflect on why something happened won’t see how to change it, repeat it, or prevent it in the future. Reflection brings understanding and improvement.

Self-reflection allows leaders to set priorities and imagine what they might do differently. Whether on a typical workday or during a crisis, it behooves leaders to take a deep breath and practice restraint and consideration. Harry M. Kraemer, former CEO of Baxter International, stated, “If I don’t know myself, is it possible for me to lead myself? I doubt that. If I can’t lead myself, how could I possibly lead other people?” (bit.ly/3HYeRY2).

BENEFITS OF REFLECTION

Management accountants and finance professionals gather and analyze information to assist in decision making, suggest improvements, and provide advice for the future of the organization. This is a form of reflection. There are several key benefits of reflection.

Emotional intelligence. Taking the time to reflect on reactions and

experiences to develop self-awareness helps you to better understand your emotions and recognize their impacts on your work, team, and ability to lead others effectively.

Better decision making. Taking time to reflect on future goals helps us to articulate a plan for achieving those goals. Reflecting on past events and working to understand what made them successful or not helps us to make better decisions when we’re in similar situations and to correct or mitigate past missteps.

Continuous improvement. Part of self-reflection is admitting that you aren’t a perfect person and have room for improvement as a leader. Taking the time to reflect on projects, meetings, team assignments, decisions, and actions helps you to figure out how to improve your performance.

Authenticity. Authentic leaders are transparent and hold themselves accountable for their mistakes and celebrate the contributions of others—they don’t just take credit for their own and their team’s victories. Transparency and authenticity help to build a culture of trust with employees.

Self-reflection is taking the time to gather information, evaluate and analyze it, and think about the reasons behind your thoughts and behaviors. How can we translate our activities and experiences as management accountants into self-reflection for improved leadership?

ACTIVITIES FOR REFLECTION

There are many ways that leaders can reflect. More

important than how you reflect is choosing an activity that you’ll actually do on a regular basis. One way to turn reflection into a regular habit is to integrate it into something that you enjoy doing. The following are a few best practices that have proven successful.

Keep a journal. Write down what happened during an event. Try to describe in detail everything you remember about it, including how it made you feel. Then think about why you felt that way and how others reacted to it.

Block out time on your calendar. Schedule time into your day for self-reflection. Remove distractions during that time—turn off your phone, don’t check email, and walk away from your desk. Start with a small amount of time every day, say, 10 minutes, and then add time as you’re able.

Go for a walk—get some exercise. Give yourself a topic or question to reflect on during your stroll. I tend to reflect during my daily workout. My mind naturally wanders while I’m working out, allowing me to think about recent activities and put them in perspective.

Talk to someone you trust. Have a conversation with a friend or family member and ask for their perspective and thoughts about a situation.

Seek 360° feedback. Ask for feedback from people you report to, people who report to you, and your peers. Analyze the similarities and differences between the results. Contemplate ways that you can develop your leadership skills, reflecting on the feedback you receive.

SF ADVICE

IMA LEADERSHIP ACADEMY

The IMA® Leadership Academy supports the development and enhancement of our members’ leadership education and skills to aid in career advancement. From presentation of or participation in leadership courses offered in person or virtually to our community of experienced leaders through our mentoring program to IMA’s leadership recognition program where members can measure their development and earn digital badges, the IMA Leadership Academy can help you meet your leadership goals. For more information, please visit the Leadership Academy website at www .imanet.org/career-resources /leadership-development.

GUIDING QUESTIONS FOR SELF-REFLECTION

If you acknowledge the value of self-reflection to bolster your leadership skills but don’t know where to start, ask yourself the following questions:

1. How do your role and responsibilities as a leader relate to and support your organization’s goals?

2. Where do you see opportunities for improvement and development in your own work, skills, knowledge, career, and life?

3. Are you avoiding a conflict or something unpleasant or complicated? Why are you avoiding it?

4. What happened in a recent meeting? Were you upset or surprised by something? Did you say so? Why or why not?

5. When did you last push the boundaries of your comfort zone?

6. What happened today that made you smile? That frustrated you?

7. What motivates you? How can you boost others’ motivation?

8. How do you react when frustrated and how does that affect others?

Reflection is an integral part of leadership, skills development, and learning from your experiences to become a better leader. Taking the time to self-reflect has multiple benefits for yourself, your team, and your organization. SF

Amy Pilcher, Ph.D., CMA, is an assistant professor of business administration at Wartburg College and a member of IMA’s Waterloo-Cedar Falls Chapter. You can reach her at amy .pilcher@wartburg.edu

PEOPLE, PLANET, AND PROFIT AT KING ARTHUR BAKING COMPANY

The Certified B Corp balances funding sustainability initiatives and prioritizing ESG with staying in the black.

BY DANIEL BUTCHER

ertified B Corporations (B Corps) are for-profit companies that have met a set of established standards for environmental, social, and governance (ESG) performance; accountability in terms of profit and purpose; and transparency regarding operations, offerings, and policies such as sourcing, ingredients, and labor practices. They require leaders to act in the interest of all stakeholders, including customers, employees, vendors, and the local community. As a member of the first list of Certified B Corps in 2007, King Arthur Baking Company was an early mover in embracing sustainability and corporate social responsibility (CSR), tracking ESG metrics, and taking all stakeholders’ interests into account.

Reporting to one of King Arthur’s two co-CEOs, three vice presidents—Suzanne McDowell, VP of CSR and sustainability; Janis Abbingsole, VP of operations; and Brock Barton, VP of finance—collaborate to lead the way on prioritizing sustainability, ESG standards, and CSR in the company’s goal setting, strategic planning and execution, tactical implementation, and reporting and disclosure. That cross-departmental approach to sustainable business management instills trust and confidence in the company’s purpose, governance, and oversight, as well as its financial and nonfinancial reporting. It also boosts morale, fuels recruitment, and leads to better decision making by prioritizing long-term success for all stakeholders over short-term profitability.

Becoming a Certified B Corp

To achieve B Corp certification, companies must apply to the nonprofit network B Lab. Every three years, the organization updates the B Impact Assessment, which asks companies to answer a series of questions about their practices and outputs across five categories: governance, workers, community, the environment, and customers. This allows company leadership to set improvement goals against the most up-to-date standards and to benchmark performance. For certification, businesses are graded on contributing to an inclusive, sustainable economy by how completely they abide by a set of principles (bit.ly/3JYwND7).

Like all other B Corps, King Arthur is committed to stakeholder governance. Also qualified for benefit corporation status under Vermont state law, the company is legally required to consider the impact of its decisions on all of its stakeholders, including workers, communities, customers, suppliers, and the environment.

“[Being a] B Corp creates a legal structure that [obliges] our corporate governance and our board to take into account all stakeholders when they’re evaluating strategies, budget allocations, and transactions,” Barton says. “If somebody comes in and tries to acquire us, in a traditional company, it comes down a lot of times to dollars and cents, but with the Vermont benefit corporation legal structure, there’s an evaluation of [the impact on] all stakeholders

and whether or not the acquirer would also adhere to those values. We put our money where our mouth is when we shifted to this legal structure that embodies some of the B Corp values.”

Reporting and Disclosure

The U.S. Securities & Exchange Commission (SEC) is planning to issue disclosure requirements for climate-related risks and financial statement metrics, including greenhouse gas emissions, in the near future. There are also various sustainability and ESG guidance frameworks such as the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the International Integrated Reporting Council (IIRC). B Lab’s B Corp structure offers an approach that will likely overlap with many of those standards and guidelines while providing a clear path for the company to pursue its commitment to sustainability, CSR, and ESG.

For King Arthur executives, prioritizing sustainability, CSR, and ESG comes down to a triple bottom line: people, planet, and profit. Reporting on the latter is a traditional role of the finance function, but benchmarking the first two requires reporting and disclosure of a range of nonfinancial metrics. That’s where B Lab’s B Corp standards come in. Every year, the company fills out a survey, makes nonfinancial disclosures, and receives a B Corp score (see Figure 1).

“In addition to B Corp reporting, there are a few things on the legal aspect of the Vermont benefit corporation and disclosures related to employee ownership, and I provide data to the team that manages that,” Barton says. “Every few years, we have to provide a little bit more thoroughness to our [sustainability and ESG] data, and we also rely on our outside auditors [to vet] our financials, as well as how we report out internally into [B Lab to satisfy the] B Corp [requirements].”

B Corp Classification

Founded in 1790 as Henry Wood & Company—the first flour company in the United States and the first food company in New England—King Arthur has been 100% employee-owned since 2004, a process that began in 1996 when owners Frank and Brinna Sands decided to sell the company to its employees. But the decision to become a B Corp and follow the B Lab standards came from the top down. In fact, a board member initially brought the designation to the company’s attention during the transition to employee ownership.

“It has to be a belief that being able to include your employees as well as your customers as part of the stakeholders in what the company is achieving allows you not to be driven by profit for the sake of profit, which puts companies in a corner of having to make choices that sacrifice the stewards of your company, which are your workers, or your product quality, and we’re not doing that,” Abbingsole says. “We’re putting people and the planet first—it doesn’t mean that we’re not profitable and that we don’t want to be profitable.”

FIGURE 1: MEASURING PROGRESS, THEN LOOKING AHEAD

MEASURING PROGRESS

B Impact Assessment: King Arthur has been evaluating its social and environmental performance since 2007.

Overall B Score

* Of all businesses that have completed the B Impact Assessment in the U.S.

LOOKING AHEAD

In FY2022, King Arthur stated its aim to nurture culture and community through the following goals:

■ Focus on diversity, equity, and inclusion, specifically around equitable access and building a culture of belonging

■ Introduce new hybrid work model supported by new facilities plan

■ Develop talent to support future growth

■ Build and begin implementation of a sustainability strategy, including multiple regenerative agriculture initiatives

As a benefit corporation, the company’s directors and officers upheld and acted in accordance with Vermont standards. It uses the B Lab Impact Assessment to measure its public benefit. King Arthur increased its score by 1.2 points to 125.4, well above the median of 84.1.

“We’re proud of the progress we’ve made in the past year, and we will continue to hold ourselves accountable to our intentions and promises through transparency and open communication with our employee-owners, customers, and fellow bakers,” says Alison May, benefit corporation director at King Arthur.

Source: www.kingarthurbaking.com/impact

A tangible example she gives is that King Arthur leaders know that as the company’s profits continue to rise and its earnings before interest, taxes, and amortization (EBITA) values go up year-over-year, those monies can go to help fund its ESG initiatives (see Figure 2). Focusing on the triple bottom line fosters a virtuous cycle.

“ESG, sustainability, and even what we’re doing with regenerative agriculture don’t always have a clear path to a revenue line within the P&L [profit and loss ], and that’s

okay; we don’t need it to do that,” Abbingsole says. “We know that to be a company that’s benefiting more than just profit in our pockets as employee owners, we’ve got to be investing some of our dollars on an annualized basis into these other initiatives for something that’s greater than ourselves. The B Corp standards that hold us accountable there enable us to do that and to continue striving to increase our B Lab score year-over-year.”

FIGURE 2: INITIATIVES TO HELP PEOPLE IN THE COMMUNITY

Giving 2021

King Arthur’s giving-back philosophy is a cornerstone of its mission to use its business as a force for good and to build stronger and healthier communities.

For Goodness Bakes

The company launched For Goodness Bakes, an initiative to help bakeries across the country during financially challenging times. It directed tens of thousands of dollars to purchase bread and baked goods from bakeries, which it then distributed to areas of need within their local communities.

Equitable Access to Real Food

Creating a more just food system is integral to realizing an inclusive, equitable future for all people. In 2021, King Arthur donated flour to 55 food banks in 34 states and was named a Feeding America Guiding Partner.

Building Community through Baking

The company runs a national Bake for Good program: a free, STEM-based program that teaches kids how to bake bread and encourages them to donate a loaf. This program went virtual in 2021, providing a bright spot for many students and teachers during remote learning.

Local Giving

The company helps to raise up its local communities through the support of partners such as Willing Hands, a food recovery organization that serves 30,000 individuals annually while mitigating 1 million pounds of CO2 emissions from food waste.

Regenerative Food Systems

King Arthur supports efforts that positively impact its natural environment, conserve resources, and develop renewable energy sources, such as Northeast Organic Farming Association of Vermont’s Resilience Grants for the BIPOC (Black, Indigenous, People of Color) farming community.

Source: www.kingarthurbaking.com/impact

Cross-Departmental Commitment

King Arthur’s co-CEOs lead an 11-person executive team in a collaborative leadership structure. McDowell heads

up CSR and sustainability and is ultimately accountable for adherence to B Lab’s B Corp standards. It’s a trifecta between her, the finance function led by Barton, and operations led by Abbingsole, as well as directors within each of those teams, who sit on a committee that makes sure that the company meets all the requirements of the B Corp stan-

dards and contribute to strategic planning. Cross-departmental collaboration is a key to success.

“Part of why I came to King Arthur is to break down the silos, and it’s actually been an initiative in operations in particular,” Abbingsole says. “We’re working on this mission, and it takes collective effort, energy, intellect, and heart to achieve the outcomes that we desire, and so if we’re siloed, we can’t achieve it in the way that’s the most long-lasting.”

As the head of operations, Abbingsole oversees the entire supply chain for the company, which includes sourcing both ingredients and packaging materials, flour mill relations, transportation, commercialization of new products, sales support for the wholesale and bakery food service channels, and oversight of the manufacturing facility and direct-to-consumer operations—what she calls “pick, pack, and ship” for the e-commerce business. It also includes all quality and regulatory oversight for the company, including all U.S. Food and Drug Administration food and safety regulations.

From the standpoint of understanding cost of goods sold (COGS) implications and labor cost efficiencies, operations and finance work together every day. A large percentage of CSR and sustainability initiatives are operations-led because they run through the supply chain.

“Take something like greenhouse gas emissions across our operational footprint,” Abbingsole says. “My operations group is responsible for our strategy for how we source ingredients of packaging, as well as regenerative agriculture, how we work with our milling partners relative to the way wheat is farmed in the U.S. That’s operations running those programs, in concert and deep relationship with our sustainability team.”

Supply chain management, procurement, and oversight of suppliers are intimately related to sustainability and ESG initiatives. Instead of those efforts being driven by topdown directives from the CEO or head of sustainability, at King Arthur, the leadership team makes collaborative decisions about where the company is headed, with contributions from all employee owners, so it’s much flatter or more bottom-up than hierarchical.

“We’ve got all the employee owners involved in supply chain management and operations who have the opportunity to impact our corporate goals around sustainability, ESG, and CSR, and so that makes it much more potent,” Abbingsole says. “From a change management perspective and getting people rallied around the cause, it’s a much easier lift, because we’re not trying to convince people we need to do it—they want to be involved.”

There’s a subcommittee that’s part of the B Corp council that makes sure that the organization is on track to achieve the outcomes laid out in the strategic plan across people (spearheaded by human resources), the planet (led by the CSR/sustainability team), and profit (shepherded by finance), but, ultimately, operations, CSR/sustainability, and finance share responsibility for all three.

“My sourcing director sits on that committee because so much of what we do from the standpoint of how we source all ingredients and packaging impacts our B Lab score,” Abbingsole says. “We work in partnership with HR for people [initiatives] and with finance for profit [meetings] about

how we roll through our profitability structure relative to influencing B Lab’s B Corp certification.”

King Arthur has to report on how the company is sourcing its materials, ensuring that it’s sourcing from companies that treat their workers well and have their own sustainability statements. A top strategic priority is minimizing its carbon footprint, so the company is working to reduce greenhouse gas emissions and thus continue to increase its B Corp score. This process can be challenging because the company doesn’t control the entire supply chain. In the last 12 months, operations has transitioned more of the company’s goods to be transported by rail vs. truck because rail has less of an impact on the environment due to lower greenhouse gas emissions than truck shipping.

“I have people who are accountable for running those baseline reports and making sure we’re updating them quarterly so we can see that we’re moving the needle toward less emissions,” Abbingsole says. “It’s within people’s corporate goals every year to achieve the CSR standards that we want as a B Corp. We drive that into people’s jobs so they know that they’re held accountable from a goal standpoint to meet the needs of our ESG and B Corp values; we want to be able to have it be culturally relevant for everybody, which means it needs to be part of their daily experience of being an employee owner at King Arthur.”

The Sustainability Department

After becoming a Certified B Corp, King Arthur created the CSR and sustainability department, which includes an environmental manager and a sustainability manager reporting to McDowell, and gave it a seat at the table to weigh in on product innovation and how existing products are packaged and sourced. The financial planning and analysis (FP&A) team is also involved in collaborating with research and development (R&D) and helping to model new products. The question of “How could we do this more sustainably?” has become part of those teams’ foundation and mandate (see Figure 3).

“‘How could we limit certain types of [nonbiodegradable] packaging?’ It comes into play for FP&A both shortterm, when we talk about products, but also long-term, when we’re talking to the board,” Barton says. “There’s always this push and pull between employee ownership and B Corp [standards]. A traditional finance person may say, ‘It needs to be an X profit, no questions asked,’ but how do you layer in the employee ownership piece, B Corp investment, and understanding how that may not necessarily meet your traditional modeling when it comes to financials?”

In addition to leading the finance function, Barton also oversees the facilities function. He started at the company almost 10 years ago as a senior accountant before moving up to controller and then eventually to his current position. The finance function is a three-tiered team. The aforementioned FP&A team helps the various business units to drive

FIGURE 3: INITIATIVES TO PROTECT THE PLANET

From farms to kitchens, King Arthur is on a mission to use the power of baking to restore nature and build a more equitable world. In 2021, the company conducted a yearlong sustainability assessment to evaluate the life cycle of its products from farm to kitchen and identify its 2030 sustainability goals.

Sustainability

Its definition of sustainability is holistic. King Arthur aims to nurture people and the planet with:

■ An approach to business that balances purpose and profit

■ Protection and regeneration of natural resources

■ Responsible sourcing of ingredients and products

■ Greater equity for all people and communities

Renewable Energy

■ 500kW solar array in Norwich, Vt., that offsets over 50% of its total electricity use

■ Two electric vehicle (EV) charging stations at retail location

■ Purchased electricity 100% carbon-free and 68% renewable

The company’s emissions are dominated by the wheat supply chain (growing, milling, and transportation), not its headquarters offices and operations. And King Arthur takes responsibility for all of it.

Source: www.kingarthurbaking.com/impact

performance. There’s also the core accounting and transactional accounting team, which includes the controller, the accounts payable team, and the accounts receivable team. The third piece is payroll and retirement benefits, which, because the company is employee-owned, is a much more significant part of the finance function. Barton says that the employee stock ownership plan (ESOP) administration is somewhat complex, so a position was created with its sole focus on managing, promoting, and advocating for the ESOP.

“It’s quite a collaborative team—operations, finance, and HR, along with the CSR team, are driving the results,” Bar-

Circular Packaging

■ 100% recyclable flour bags

■ Sustainable Forestry Initiative (SFI) certified (mill partners)

■ Incorporating post-consumer recycled (PCR) materials into pack

Total Estimated Emissions Usage

ton says. “CSR and sustainability collaborate with so many other teams, including the new product team. They’re given a seat at the table for a lot of these discussions, whether or not we’re bringing on new vendors or introducing new products, looking at expanding buildings, etc., so they’re very cross-functional.”

Having a dedicated CSR and sustainability team has been an incredible benefit to the organization, Barton says, because it helps the leadership team to always keep sustainability, CSR, and ESG commitments top of mind, balancing out his top priority of the financials and margin targets.

“A good example is if we’re saying we need to hit a 30% margin and we’re at 26%, we say, ‘Yeah, we’re at 26, but we’re doing A with our packaging for the planet, we’re doing B for our people, and we’re doing C to grow the business five years from now,” Barton says. “We need to be able to fund those really good things, and, to do that, the portfolio has to achieve a certain target, so for every two or three products that aren’t meeting [profitability] targets, you need to have another four or five that do. So let’s find that balance.”

Striking that delicate balance of the right level and speed of investments requires intentionally sequencing them in waves so that it’s more manageable and can be calibrated appropriately. Investing a little bit over time to achieve objectives is more prudent than trying to do everything at once.

“Everybody wants to incorporate so many things for all the right reasons, but we need to be able to fund it, so that’s a little bit of a struggle where sometimes it has finance coming off as the bad guys who are policing the budget a little bit, but obviously we feel that passion as well, knowing that we need to find a way to be evergreen with our ESOP and our B Corp funding, balancing all three aspects of the triple bottom line with it,” Barton says.

B Corp Culture

All of these elements of the B Corp, the Vermont benefit corporation, and the employee ownership structure all feed together to cultivate a particular sort of company culture at King Arthur. A key element of that is transparency.

“King Arthur does [all-hands meetings] in a great way every month where I or someone on my team will present financials—good, bad, or ugly—to the whole company, and I love that transparency and visibility into that, but it’s also to measure other things, [such as nonfinancial metrics] like philanthropy and the number of hours employee owners spend volunteering every year,” Barton says. “We report on stuff like that, which we try to build into that scorecard, and the planet piece has always been like any of these initiatives that are still somewhat immature.

“We measure our waste and energy usage and report on whether or not that’s improving, so it gives it substance and puts accountability behind some of the things that do for [meeting] B Corp [standards], and it helps us prove that out,” Barton says.

The pros of becoming a B Corp and maintaining those commitments are quite clear to McDowell, Abbingsole, and Barton. They say it brings more of a sense of purpose to their daily tasks. They see finance and operations functions as engines to do better things.

“Especially in a finance role, where we aren’t used to necessarily being part of something bigger and better, [the norm is] being part of a finance team that ideally drives profitable results,” Barton says. “Both employee ownership and [being a] B Corp bring everybody together for a common good and benefiting all stakeholders, and that permeates through the culture where, yes, we know that finances are important, but we also know that doing well and growing the pie allows us to do better things.

“[A commitment to sustainability, CSR, and ESG] was like gravy in the past, but now, especially with the younger generations, we’re seeing it more and more as a recruiting tool, where people are coming to us for these reasons, not necessarily because of our product or the role,” he says. “It provides a great avenue to get like-minded people in the door.”

Abbingsole seconds the notion that being mission-driven has become part of King Arthur’s culture and reputation as a B Corp, which has turned into an effective recruiting tool. B Corp is branding that demonstrates the company’s corporate purpose and values.

“People come to work for us because we’re a B Corp, because being a B Corp has social currency for people about how they want to live their lives and the [types of] companies that they want to work for,” Abbingsole says. “It aligns with our mission and values that we had even before we were a B Corp; it helps form a sense of cohesion and cultural relevancy for the people who work at the company and gives us something to feel proud of when we see our products with the B Corp emblem, when we see other CPG [consumer packaged goods] companies in particular who have shared values with their B Corp emblem on their products.

“We have to go through the process on an annual basis; it’s an investment for us that holds us accountable and keeps us on track,” she says. “You pay to be audited and have the certification, and it keeps us accountable to those values that we hold dear.”

There are different points of entry depending on the size of the company to meet the B Corp standards. Abbingsole doesn’t see any pitfalls, but you have to be prepared to invest time and resources, so go in with your eyes open.

“It’s important as a company of our size to be vocal about being a B Corp so that we’re helping to inspire other companies to become a B Corp, [demonstrating] that there’s a different way to participate in capitalism, and B Corp provides that structure in order to do that,” Abbingsole says. “Employee ownership, being a B Corp, and open-book management absolutely create a great sense of cohesion about understanding that every employee owner is a shareholder, and it also really engenders a feeling of entrepreneurial spirit.

“Transparency engenders a deeper level of trust, and employee owners are showing up with their best selves— even if we don’t agree about how we’re going to achieve the outcome that we set out to do, people show up with candor about how they want to do their work,” she says. “People have a sense of pride about what they do and what they contribute to as a result of employee ownership and [being a] B Corp.

“That sense of belonging definitely feels very tangible to me in the organization—I’m doing something that’s greater than myself, greater than the sum of all of the parts of employee ownership.” SF

Daniel Butcher is the finance editor at IMA and staff liaison to IMA’s Committee on Ethics. You can reach him at daniel.butcher@imanet .org

THE VALUE OF

CIVILITY

Incivility is an issue in the workplace and beyond. Savvy finance professionals consider its potential impact and implement safeguards to create a more civil environment.

BY R. DOUGLAS PARKER, DBA, AND AMANDA S. MARCY, DBA, CPA

inance and accounting professional organizations around the world such as IMA® (Institute of Management Accountants) emphasize the importance of ethics. The IMA Statement of Ethical Professional Practice, for example, serves as an ethical guide and details the importance of honesty, fairness, objectivity, and responsibility. Ethical leadership can cultivate the growth of these individual traits throughout the organization, and civility is an important part in fostering such ethical modeling.

In the article “Cultivating Ethics in Business,” Babu I. Razack stated, “An important trait of ethical leadership is giving respect to everyone regardless of rank by listening attentively, valuing their contributions, and being compassionate while considering opposing viewpoints” (Strategic Finance, June 2021, bit.ly/3DpXCwb). Civility goes beyond the act of being polite and showing regard for others. It includes the ability to disagree with others without disrespect, considering the opinions of others, valuing their positions, and truly listening.

What impact does incivility have on the finance and accounting profession, and what strategies can organizations use to combat incivility in the workplace? We surveyed finance and accounting professionals to examine incivility in the workplace and its resulting impact on employees’ overall job satisfaction and turnover intent. The results have implications for supervisors and underscore the importance of implementing organizational strategies to address incivility.

Though data may vary internationally, the study Civility in America 2019: Solutions for Tomorrow reported that the average American encounters uncivil acts on average 10.2 times per

The IMA® Committee on Ethics and Strategic Finance are proud to announce that “The Value of Civility,” by R. Douglas Parker, DBA, and Amanda S. Marcy, DBA, CPA, has been selected as the 2023 Curt Verschoor Ethics Feature of the Year.

This annual award is named in memory of Curtis C. Verschoor, a longtime member of the IMA Committee on Ethics, editor of the Strategic Finance Ethics column for 20 years, and a significant contributor to the development and revisions of the IMA Statement of Ethical Professional Practice. Curt was a passionate, renowned thought leader on ethics in accounting, having earned a Lifetime Achievement Award from Trust Across America—Trust Around the World for his leadership in and advocacy for trustworthy business practices.

The Curt Verschoor Ethics Feature of the Year highlights an article that focuses on the importance of ethics in business as a whole and finance and accounting in particular—issues that Curt deeply cared about.

week and 93% of Americans believe incivility is an issue in the United States (bit.ly/3HIf6q8). For those who believe this number is high, incivility blindness may have set in. It doesn’t take much time or effort to witness uncivil acts; simply visit the comments on any social media platform, watch the news, or pay attention while dining at a local eatery. Does the incivility we witness in everyday life translate into uncivil workplaces?

Although some may believe the workplace to be an escape from the incivility witnessed in daily life, this isn’t always the case. The Civility in America study also noted that 89% of respondents indicated the workplace is very or somewhat civil. This contrasts with the study results of Christine Porath and Christine Pearson (“The Price of Incivility,” Harvard Business Review, January-February 2013, bit .ly/3XMY937), who surveyed thousands of workers over a 14-year period and found that 98% of respondents had experienced uncivil behavior in the workplace. These studies draw attention to workplace incivility issues potentially impacting the finance and accounting profession.

What Is Incivility?

Porath and Pearson define incivility as “the exchange of seemingly inconsequential inconsiderate words and deeds that violate conventional norms of workplace conduct” (“The Cost of Bad Behavior,” Organizational Dynamics, January 2010). Elsewhere, Pearson and Lynne Andersson define workplace incivility as “low-intensity deviant behavior with ambiguous intent to harm the target, in violation of workplace norms for mutual respect. Uncivil behaviors are characteristically rude and discourteous, displaying a lack of regard for others” (“Tit for Tat? The Spiraling Effect of Incivility in the Workplace,” Academy of Management Review, July 1999).

In other words, incivility comprises small acts that are perceived by others as demeaning or that make them feel unimportant or underappreciated. Small acts in the workplace could include ignoring a coworker’s or employee’s opinion, dismissing a coworker’s or employee’s input on a project, talking down, making derogatory remarks toward a coworker or employee, texting during a meeting, excluding coworkers or employees from workplace activities, and so on. Some may seem inconsequential, such as texting during a meeting, but these acts may affect others in a significantly negative way. Perceived uncivil actions have major consequences in the workplace. Porath and Pearson say the cost of incivility in the workplace can be high, and their studies found that of the individuals experiencing incivility:

■ 48% experienced decreased work effort,

■ 80% lost time worrying about the incident,

■ 78% indicated a decline in their organizational commitment, and

■ 66% indicated declined work performance.

This shows that seemingly inconsequential words or deeds may have lasting implications for an organization. Workplace incivility is an issue that the finance and accounting profession shouldn’t ignore. Our survey results of 190 finance and accounting professionals found 74% of respondents had experienced at least some form of incivility from a superior in the past year, with 24% reporting

incivility occurs occasionally or often in the workplace.

Employees look to supervisors as models of acceptable behaviors within an organization. This tone at the top permeates an entire organization, setting the organization’s general ethical climate. According to Bill George, senior fellow at Harvard Business School, “If people see their leaders as trustworthy and willing to learn, followers will respond very positively to requests for help in getting through difficult times” (bit.ly/3RILwUH).

Experiencing incivility in the workplace at the hands of a supervisor may lead to employees displaying acts of coworker incivility. We found 62% of survey respondents indicated they had experienced some form of incivility from a coworker in the past year, with 21% reporting this incivility occurred occasionally or often in the workplace. This leads to the question: Does workplace incivility experienced by finance and accounting professionals negatively impact their job satisfaction and work performance, ultimately leading to their increased intent to leave their companies? Our survey results point to yes on both accounts.

Survey Results

We used the Workplace Incivility Scale (WIS) to measure 190 respondents’ experiences with workplace incivility. The

WIS is a common measure of experienced incivility asking respondents to indicate, using a four-point Likert scale, how frequently they have experienced seven uncivil acts (Lilia M. Cortina, Vicki J. Magley, Jill Hunter Williams, and Regina Day Langhout, “Incivility in the Workplace: Incidence and Impact,” Journal of Occupational Health Psychology, January 2001). Our survey asked these finance and accounting professionals to indicate which of the following seven uncivil acts they had experienced from supervisors and coworkers within the past year:

■ Paid little attention to your statement or showed little interest in your opinion

■ Doubted your judgement on a matter over which you have responsibility

■ Put you down or were condescending to you

■ Made demeaning or derogatory remarks about you

■ Addressed you in unprofessional terms, either publicly or privately

■ Made unwanted attempts to draw you into a discussion of personal matters

Figure 1 shows the frequency of the uncivil acts the respondents reported experiencing. While it’s promising that a good percentage of respondents indicated they’ve never experienced these acts of incivility, several of these

FIGURE 1: EXPERIENCE WITH UNCIVIL ACTS

Paid little attention to your statement or showed little interest in your opinion?

Doubted your judgement on a matter over which you have responsibility?

Put you down or were condescending to you?

Ignored or excluded you from professional camaraderie?

Made demeaning or derogatory remarks about you?

Addressed you in unprofessional terms, either publicly or privately?

Made unwanted attempts to draw you into a discussion of personal matters?

Paid little attention to your statement or showed little interest in your opinion?

Doubted your judgement on a matter over which you have responsibility?

Put you down or were condescending to you?

Ignored or excluded you from professional camaraderie?

Made unwanted attempts to draw you into a discussion of personal matters?

Addressed you in unprofessional terms, either publicly or privately?

Made demeaning or derogatory remarks about you?

SURVEY RESPONDENTS’ EXPERIENCES

In experiencing supervisor incivility: “Accounting is viewed as operational and not integral to the mission of the organization.”

“I have had supervisors and managers humiliate me for making mistakes or not meeting expectations, which were not communicated.... Feedback from these same people is typically passive-aggressive or condescending.”

“Management did not really care that much about the issues [of safety during the pandemic] and still made us attend in-person work even though it went against local guidance. Any person that disagreed with that decision was looked down upon.”

“Company president regularly demeans, criticizes, and yells at people in front of peers.”

“I have seen boundaries ignored between work life and personal life, and supervisors prioritizing work at all costs.”

“I think a long-running issue in public accounting is that most staff accountants are viewed as equipment or something that is expendable.”

In experiencing coworker incivility:

“My peers would not train me because they did not think I should have gotten the position—they would say rude and hurtful things around me, and my boss would not intervene.”

“I have 30 years of experience in a field that is predominately men. The incivility I experienced revolved around men not liking taking direction or being managed by a woman.”

“I have been screamed at, threatened, and physically confronted.”

“Phrases often said to me: ‘Bean counters are no fun,’ ‘You deal with numbers so you would not understand,’ and ‘You are up there working on that second set of books.’”

“My race is brought to everyone’s attention, more often in a derogatory way.”

“I found that incivility does not happen in the open. It happens behind closed doors.”

In the resulting impact of incivility on work performance:

“It certainly makes you less motivated to do a good job and to want to get the job done as fast as possible.”

“Incivility makes it hard to be excited about going to work.”

“I was constantly looking for other jobs and not giving my all. It ultimately caused a lot of sadness for me.”

“I stopped providing thoughts, some of which would have been very valuable. I felt unvalued, so I stopped sharing.”

“Overall, I never let it impact my work. If I played the victim, I would appear weak.”

behaviors are nonetheless prevalent in the workplace. Regarding incivility from a supervisor, respondents most often cited that they had experienced supervisors paying little attention to their opinions/statements (62% ), doubting their judgment over a matter for which they were

responsible (56% ), putting them down or acting condescending toward them (47% ), and ignoring or excluding them from professional camaraderie (44% ). Additionally, respondents most commonly indicated they had experienced coworker incivility in the form of their paying

little attention to their opinions/statements (45% ). These results show that it’s imperative for finance and accounting organizations to develop mechanisms to address these specific concerns in striving to mitigate workplace incivility.

To gain more insight into the impact of incivility on overall job satisfaction and turnover intent, the survey asked respondents to rate their overall satisfaction with their current job and whether they plan to seek new employment within the next year. A regression analysis indicates supervisor incivility significantly correlated to an employee’s overall job satisfaction and their intent to seek new job opportunities. Of those who have experienced supervisor incivility, 24% indicated that they plan to leave their current employer within one year compared to only 6% of those that had never experienced such incivility. In addition, those suffering from supervisor incivility indicated they experienced lower overall job satisfaction.

On a scale of 0 to 8 (0 being low satisfaction and 8 being high satisfaction), those who had experienced workplace incivility rated their job satisfaction lower compared to those who never experienced incivility (4.2 compared to 6.4). While coworker incivility may not have the same level of impact on employees’ job satisfaction or turnover intent as supervisor incivility in this study, it’s important to note other recent studies have shown that coworker incivility impacts job performance. As Porath and Pearson’s research found, not only do employees who experience incivility reduce their efforts at work, but those employees that witnessed these acts also “felt less respect for and commitment to their organizations” (Mastering Civility, 2016).

Reduced job performance and loss of commitment by someone who’s experienced incivility can have a negative ripple effect across an organization. Low morale could ensue as other employees work to pick up the slack left by the poorly performing professional. If supervisors fail to address the issues, then staff conflict with company leadership could develop. As team morale drops, client service quality could suffer, impacting current client relations, future business development, and the potential for attracting new clients. Finally, as employees decide to leave their position, the organization will have to endure significant time, money, and energy costs in recruiting and hiring replacements. According to the 2022 Rosenberg Survey, an annual report on the performance of U.S. accounting organizations, the “labor shortage in the accounting profession continues to have a major impact on nearly every firm.” Based on our survey results, ensuring a civil workplace for all team members is a step in the right direction to improve job satisfaction and reduce employee turnover, which, in turn, can lessen the impact of the labor shortage on companies struggling to find talent.

Our survey asked respondents open-ended questions to gain additional insight on the types of incivility and the resulting impact it had on their work. Hearing from those impacted by incivility, in their own words, can be eye-opening for organizations and those in leadership positions. See “Survey Respondents’ Experiences” for direct quotations from survey respondents on their

experiences of supervisor incivility and coworker incivility, as well as the impact of incivility on work performance.

Our survey results show workplace incivility continues to be an issue in the finance and accounting profession, leading to higher levels of job dissatisfaction and increased likelihood of employee turnover. As such professionals become less committed to their organization, they could begin to exhibit decreased productivity and poor job performance, causing the quality of client services provided to suffer. Additionally, other company employees may need to work harder to fill these productivity gaps, decreasing team morale and increasing job stress and workload, which studies show can lead to job burnout in financial professionals. This means that even company clients and employees who have not directly experienced incivility may also be negatively impacted by its consequences. This cycle could prove detrimental to afflicted organizations. Therefore, it’s critical for finance and accounting organizations to look for ways to build a civil culture within the workplace.

Supervisor incivility significantly correlated to an employee’s overall job satisfaction and their intent to seek new job opportunities.

WORKPLACE INCIVILITY RED FLAGS

Studies show that there are traits both at the organizational and individual levels conducive to workplace incivility (Anselmo Ferreira Vasconcelos, “Workplace incivility: a literature review,” International Journal of Workplace Health Management, November 2020).

■ Counterproductive workplace behaviors: Employees who voluntarily behave in ways that harm the organization and/or its staff could increase the threat of workplace incivility. Such behaviors could include ostracism or other exclusionary behaviors, gossiping, interpersonal and organizational deviance, rude or disrespectful communications, and privacy invasion.

■ Climate of incivility: Individuals experiencing incivility firsthand or witnessing incivility among others in the workplace are more apt to engage in uncivil acts themselves, especially in instances where the organization turns a blind eye to such behavior.

■ Workplace stress: Increased stress levels have also been linked to instigated incivility. Such workplace stress could result from increased job demands, role overload, or expected performance pressures; high levels of experienced job burnout or emotional exhaustion; job insecurity; and corporate change initiatives, such as organizational restructuring, downsizing, mergers, or technological changes.

■ Toxic leadership styles: Employees are more likely to exhibit workplace incivility when they perceive their supervisor(s) to be abusive, undermining, or conflicting, as well as when they perceive there to be a violation of their psychological contact.

■ Perpetrator attributes: Individuals with personalities exhibiting higher levels of neuroticism, hostility, and aggressive behaviors, as well as those in higher-level job positions and social status, tend to be more likely to engage in uncivil acts against those around them.

Recruitment and Retention

Organizations should instill recruitment and retention policies conducive to a civil workplace. Setting expectations for civility starts with the interview process—interviewers have the opportunity to explicitly articulate the organization’s values and the required attributes for the position and assess the candidate’s cultural fit with the organization (Porath, “Make Civility the Norm on Your Team,” Harvard Business Review, January 2, 2018, bit.ly/3Yb14T6).

Including behavioral and situational questions as part of the interview process can help in evaluating whether the candidate will be comfortable at the organization (Rebecca Knight, “How to Conduct an Effective Job Interview,” Harvard Business Review, January 23, 2015, bit.ly/3wHXvrQ). Furthermore, when employees leave the organization, human resources managers can conduct exit interviews to determine if workplace incivility is to blame for the departure (Dori Meinert, “How to Create a Culture of Civility,” HR Magazine, March 20, 2017, bit.ly/3HIsaM4). This will allow company leaders to further address the issue.

Put It in the Handbook

Organizations need to promote peer collegiality through the development of corporate policies that discourage uncivil behavior among coworkers and peer-training and civility seminars focusing on team building and peer conflict resolution strategies (Rajashi Ghosh, Thomas G. Reio, and Hyejin Bang, “Reducing turnover intent: supervisor and co-worker incivility and socialization-related learning,” Human Resource Development International, April 2013). Mission statements and policy manuals must clearly state expectations for workplace behavior and civility (Lilia M. Cortina, Dana Kabat-Farr, Emily A. Leskinen, Marisela Huerta, and Vicki J. Magley, “Selective Incivility as Modern Discrimination in Organizations: Evidence and Impact,” Journal of Management, September 2013).

According to Porath, developing a code of civility helps to define civility for employees and reinforces civility expectations. Cortina, et al., further suggested that employees should receive training regarding civility expectations and interpersonal skills. Porath notes that civility trainings

teach employees what both civility and incivility look like, provide tips on self-conduct in uncivil situations, and allow opportunities to practice civil behavior in challenging scenarios. Furthermore, organizations should put in place a consistent rewards and sanctions system to promote civil behaviors among employees.

Setting the Example

Company leaders need to model civil behaviors for their employees (Thomas G. Reio Jr., “Supervisor and Coworker Incivility: Testing the Work Frustration-Aggression Model,” Advances in Developing Human Resources, February 2011). Ghosh, et al., stated that establishing a good tone at the top has been shown to help to prevent unethical behaviors, so organizations should implement leadership development programs that train supervisors on effective leadership etiquette and identification of factors that could lead to uncivil acts among employees.

These programs, they further suggested, can focus on diversity awareness, anger management, conflict manage-

ment, and employee coaching and mentoring, which will allow supervisors to develop more collegial relationships with their subordinates. Furthermore, according to Ghosh, et al., it’s beneficial for organizations to reward supervisors for fostering supportive behaviors and establish zero-tolerance policies for those who continue to engage in uncivil acts.

Cyberbullying Risks

With the expansion of information and communications technology in the workplace, especially with the growth of the remote work environment brought on by the COVID-19 pandemic, organizations need to pay special attention to employee technology-supported activities. Uncivil interactions and workplace cyberbullying via email, text and instant messaging, and social networking sites can be just as, if not more, harmful as those faceto-face (Vivian K.G. Lim and Thompson S.H. Teo, “Mind your E-manners: Impact of cyber incivility on employees’ work attitude and behavior,” Information & Management , December 2009; Halit Keskin, Ali Ekber Akgun, Hayat Ayar, and Şaziye Serda Kayman, “Cyberbullying Victimization, Counterproductive Work Behaviours and Emotional Intelligence at Workplace,” Procedia–Social and Behavioral Sciences , November 2016 ). According to Reio, workshops encompassing emotional intelligence training and development of civil written communication skills can help to guide such behaviors in a positive direction.

Incivility in society is now omnipresent. While workplace incivility may not be as prevalent as that witnessed outside of the workplace, it should still be of great concern to finance and accounting organizations and leaders. The workplace should be a place of civil interactions, where all are respected and ideas can flourish. As such, it’s essential that finance and accounting organizations implement techniques to successfully enhance civility in the workplace, promoting job satisfaction and, in turn, organizational commitment.

In the end, civility begins with the individual. Take a moment and evaluate your own workplace civility. Think about your actions over the last year. Did you text or email while having a conversation with a coworker or employee? Or maybe you ignored the input of others during a project? Did you ever take credit for ideas that weren’t your own or blame others for failures to which you contributed? All of these contribute to incivility. To understand areas where you may be contributing to incivility, take a full workplace incivility assessment at bit.ly/3leIJGL SF

R. Douglas Parker, DBA, is assistant professor of accounting at Western Carolina University and a member of IMA’s Charlotte North Carolina Chapter. He can be reached at rdparker@wcu.edu

Amanda S. Marcy, DBA, CPA, is assistant professor of accounting at the University of Scranton and a member of IMA’s Pennsylvania Northeast Chapter. She can be reached at amanda.marcy@scranton.edu

The workplace should be a place of civil interactions, where all are respected and ideas can flourish.

UNDERSTANDING BLOCKCHAIN

Cryptocurrencies aside, knowing blockchain’s potential uses and impacts on operations and the finance function is critical.

BY KELLY RICHMOND POPE, PH.D., CPA, AND LAMONT BLACK, PH.D.

iven the ongoing headlines regarding the volatile cryptocurrency market, including the collapse of the cryptocurrency exchange giant FTX and the indictment of its founder and CEO Sam Bankman-Fried, it isn’t surprising that many are skeptical about the cryptocurrency space. Despite these alarming headlines, we know one fact: Cryptocurrency may be relatively new and slightly unstable, but it’s built on top of a powerful and stable technology called blockchain. Not only is blockchain here to stay, but there are various applications and implications for the finance function.

A December 2022 Nasdaq article noted, “While the cryptocurrency fallout from the collapse of digital currency exchange FTX might be roiling the markets, financial firms are moving on undeterred, continuing to explore ways to use blockchain technology” (bit.ly/3DQQGrX). This is spot-on. Finance professionals must keep their eyes on the ball as their clients evaluate the potential benefits blockchain technology can deliver, including benefits to their recordkeeping practices and accounting functions. Therefore, it’s critical that management accountants and finance professionals continue to understand how blockchain technology can impact daily business operations and improve organizational efficiencies.

Immutable Distributed Ledger

By definition, blockchain is a shared, immutable ledger for recording transactions, tracking assets, and sharing information. Blockchain technology is particularly well-suited for accounting applications and could become a bedrock of global recordkeeping systems.

Interest in blockchain and distributed ledger technology (DLT) continues to surge worldwide. Deloitte’s 2020 Global Blockchain Survey revealed that 55% of executives identified blockchain technology as a critical priority for their organizations ( bit.ly/3YsVP1X ). In 2021, Deloitte’s global survey reported a seismic shift in acceptance of blockchain technology, with financial leaders increasingly envisioning digital assets as the future ( bit.ly/3X9EvgJ ).

Blockchain technology is still relatively young, just around 15 years old. Even so, the blockchain economy is already massive and still growing rapidly. In a 2015 survey, the World Economic Forum estimated that 10% of the global gross domestic product (GDP) will be stored on blockchain technology by 2027 (bit.ly/3KdnejN ).

Blockchain analysts predict increasing investments in blockchain technology in 2023 and beyond. For instance, the use of blockchain in the financial sector will likely reach a value of $22.5 billion by 2026 (bit.ly/3YdidvY). Beyond finance, blockchain investments will continue expanding into other areas. For example, in the healthcare space, spending on blockchain technology is expected to rise to $5.61 billion by 2025 (bit.ly/3JPbpA7).

IMA C-Suite Report

This article is adapted from the forthcoming IMA® (Institute of Management Accountants) C-suite report Blockchain, Cryptocurrency, and Management Accounting: Adopting the Technology while Mitigating Ethical and Governance Risks. It has been edited and abridged for Strategic Finance. The full report will be available at bit.ly/3DDiShU.

Having access to the real-time, highly reliable data that blockchain provides is a game changer for management accountants. They can use it to increasingly monitor financial performance and provide invaluable strategic insights in real time. The current environment around blockchain technology presents opportunities for management accountants to get in on the ground floor and lead their organizations’ blockchain-related strategies.

Origins of Blockchain

Blockchain technology’s history traces back to 1991 when research scientists Stuart Haber and W. Scott Stornetta first proposed digital time-stamping documents in sequence to authenticate authorship of intellectual property. At the outset, Haber and Stornetta sought to develop a computationally practical solution for time-stamping digital documents so no one could backdate or tamper with them.

The first reference to this data structure as a “chain of blocks” appears to come from Satoshi Nakamoto in 2008 (bit.ly/3jMchuN). Nakamoto’s innovations with bitcoin included the connection of the blockchain concept to a public ledger jointly updated by numerous participants in an open-source network (see “How Blockchain Works”).

The most well-known blockchain in the world is the public blockchain behind the cryptocurrency bitcoin. By any measure, bitcoin has enjoyed broad adoption. As of September 2022, more than 15,000 businesses accept bitcoin for payment of goods and services, including more than 2,000 in the United States ( bit.ly/3YsldEg ). Microsoft

HOW BLOCKCHAIN WORKS

Record the transaction.

Step 1:

A blockchain transaction shows the movement of physical or digital assets from one party to another in the blockchain network. The transactions are recorded as a data block and include details like the following:

■ Who was involved in the transaction?

■ What happened during the transaction?

■ When did the transaction occur?

■ Where did the transaction occur?

■ Why did the transaction occur?

■ How much of the asset was exchanged?

■ How many preconditions were met during the transaction?

Gain consensus.

Step 2:

Every blockchain requires a consensus mechanism to validate the proposed transactions. In most consensus mechanisms, a majority of participants on the distributed blockchain network must agree that the recorded transaction is valid. Depending on the type of network, rules of agreement can vary but are typically established at the launch of the network.

Step 3:

Link

the blocks.

Once the participants have reached a consensus, transactions on the blockchain are written into blocks equivalent to the pages of a ledger book. Along with the transactions, a cryptographic hash is also appended to the new block. A hash is a unique identifier for the information in that block that can’t be reverse-engineered to reveal the information in the block.

■ The hash also references the previous block, so the hashes act as a chain that links the blocks together.

■ If the contents of the block are intentionally or unintentionally modified, the hash value changes, providing a way to detect data tampering.

Share the ledger.

Step 4:

The system distributes the latest version of the ledger to all participants. Every node on the network has a copy of the latest version of the ledger, which is the defining feature that makes blockchain a distributed ledger technology (DLT). This is why blockchain is a system of shared accounting.

is the largest U.S. company that accepts bitcoin, and, as of June 2022, the top five industries that accept bitcoin are gambling, tourism, banking, food, and retail ( bit.ly/3x5hVv3 ).

While it was the application to cryptocurrencies that put blockchain technology on the global map, that represents

only one application of blockchain. The technology lends itself to dozens of other potential applications across many industries including:

■ Online voting

■ Insurance policies

■ Property and real estate records

TABLE 1: COMPANIES USING BLOCKCHAIN FOR SUPPLY CHAIN TRACKING

De Beers Group

Abu Dhabi National Oil Company (ADNOC)

Uses blockchain to track high-value diamonds along its supply chain from mine to retail, avoiding conflict diamonds and offering trust in provenance.

Uses an IBM-based blockchain pilot program to track oil from the well to customers.

Maersk Uses blockchain technology to track cargo ships and containers.

John West Foods

Uses blockchain to track codes on tuna cans that allow customers to trace the product back to the fishermen.

Ford Motor Company Uses blockchain technology to trace cobalt supplies used in electric car batteries to ensure quality control and authenticity.

■ Forecasting

■ Medical records

■ Cloud storage

■ Private transportation and ride sharing

■ Copyrights and licenses

■ Supply chain tracking (see Table 1)

The Growth of Blockchain Adoption

According to a 2021 survey by research firm Blockdata, blockchain adoption has grown exponentially since PayPal and The Walt Disney Company embraced the technology in 2014. Currently, at least 81 of the world’s top 100 public companies by market capitalization employ blockchain technology, with at least 27 having a fully functioning live product (bit.ly/3HJivnf).

Leading public companies from all sectors are incoporating and leveraging blockchain technology in various ways. For example, energy companies utilize blockchain technology to create peer-to-peer energy trading platforms and streamline access to renewable energy. In one case, homeowners with solar panels use an energy trading platform to sell excess solar energy.

In the finance sector, banks and stock exchanges utilize blockchain technology to manage online payments, accounts, and market trading. Singapore Exchange Limited—an investment holding company that provides financial trading services throughout Asia—utilized blockchain technology to build a more efficient system

Leading public companies from all sectors are incorporating and leveraging blockchain technology in various ways.

Source: bit.ly/3xtj0gz

TABLE 2: BLOCKCHAIN PROS AND CONS PROS CONS

Immutability: impossible to erase or replace recorded data; prevents data tampering; enhanced security.

Transparency: decentralized, any network member can verify data recorded into the blockchain; the public can trust the network.

Censorship resistant: No single authority (including governments) can interrupt the operation of the network.

Traceability: creates an irreversible audit trail; confirms provenance.

Lower operational cost: no need for centralized servers; lower overhead costs; no banking or payment processing costs.

No single point of failure: As a distributed network, with each node sharing the database, blockchain is secure and tamper-proof.

Reduced fraud: every transaction validated and its provenance checked via a consensus.

High implementation cost: costlier than a traditional database; organizations need proper planning and execution to integrate blockchain into their processes.

Data modification: difficult to correct a mistake or make necessary adjustments; once data is recorded, modifying that data requires rewriting the codes in all of the blocks, which is time-consuming and expensive.

Speed and performance: slower because it carries out more operations per transaction, including signature verification, consensus, and redundancy.

Adoption: Since blockchains connect a network of users, they’re only useful when the users adopt the platform.

Data encryption: use of private access keys in consumer-facing applications.

Scalability: fewer transactions processed per second; every transaction must be validated by the majority of the nodes; network congestion issues; high transaction costs.

Costs: Some public blockchains continue to use mining or “proof of work”; mining uses a lot of energy for consensus protocol. (That said, most public blockchains now use “proof of stake” (staking) rather than mining, which is much more energy-efficient.)

Enhanced security: encrypts transactions in a digital database and the transaction history itself is immutable.

Speed: Blockchains need miners; transactions take longer to complete.

for batch processing and manual reconciliation of thousands of financial transactions.

Governments are also betting on blockchain growth. The European Union, for instance, announced plans in 2021 for a multibillion-euro investment into blockchain infrastructure that provides grants and prizes to fund blockchain research and innovation

On the flip side, these benefits require certain trade-offs. For example, blockchain doesn’t allow easy modification of

data once recorded. Changes would require rewriting the codes in all blocks in the chain, which is time-consuming and expensive. Correcting a mistake or making any necessary adjustments is difficult at best.

Another trade-off, particular to consumer-facing applications such as bitcoin, is that—without a centralized third party governing the database—users can’t recover assets if they lose their private key. For these reasons, decentralization is a mixed bag. Still, most observers agree that

blockchain’s overall benefits far outweigh these trade-offs (see Table 2).

Public and Private Blockchains

Whether blockchains are public or private may impact certain governance risks. Thus, the distinction is important for management accountants and financial professionals to understand when assessing the adoption of private or public blockchain applications.

Public blockchains are “permissionless,” meaning that anyone can participate in the network. The two largest public blockchains are bitcoin and Ethereum, which both have their native cryptocurrency. Cryptocurrency and public blockchains are closely related, because cryptocurrency is the payment mechanism on a public blockchain. Executing a transaction on a public blockchain requires payment in a cryptocurrency; therefore, public blockchains don’t function without cryptocurrency. The blockchain is the underlying platform for the network, and the cryptocurrency is the value being transferred on the network. A peer-to-peer cryptocurrency transaction occurs when some amount in crypto tokens is sent by one participant to the blockchain address of another participant. Public blockchains allow anyone to participate in this open and transparent exchange of value on the network.

Although private blockchains feel “safer” due to the closed network, private blockchains haven’t lived up to much of the hype generated over the last five to 10 years. This is likely because private blockchains are similar to traditional systems of accounting. Although they use different technology, the governance of the technology is still largely centralized, which undermines many of the benefits of blockchain as decentralized.

With public blockchains, on the other hand, there is no “trusted third party” to verify transactions. This is typically thought of as removing the need for a government or bank, but it also could apply to accounting firms. There’s no external auditor to serve as the ultimate source of truth. The blockchain is the single source of truth.

Blockchain and Management Accountants

Blockchain isn’t simply software for analyzing or visualizing data: It’s a foundational technology for recording data. This could have a much more transformative impact than many of the other incremental technologies being explored in accounting.

In “Blockchain Disruption on Management Accountant’s Role: Systematic Literature Review,” Vecco Saputro, Hamzah Ritchi, and Sofik Handoyo acknowledged the foundational nature of blockchain and attempted to identify many areas where blockchain implementation could impact the management accountant’s work

( Journal of Accounting Auditing and Business , January 2021, bit.ly/3YzKM6K ). For management accountants, blockchain can potentially disrupt (in a good way) certain aspects of such tasks as:

■ Accessing performance data in real time,

■ Facilitating continuous financial monitoring,

■ Advising on decreasing operations costs, e.g., data transmission costs,

■ Leveraging the ability to better track error information,

■ Implementing more efficient and effective accounting practices,

■ Leveraging the increasing accuracy and reliability of a company’s underlying transaction and operational data, and

■ Improving corporate compliance and internal controls.

Continuous updating of financial and operational data on a blockchain provides management accountants with highly reliable information at all times. Strategic analysis and corrective actions can improve, which in turn improves corporate monitoring, performance monitoring, and inter-

Blockchain isn’t simply software for analyzing or visualizing data: It’s a foundational technology for recording data.

nal controls. Basic accounting and auditing activities can also become more efficient with blockchain. For example, once in place, blockchain can reduce the costs of maintaining and reconciling ledgers and eliminate uncertainty regarding the ownership and history of assets.

In the auditing space, the underlying foundations of auditing and internal controls can be embedded into each transaction at the outset. As Deloitte and others have observed, this means that the internal audit design would shift from being a “retroactive, point-in-time examination to an ongoing, real-time monitoring process” instead (bit .ly/3JTwR7o).

Managing Ethical and Governance Risks

In general, adopting new technology introduces new ethical and governance risks, and blockchain technology is no different. Management accountants can assist the rest of the management team and the board of directors in analyzing and overcoming these risks.

From a corporate governance standpoint, there are several overarching issues to consider before assessing ethical and governance risks. First, management accountants can help the rest of the management team and the board determine:

■ Appropriate potential uses of blockchain technology for their industry and organizations;

■ Their organization’s commitment and ability to deploy the necessary internal controls to maintain security;

■ The necessary tools needed to monitor the governance and health of each blockchain platform their organization partners with; and

■ Their organization’s personnel/skill sets to maintain appropriate blockchain applications on an ongoing basis.

Once the decision is made to adopt blockchain technology and the necessary personnel and infrastructure are in place, an organization can zero in on potential ethical and governance risks. In a May 2022 Harvard Business Review article (bit.ly/3JnzwpG), Reid Blackman identified four overarching ethical and governance concerns around blockchain adoption that management accountants should be cognizant of:

1. A lack of third-party protections

2. Privacy violations

3. The zero-state problem

4. Bad governance

One of the common misconceptions about blockchain is that being “decentralized” or “permissionless” equates to a lack of governance. This couldn’t be further from the truth. In reality, blockchain governance is quite complex. According to Blackman, a blockchain’s creators have to set forth at the outset “who has power; how they acquire it; what, if any, oversight there is; and how decisions will be made and operationalized.” Making any changes to these significant items after the fact isn’t easy.

Many blockchains use a form of decentralized governance known as decentralized autonomous organizations

(DAOs). A DAO is a community-led entity with no central authority. It’s fully autonomous and transparent: Smart contracts lay the foundational rules and execute the agreedupon decisions, and, at any point, proposals, voting, and even the code itself can be publicly audited.

As Blackman aptly noted, blockchain governance can raise various “significant ethical, reputational, legal, and financial ramifications” for anyone utilizing the blockchain. To properly advise clients and mitigate risk, it’s imperative that management accountants understand the governance structure of a particular blockchain, including with respect to how potential issues will be resolved.

Assess Future Impacts

As blockchain technology expands into multiple industries, it will be important for management accountants and finance professionals to stay knowledgeable about how blockchain can be a value-add to their organizations. We must remember that blockchain adoption extends well beyond cryptocurrency and has been utilized to improve organizational efficiencies such as real-time access to financial reporting and other operations data. As blockchain technology becomes embedded throughout various industries and additional blockchain applications continue to surface, we can expect heightened regulatory scrutiny. Key takeaways for finance professionals include the following:

■ Blockchain adoption is growing across a wide range of applications beyond cryptocurrencies.

■ Public blockchains and cryptocurrency are an important part of the blockchain ecosystem.

■ Adopting blockchain technology has improved efficiencies within organizations.

■ Concerns about potential ethical and governance risks associated with blockchain adoption can be mitigated.

Management accountants should be assessing the future impact of this rapidly emerging technology on their own role and responsibilities, the finance function, and their organization’s industry vertical. (For more, also read “Blockchain Implementation and Cybersecurity” on p. 58.) Whether or not it’s the right time for your organization to implement blockchain, gaining expertise in this rapidly emerging technology is paramount for forward-looking finance professionals. SF

Lamont Black, Ph.D., is an associate professor of finance in the Driehaus College of Business at DePaul University. He is a financial futurist whose interests focus on cryptocurrency, blockchain, and data analytics. You can reach him at lblack6@depaul.edu

Kelly Richmond Pope, Ph.D., CPA, is the Dr. Barry Jay Epstein Endowed Professor of Accounting at DePaul University and the author of Fool Me Once: Scams, Stories, and Secrets from the Trillion-Dollar Fraud Industry. She can be reached at kpope2@depaul.edu

INNOVATE WITH CREATIVE PROBLEM SOLVING

Creative problem solving enables accounting and finance teams to work together in new ways to overcome challenges in a short amount of time.

BY MARSHA HUBER, PH.D., CPA, AND LOREAL JILES

anagement accountants are increasingly tasked with developing innovative solutions to time-sensitive business problems. Prompted by the dynamic environment within which many organizations find themselves, the rise in demand for an efficient path to business solutions translates into accounting and finance teams acquiring new skills to implement novel approaches to problem solving. One such method they can use is creative problem solving (also known in this context as CPS).

CPS offers a four-step process that leads to novel solutions and enables management accountants to optimize creative thinking to find solutions in a matter of a few hours. The methodology provides an efficient and effective framework for companies to tackle a single challenge by taking teams through four problem-solving steps (see Figure 1):

1. Clarifying a challenge

2. Ideating solutions

3. Developing a proposed solution

4. Planning for implementation

The CPS process requires teams to look at a problem from many different perspectives and to brainstorm numerous options before selecting the best solution. CPS empowers accountants to generate ideas in an inclusive and efficient way that can strengthen their contribution to strategic decision making, enabling delivery of incremental value to their organizations.

Employing the CPS process can position management accountants to make even greater contributions to organizational performance and competitive advantage during the most critical times. By understanding the four steps of CPS, accounting and finance teams can work together in new ways, allowing for increased collaboration and innovative thinking.

When to Use CPS

CPS is most effective when tackling a challenge that requires innovative thinking for questions such as “How might we improve a process?” or “How might we reduce costs?” The following real-world examples show how CPS has helped organizations in the business and nonprofit sectors.

General Motors used CPS at a plant in upstate New York to reduce manufacturing costs. During a CPS training session at the plant, the operations team wanted to tackle the problem of ring gears (which are critical components in manufacturing) sticking in the dies (which are cast or mold-like tools that enable manipulation of a material into a specific shape and size) and breaking during the manufacturing process. During the brainstorming session, one of the team members suggested spraying something like a nonstick cooking spray on the dies before casting. Another team member suggested using a spray bottle (cost $1) with a nonstick solution ($0.50) to apply the solution on ring

Statement on Management Accounting

This article is excerpted from the upcoming IMA® Statement on Management Accounting (SMA) Creative Problem Solving: A Path to Efficient Innovation. It has been edited and abridged for Strategic Finance. The full report will be available at bit.ly/3DDiShU.

gears before production to prevent sticking. Plant operators now spray the dies before making ring gears. Thus, within a CPS session of 45 minutes, a solution was developed that saves the plant $40,000 per week (bit.ly/3ZkVejs).

Another example is the Small Business Development Center (SBDC) at Youngstown State University. The SBDC had both limited funding and staff and therefore needed to narrow its strategic priorities to what could be accomplished in the next six months. The director decided a collective effort would be better than any plan she might create independently, so she decided to hold a CPS session with her staff. The session focused on setting priorities and brainstorming the tasks needed for completion in the immediate future.

As a group, the team decided to redesign the SBDC’s service offerings to both showcase its strengths and maximize benefits for the local economy. Staff brainstormed ideas for: How might we find time to do this? How might we develop content? How might we select the services that would have the greatest impact? After a three-hour session, the director was satisfied with the ideas generated, and the group developed a six-month implementation plan with deadlines and personnel assignments. The team also delegated responsibility to different staff members who would oversee the plan to ensure it was being implemented as intended.

At West Los Angeles College, the college president asked a faculty member to write a proposal to convert a 2,000-square-foot multipurpose space into a Creativity Studies Lab. The faculty member, also the future director, wanted to write a persuasive grant proposal. She assembled a CPS team to help her improve the proposal.

The team brainstormed suggestions recommending ideas such as discussing stakeholder value, calculating return on investment, and adding the use of a flex space to the report.

CLARIFY

• Asking questions

• Gathering facts

• Formulating challenges

FIGURE 1: THE CPS PROCESS

IDEATE

• Brainstorming

• Pursuing out-of-the-box ideas

DEVELOP

• Evaluating pros and cons

• Making ideas feasible

IMPLEMENT

• Figuring out priorities

• Setting a timeline

The group also helped her identify “assisters,” those who would serve as her allies, and “resisters,” those from whom she should try to garner support. After the two-hour session and asking various individuals to read her draft, the faculty member submitted her proposal for the new Creativity Studies Lab and received a seed grant to fund its creation.

Consistent with these examples, management accountants can use CPS for similar challenges such as brainstorming strategic perspectives, setting priorities, or preparing business cases. The beauty of CPS is its simplicity if a creative solution is needed in less than a day.

Not all problems require CPS: Some problems have obvious solutions, such as booking an accrual to recognize revenue for a sales transaction that has already occurred but for which cash will be received in the future. CPS, however, should be used by a person who needs a creative solution and has the authority to bring about change.

Before the CPS Session

To hold effective CPS sessions, preparation is necessary. Ismet Mamnoon, a CPS consultant and former accountant, says, “For creative methodologies to be effective, certain preliminary steps should be followed to support an optimal experience.” The principles of CPS are based on the flow of ideas from nurturing a creative environment that allows for humor, mutual respect, reflection, excitement, idea incubation, and effort, and providing a stage that

allows for the use of sticky notes and permanent markers or a virtual whiteboard. There are six essential prerequisites to beginning the CPS session to increase the likelihood of success (see Figure 2).

Assemble the CPS team. Ideally, a team includes the client, a facilitator, the resource group, and a process buddy. The facilitator, an expert in CPS, guides the process. The client is the person who owns the challenge. The resource group—usually three to seven people—are those who can add energy, enthusiasm, and relevant knowledge to the process by generating and evaluating ideas. Finally, a process buddy is an assistant who helps the facilitator manage the logistics and tasks during the session, freeing the facilitator to focus on leading the group through the four steps in the CPS process.

Secure adequate meeting space. The meeting space for the CPS session can be physical or digital. Physical creative thinking environments provide whiteboards and flip charts in a room with enough space for participants to stand and move around. In the digital world, companies provide online whiteboards that operate similarly to a physical space, where participants can type on sticky notes and arrange them in a digital platform.

Prepare for divergent and convergent thinking. Each step in CPS includes the movement between divergent thinking (generative thinking) and convergent thinking (evaluative thinking), as first identified by Alex Osborn, the father of brainstorming. Without this movement, the pro-

FIGURE 2: PREREQUISITES TO CPS

cess can’t move forward. For example, during a brainstorming session, participants present many ideas to address a challenge—divergence—and then cluster those ideas and decide which one should be developed—convergence. The guidelines for divergent and convergent thinking are presented in Figure 3, which should be posted in the room prior to the session for the team to see and review during the process.

Acquire proper supplies. The proper supplies for a meeting in a physical space include sticky notes (like Post-it notes), small paper sticky dots of different colors, and markers. A few tips of the trade include:

■ Consider the use of 3" x 5" sticky notes, as typical 3" x 3" sticky notes might be too small.

■ Encourage participants to use markers rather than ink pens to write on the notes so that all participants can read what is written.

■ For added creativity and engagement, some facilitators bring toys, such as Legos, interlocking plastic bricks, or stress balls, for participants to fiddle with and snacks for breaks.

Interview the client. Prior to the CPS session, the facilitator meets with the client to explain the process, agenda, and support needed, and to confirm that CPS is the appropriate methodology to address the client’s challenge. This session takes about an hour to complete and is usually conducted a few days ahead of the CPS session.

In the preparation session, the facilitator will interview the client to clarify the challenge, posing a series of probing questions (see “Preparation Session Questions”). The facilitator will record responses as the client speaks to aid in freeing up the client’s mind to gain new perspectives about the challenge.

After recording the answers, the facilitator will ask the client to highlight the answers that best speak to the challenge, present new insights, or are important to consider for a CPS session. Then, the facilitator will ask the client to put a check mark by the statements they have influence over. Next, the client is asked to put a check mark after statements that require imagination. Lastly, they’re asked to put a check mark by statements that need immediate attention.

After reviewing what appear to be the most important statements, the facilitator will ask the client to complete the following visionary statements:

■ I wish…

■ It would be great if…

■ Wouldn’t it be nice if…?

The facilitator asks the client which visionary statement they would like to present to the resource group, then makes a poster that lists the visionary statement and key data points to take to the CPS session.

Warm up. Like physical exercise, a warm-up is best to ready the brain for creative thinking. Warm-ups should be used at the beginning of any session or after a long break,

such as lunch. Another goal of a warm-up is to loosen people up, adding the “silly” factor. Facilitators can use a simple exercise such as “What might be all the uses for a brick—be as creative as possible?” or “How might we improve an airplane seat?”

The goal of this warm-up exercise is for the group to come up with 30 to 50 ideas in a few minutes. If the group slows down, the facilitator can use a technique called forced connections, which asks an additional question to the original one to prompt more ideas. For example, the facilitator could ask the group, “If you were an animal, how would you use a brick?” or “If you were a child, what would you like to add to an airplane seat?” Using forced connections teaches participants to view challenges from different perspectives, thereby leading to increased ideation.

Facilitators should encourage the group by saying, “You’re doing well. I like these ideas. Keep them coming!” Be wary about praising certain types of ideas or specific

PREPARATION SESSION QUESTIONS

■ Describe what you’re dealing with.

■ Who’s involved in this situation?

■ What’s your role in the decision-making process?

■ Who will make the decision?

■ What do you wish would happen?

■ What would be an ideal outcome for you?

■ What do you want that you don’t have?

■ Are you looking for something similar or something radically different?

■ What’s getting in the way of your achieving your ideal outcome?

■ Why is it that you want to work on this particular issue now?

■ How important is this to you?

■ Why is it important to you?

■ What are the consequences if you don’t solve the problem?

■ How might dealing with this problem impact other areas of your life?

■ What have you done to already deal with this problem?

■ How would you typically solve a problem like this?

■ Why haven’t these approaches to solving the problem worked for you?

■ Are you willing to put in the time and energy to use the CPS process?

Divergent Rules

Convergent Rules

individuals as it might send a message to the group that the facilitator is looking for certain types of ideas or is encouraging ideas from certain individuals.

The CPS Session

As a session begins, the facilitator presents the agenda. The facilitator will also share the guidelines for divergent and convergent thinking. These rules should be restated each time the group uses divergent and convergent thinking.

Each step in the CPS process—clarify, ideate, develop, and implement—is critical to leveraging the methodology effectively. Following the key activities in each will contribute to the efficient development of tailored solutions.

Step 1: Clarify. At the session’s onset, background information—the organization’s industry, culture, and disruptions—is shared with the resource group. The key data points on the poster created at the client interview will be read by the client to the team, with the team asking questions. The client’s “I wish” statement will also be shared.

In the CPS process, step 1 typically takes the most time. After introductory remarks and a warm-up exercise, the team will help the client clarify the challenge by reframing it into

FIGURE 3: RULES OF BRAINSTORMING

FIGURE 4: BRAINWRITING

Ev u ions based on growth r her than specific obje ives 1B 1C 3A 3B 3C

H p me under and wh you ’re looking for

a problem statement. Using phrasing such as “How to…” or “How might…” is key to advance to step 2. Participants should be encouraged to write their ideas on sticky notes and place them on a whiteboard or flip chart. Examples of problem statements used by accounting and finance teams include:

■ How might we set strategic priorities for the finance function that most effectively deliver value to the operational teams supported?

■ How might we grant real-time access to our financial data that meets the needs of our business partners?

■ In what ways might we measure the most relevant sustainable business information to our business?

■ What might be all the ways we can streamline our procurement operations for efficiency and cost-effectiveness?

After coming up with 20 to 25 problem statements, the group can mark the statements that interest them the most, clustering similar statements together and ultimately naming clusters with new problem statements by theme.

Step 2: Ideate. In step 2, the team generates ideas and converges on a solution. One of the most common ide-

ation techniques is brainstorming. Without proper training, however, the ideas generated at most brainstorming sessions aren’t unique but rather represent a collection of ideas already in participants’ heads. In many instances, people can’t seem to get to new ideas until existing ideas are out of the way. Research shows that it takes a few rounds of brainstorming for the best ideas to emerge (Paul Paulus, Jubilee Dickson, Runa M. Korde, Ravit CohenMeitar, and Abraham Carmeli, “Getting the Most out of Brainstorming Groups,” in Arthur Markman, ed., Open Innovation, 2016).

The two most common ideation techniques in CPS are “stick ’em up brainstorming” and “brainwriting.” Facilitators should consider using both to give extroverts and introverts a chance to ideate in a way that speaks to their preferences.

As the name suggests, stick ’em up brainstorming involves the team generating ideas, writing them on sticky notes, and posting the notes on a whiteboard. When team members say what they write, others can hear the idea so they don’t duplicate it, and that idea can spark new thinking.

The order of sharing an idea is “write it, say it, and stick ’em up.” When working in a group, following a different order can be distracting, and some team members may not speak at all. Thus, at times, the facilitator may need to remind team members to follow the guidelines. If the group slows down when it comes to ideation, the facilitator can use techniques, such as forced connections, or can show pictures—nature, people, or food—and ask the group what new ideas they get from looking at the pictures. Another useful technique is role-playing, during which team members can take on roles of fraudster, CFO, auditor, government official, or even a superhero to spur ideation.

The other ideation technique is brainwriting, which is done in silence. This should be done after stick ’em up brainstorming, not before. Each member is given a brainwriting sheet containing nine squares with a sticky note placed in each square with an idea on it (see Figure 4). Each person writes three ideas on the brainwriting sheet. When completed, the team members pass their brainwriting

sheets to someone else. This way, people can think of new ideas in silence by reading others’ ideas and building on them.

There are four key steps in the brainwriting process, which should be read out loud to team members before brainwriting begins:

■ Participants write the problem statement/creative question at the top of each grid.

■ They use the guidelines for generating ideas: defer judgment, strive for quantity, seek wild and unusual ideas, and combine and build on other ideas.

■ Participants write three ideas on the first open row of the brainwriting grid—one idea per sticky note placed in each box.

■ After writing three ideas, participants place the form in the middle of the table and pick up a different grid that another participant has started. If there are none, they start with another blank grid. With extras in the middle, no one has to wait for other members of the group. A grid will always be waiting for them.

After using both ideation techniques for around 20 minutes each, the facilitator should see if the client is satisfied with the quantity and quality of ideas. If so, then it’s time for the group to converge on the best ideas. The facilitator will give each team member three to five dots to place on the most promising or intriguing ideas. The group should consider the need for novelty when converging on the best ideas, clustering similar ideas together and labeling them, using a verb in the label.

For example, the problem statement for an accounting class was “How might we engage students to learn without thinking about grades?” After generating 75 ideas, the resource group (made up of students) labeled clusters with statements such as:

■ Relate accounting to superpowers.

■ Create new types of class projects (i.e., video).

■ Add play/competition with prizes to classes.

After renaming the clusters, the resource group and client will decide what ideas they want to pursue. At this time, the facilitator should check the client to see if the team is on the right track. If the client agrees, the facilitator will ask the client to complete the following statement and write it on the flip chart for the team to see: “What I see myself doing is…”

In the example of creating an “engaged” classroom, the client (a faculty member) developed a model of peer learning, constructed with the help of the resource group. She could see herself implementing this peer learning model of teaching in future classes, using ideas from the resource group.

Step 3: Develop. Step 3 takes what the client envisions doing and turns promising ideas into workable solutions. This includes evaluating the pros and cons of the proposed solution with intentions of strengthening it by using techniques such as “assisters and resisters” or POINt (Pluses, Opportunities, Issues, and New Thinking).

“Assisters and resisters” ask questions to help the client strengthen their ideas. Assisters represent the people

The two most common ideation techniques in CPS are “stick ’em up brainstorming” and “brainwriting.”

What are the Pluses?

What do you see yourself doing now?

FIGURE 5: OPERATIONALIZING POIN t Improve your solution:

What are the Oppor tunities?

1. It might…

2. It might…

3. It might…

What are the Issues?

1. How to…?

2. How to…?

3. How to…?

What New Thinking is needed? Generate 10 ideas to overcome each issue. Do this until each issue is addressed.

After your POINt evaluation, write your idea phrase below:

To strengthen my solution, I will…

who might assist the client with the proposed solution, and resisters are those who might resist it. The team will create a list of stakeholders and categorize them as supporting or opposing the solution. The group will then brainstorm ideas for the following questions: How might we utilize or gain their support? How might we overcome resistance?

Bob Eckert, CPS consultant and CEO of New and Improved, said, “When a group is embedded in the creative process, and they want to move things forward, they are unstoppable. Resistance is welcomed as input to strengthen their efforts; assisting them wins you allies for your own future challenges” (bit.ly/3GAEDPZ).

Similar to the assisters and resisters technique, POINt works to strengthen the proposed solution. The facilitator instructs the group to complete a POINt sheet (see Figure 5):

■ List at least three pluses related to the promising idea.

■ Next, list three opportunities (e.g., spin-offs, gains) for the idea.

■ If the idea works, what are new opportunities? Use the statement “It might…”

■ Finally, list the issues you have with the idea. Be sure each issue uses the wording “How to…?” These questions will allow the team to address the statement with new

thinking to overcome any issues. For each issue, write 10 ideas to overcome each concern.

After completing that exercise, the facilitator should ask the team to converge, and the client will write a single statement on how to strengthen their solution: “To strengthen my solution, I will…”

Step 4: Implement. In the final stage of the CPS process, the facilitator asks the client if they feel they have an effective, actionable solution to their challenge. If so, then the group will create an implementation plan, designed to fuel commitment by having the client commit to actions, dates, people, and accountability. Before filling out the action grid (see Figure 6), the facilitator will ask the team to generate at least 15 actions needed to bring the solution to reality and write them on sticky notes.

The action grid has columns for the specific action steps that need to take place: Who is going to do it? When will it be completed? Who will check to make sure it’s done?

The group also will use the action grid to place the tasks into the proper time frame: what needs to be done in the next 24 hours, in the short term (i.e., 30 days), midterm (31 to 90 days), and the long term (beyond 90 days).

The facilitator will ask the client if they’re satisfied with the action grid and the session. The client and resource

CPS can shift a group from focusing on obstacles to creating solutions.

FIGURE 6: ACTION GRID

group may feel tired after all the hard work, but they’re usually very satisfied with the plan they collectively developed to address the client’s challenge.

Creatively Designing Tomorrow

CPS can shift a group from focusing on obstacles to creating solutions. Key principles include balancing divergent and convergent thinking, reframing problems into questions, deferring judgment of ideas, building on each other’s ideas, and getting things done. While brainstorming, deferring judgment allows for potentially implausible ideas to turn into innovative ideas worth further exploration.

The CPS process can serve as a valuable strategic tool in the management accountant’s toolbox. No matter the role, developing proficiency in CPS equips professionals with an effective skill to foster creativity, leading to greater innovation for the finance function and business teams. Well beyond business professionals, CPS offers an efficient path to novel solutions to problems of nearly any type. Upskill today to tap into and develop your creativity. SF

Marsha Huber, Ph.D., CPA, is a former director of research at IMA. She can be reached at hubercpa@hotmail.com

Loreal Jiles is vice president of research and thought leadership and global head of DE&I at IMA, a member of IMA’s Technology Solutions and Practices Committee, and a member of IMA’s San Gabriel Valley Chapter. She can be reached at loreal.jiles@imanet.org

HOW WELL DOES CHATGPT KNOW EXCEL?

ChatGPT is a chatbot project from OpenAI developed to make AI systems appear more natural. It’s currently in a free research preview, and the response so far has been a mix of the positive and negative. ChatGPT is able to produce natural, human-like text, but questions arise as to its accuracy and concerns over how the technology could be used. The concerns over accuracy extend even into use for Excel.

formula with a caution that it would only work on small numbers: =IF(A2=2,TRUE,IF(AND(A2>2,A2/2= INT(A2/2))FALSE,IF(AND(A2>2,A2/3 =INT(A2/3)),FALSE,IF(AND(A2>2,A2/ 5=INT(A2/5)),FALSE,TRUE)))).

That isn’t an approach that I would use, but it seems like it could work. When I tested the formula, however, it fails to identify 3 and 5 as prime numbers. It does get everything correct between 6 and 48 (see Figure 2).

A few days later, I asked the prime question again. This time, ChatGPT offered the concise =ISPRIME(A2) That’s interesting but completely wrong. Excel doesn’t offer an ISPRIME function.

BY BILL JELEN

After several people asked me about using ChatGPT to write Excel formulas, VBA code, or Power Query M code, I conducted several tests in January 2023 and found that it isn’t quite yet ready.

The first result I received was amazing. I have an example in my Power Excel seminar where I show how to handle an IF function with two conditions. I asked ChatGPT to “Calculate bonus in Excel as If F2 is over 5000 and G2 is over 0.5 then multiply 0.02 times F2 otherwise 0.” In a few seconds, it produced the correct answer of =IF (AND(F2>5000,G2>0.5),F2*0.02,0) That’s better than the more common =IF(F2>5000,IF(G2>0.5,F2*0.02,0)), and I was impressed that ChatGPT offered the better formula. ChatGPT even gave a short tutorial on how the IF function works (see Figure 1).

Then I asked a more difficult question: “Excel formula to test if the value in A2 is a prime number.” In just a few seconds, ChatGPT confidently presented this

A week later, ChatGPT offered =IF(AND(A2>1,COUNTIF (ROW(2:A2),A2)=1), “Prime”,”Not Prime”) I was again impressed. It looks very clever. While trying to test the formula, however, Excel Help confirmed that the first argument for COUNTIF needs to be a range, not a calculation such as ROW(2:A2) Another fail.

TESTING POWER QUERY OR VBA

Having seen other tests on YouTube where ChatGPT could write a few useful lines of Excel VBA, I decided to try a slightly complex Power Query situation that required going beyond the Power Query Editor and writing some M code. This was a situation where I didn’t know the answer and was hoping ChatGPT would point me in the correct direction. ChatGPT offered this code:

let Source = Data, FilteredRows = Table. SelectRows(Source, each ([Item_Status] = [Item_ Type] and [Part_Number] = [Base_Part])) in Table.RemoveRows(Source, FilteredRows)

I was amazed initially, but the code didn’t work. Now I’m in trouble: I don’t know the M programming language well enough to solve my problem. I had to sheepishly go to my Power Query expert with the failed code.

He explained that Table.RemoveRows is a function in Power Query, but it can’t accept a table such as FilteredRows. He also pointed out that the code is written in a way to make it difficult to debug. He then kindly sent me the actual code to solve the problem.

LOOKS CAN BE DECEIVING

My early testing resulted in a 20% success rate. But it isn’t just the accuracy that’s a concern. On the surface, many of the answers look like they could work For that very reason, popular tech support forum stackoverflow.com has temporarily banned all answers from ChatGPT, noting that people who aren’t Excel experts were using ChatGPT to generate answers at a fast rate and posting them to the forum without testing. With novices quickly posting answer after answer, it put too much of a strain on the forum’s volunteer experts to check and verify that the answers wouldn’t work.

A new version of ChatGPT is released every few weeks. The technology will get better and more accurate as it learns. But for right now, it doesn’t seem safe enough to use for Excel work.

HAVING FUN WITH CHATGPT

As long as the accuracy of the answer doesn’t matter, ChatGPT can be fun. For example, I asked ChatGPT to write a limerick about pivot tables in Excel. It quickly came up with the following: A pivot table in Excel is grand, It can sort, count, and take a stand, With a flick of the wrist, Data organized and crisp, Making analysis a simple command! If you don’t mind the attempt to rhyme “wrist” with “crisp,” it might be the best pivot table limerick ever written. SF

Bill Jelen is the host of MrExcel.com and the author of 67 books about Excel. He helped create IMA’s Excel courses on data analytics (bit.ly/2Ru2nvY) and the IMA Excel 365: Tips in Ten series of microlearning courses (bit.ly/2qDKYXV). Send questions for future articles to IMA@MrExcel.com

ChatGPT can be fun to try if you already know how to test if the answer is correct.

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BLOCKCHAIN IMPLEMENTATION AND CYBERSECURITY

BY SEAN STEIN SMITH, DBA, CMA, CPA, CGMA, CFE

Digital security and control considerations must factor into blockchain adoption.

After a disastrous year for crypto, it might come as a surprise to accounting professionals that crypto adoption and blockchain implementation have continued virtually unabated. This is even taking into account the collapse of FTX, which exposed the company thought to be a model of good governance and management as a fraudulent enterprise. These scandals are just one small piece of the much larger blockchain and crypto asset story.

Be it the continued development of the Onyx blockchain by J.P. Morgan or the numerous other projects launched by Adobe, Allianz, Fidelity, Fujitsu, and others listed on the Forbes Blockchain 50 list (bit.ly/3JxWwCe), the blockchain and crypto space seems to be bifurcating. On the one hand, there are speculative investments and loosely regulated companies, like the aforementioned FTX. On the other, relatively staid projects are being developed and implemented by some of the largest and most successful companies in the world.

Accounting professionals are trusted with access to highly confidential, highly valuable, and highly sensitive information in virtually every company across nearly every industry, so the profession absolutely needs to contend with implications for continued blockchain adoption moving forward. Let’s take a look at a few items that management teams and management accountants need to discuss, analyze, and stresstest with regard to blockchain implementation.

BLOCKCHAIN DEVELOPMENT

One of the most important aspects of a blockchain implementation, or any technology project for that matter, is how the specific tool in question is being developed. Related questions

that have a direct impact on the control environment, and by extension the accounting function, include the following:

■ Is the blockchain itself being developed in-house, or is the company joining an existing enterprise option?

■ If developed internally, what is the vetting process to determine the technical and industry expertise of both the company and the team assigned to the development engagement?

■ What will the scope of the blockchain implementation be, i.e., just financial information or other types of data?

■ Are industry regulations around consumer privacy and the like being incorporated into the design and testing of the proposed blockchain?

SUCCESSION AND ACCESS PLANNING

As with any other technology solution, a company that’s implementing blockchain technology or joining an enterprise blockchain network must also have the appropriate processes in place to ensure continued access in the event of personnel change, entity changes, or other structural changes to the business. This consideration builds directly on the first point raised and should be discussed openly as a part of the development and implementation process. The following considerations should be factored into this analysis:

■ Which management team members have access to the underlying blockchain code?

■ How is this access monitored and controlled?

■ Does the company have a plan in place to update this access list if necessary?

■ How is the succession plan of access documented and reviewed?

■ Has all of this been analyzed by legal and risk management professionals?

FINANCIAL OR NONFINANCIAL?

While this seems simple on the surface, determining if the blockchain is financial or nonfinancial is imperative from a cybersecurity and implementation perspective. Financial blockchains, almost by default, create a bevy of cybersecurity concerns related to private key management; correctly reporting valuations and price volatility; and contending with the confusion that still abounds regarding the reporting, disclosure, and tax implications of crypto assets.

A nonfinancial blockchain generates its own unique cyber considerations. For example, how are the privacy rights of individuals squared with the immutable nature of virtually all blockchain records? Additionally, the prospect of multiple entities sharing information, even if on a private or enterprise blockchain, can cause regulators and insurance carriers to reassess the risk profile of the companies involved. These considerations also provide a quantifiable opportunity for management accounting professionals to play a leading role in the more strategic debates and discussions around blockchain implementation and its effects.

WORKFLOWS AND CYBER POLICY UPDATES

Internal controls and cybersecurity policies are going to have to be updated as a result of blockchain implementation at any organization. Even though blockchain has several fundamental traits that appeal to the business community—immutability being among the most commonly discussed—this doesn’t mean that organizations can place controls and cybersecurity as a lower priority after blockchain adoption.

Notably, the majority of hacks and breaches that have occurred in the blockchain sector, or via blockchain-based applications, haven’t been a result of failures of the technology. Rather, these failures and breaches have been, almost universally, the result of issues around how the data is imported, exported, or otherwise accessed and analyzed from the underlying blockchain.

Blockchain and crypto assets had a volatile 2022, with the failure of numerous organizations, large declines in prices, and a general souring of sentiment for the sector at large. That said, the adoption of blockchain-based applications and tools continues to accelerate, with almost every large institution (and many countries, according to the Central Bank Digital Currency Tracker, bit .ly/3RmO1vM) actively researching, investing, and implementing these solutions.

As with any new technology or technology system, accounting, control, and cybersecurity considerations need to be addressed before, during, and after the technology has been implemented. Issues like this present obstacles for management accountants and companies alike, but also create opportunities for motivated and proactive practitioners seeking to continuously elevate themselves and the management accounting function. Blockchain is here to stay and will create many more opportunities for accounting professionals than it will ever eliminate (see “Understanding Blockchain” on p. 38 for more); management accountants should take note. SF

Sean Stein Smith, DBA, CMA, CPA, CGMA, CFE, is an assistant professor at Lehman College (CUNY). He also is a member of IMA’s Bergen-Rockland-Meadowlands Chapter. You can reach him at drseansteinsmith@gmail.com

From Professional to Academic

BY WENHAO ZHU

W

HEN I WORKED AS A BUYER AT Texas Instruments (TI) in China in my 20s, I wanted to improve my business skills to boost my career development within the organization. At the time, I had already obtained my bachelor’s degree from Shanghai International Studies University, but I didn’t have any formal knowledge of business, accounting, or finance. Having worked for a few years as a professional, I quickly realized that this deficiency would prevent me from getting promoted within a multinational company like TI, which values talent with comprehensive business knowledge.

There were various options available for professionals in my country who face this kind of educational dilemma, such as an MBA degree from a major Chinese university or various accounting and finance certifications. Out of the many choices, I selected the CMA® (Certified Management Accountant) because it provided a very comprehensive system of knowledge in accounting, which is the language of business, as well as a fair amount of knowledge from other business disciplines, such as finance and economics. And as someone who worked for a multinational corporation, I felt the certification’s global perspective also made it a perfect choice to accelerate my career advancement.

There’s no such thing as beginner’s luck when learning accounting, and, for the first few months of my CMA studies, I barely made any progress. The difficulty started to ease after three months of hard work and dedication. I took Parts 1 and 2 of the CMA

exam in 2016 and 2017, respectively, and passed them both. The learning process was challenging, but the outcome was astonishingly rewarding. After I passed the exams, I felt like I knew so much more about the world of business, and I gained confidence in interacting with different stakeholders within my company.

My journey hadn’t ended, however. In the process of preparing for the CMA, I developed a strong interest in accounting and finance. The more I learned about these subjects, the more I realized how much I didn’t know. Eventually, I made a life-changing decision to pursue an advanced degree in accounting from a major U.S. university. In 2018, I left China and enrolled at the University of Illinois for my master’s degree. I spent a wonderful year in Illinois and achieved considerable academic success. Compared to my international classmates who received their business degrees in their mother countries, I felt like I had an advantage in the program because my preparation for the CMA had already covered half of the material we studied.

Through my studies at the University of Illinois, I also developed an interest in accounting research. Now I’m a Ph.D. student at Virginia Commonwealth University. I’m interested in managerial accounting research that utilizes experimental techniques to study people’s decision-making processes.

Though my CMA is pending until I gain sufficient work experience, my journey with the CMA and IMA® continues. IMA assists academia in conducting a variety of research projects that involve practicing accountants as participating subjects in these experiments. And I plan to introduce the CMA to my future students. The certification has brought me where I am today, and I’m glad that I chose to pursue it. SF

Wenhao Zhu is a doctoral student in accounting at Virginia Commonwealth University. He’s also a member of IMA’s Richmond Chapter. You can reach him at ezhuw3@vcu .edu

«The learning process was challenging, BUT THE OUTCOME WAS REWARDING.»

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