When you hear the word ‘digitalization’, you probably think of AI, virtual reality and bitcoins. However, this shift is happening in all spheres, including those presumably less directly related with the digital transformation. Professors Florence Cavélius, Christoph Endenich, and Adrian Zicari, ESSEC Business School, explain why it would be a mistake to underestimate the role of management controllers in a corporate world of tomorrow.

Bystanders or Change Makers? Rethinking the role of management controllers in the digital age, by CoBS Editor Olga Panashchenko. Related research: Cavelius, F./Endenich, C./Zicari, A. (2020): Back to the Basics or Ready for Take-off? The Tensions on the Role of Management Controllers in the Digital Age, in: Comptabilité – Contrôle – Audit, Vol. 26, No. 2, pp. 89-123.

Brave New World

Have you ever thought about how many WhatsApp messages you send per day? Have you ever counted how many Instagram posts you scroll or how many Google searches you make? 

Nowadays, unless you are an FBI agent, you are highly unlikely to succeed in keeping your data off the worldwide web. Your digital footprint (search history, connection statistics, social media activity…) can tell corporations all they want to know about your habits – even if you regularly decline cookies or use VPN, you can only partially cover your tracks.

In the era of global digitalization, Big Data has become the new gold, and hunting for Big Data is a new gold rush for businesses. Increasing numbers of companies are transforming their business models – and also face the challenge of transforming management control systems. Digital transformation means a new approach towards the market and the consumer, but it should be supported internally – through a new approach to management control. 

Full steam ahead

Historically, management controllers have mostly been dealing with budgeting and reporting. In a public perception, this has created an image of a ‘typical’ management controller: a passive bean counter married to Excel. Although it is true that management controlling still involves a lot of so-called ‘dirty work’ (checking data consistency, eliminating errors, etc.) – ‘boring’ accounting is a thing of the past. Information that arises today from Big Data is mainly non-accounting information: companies measure client satisfaction through voice and/or body language, track their clients’ holiday destinations, analyze thousands of ratings and reviews in apps and social media. All this data can be used for building a competitive offer, but processing it with Excel will definitely make it crash. New business realities call for new tools. 

The Five V’s-concept – Volume, Velocity, Variety, Veracity and Value – gives an idea of the different dimensions through which people approach Big Data. It is not just about big amounts of information, but about big amounts of incoherent information, coming from various sources, some of them less trustworthy than others. Before drawing any conclusions, it is necessary to clean things up – and this is where a controller has a card to play. 

Management controllers, once they have mastered Big Data and new tools, can become actively involved in the digital transformation of their companies, and can add value to the emerging mass of data. The role of controllers evolves from being ‘technicians’, i.e., people in charge of reporting, to ‘business partners’ – advisors with a power to influence management decisions. In the most digitalized companies, management controllers are at the heart of information exchange, providing an internal backbone for a long-term transformational shift.

Front or back wagon? 

However, while some management controllers take up more consulting and ad-hoc missions, others still remain putting debit and credit together in a balance sheet. The reason why transformation in management control practices do not occur everywhere at the same pace is that companies have different maturity levels in leveraging Big Data. In a recent empirical study, ESSEC Professors Cavélius, Endenich and Zicari identify three major groups of companies comprising firms with low-, middle- and high levels of maturity. Depending on the type, management controllers either play a role of ‘technician’, similar to traditional accountants, or make a full way to an ‘augmented business partner’. 

• Low Maturity: Companies that belong to the first group are still working in a very traditional way with limited or no engagement in digital issues. This does not necessarily mean that managers are behaving like couch potatoes, but this might as well be attributed to external factors. For instance, in the pharmaceutical sector margins are regularly comfortable while the current regulation prevents digital evolution in advertising. Besides, some companies have business models that can still run well without big data. As a result, management control systems remain rather conventional, with people still snowed under in Excel tables. 
• Middle Maturity: In the second group, companies have moved a step upward, but have not yet leveraged the full potential of digitization. They have stepped beyond Excel and started to collect huge volumes of data, thus addressing the first three Vs of Big Data: volume, velocity and variety. However, their challenge is the fourth V: data veracity. Facing huge amounts of information, these companies are still in search of an optimal way to sieve the available data so that it can serve a reliable basis for future decisions. Imagine a minor gap in figures between salespeople and controllers: the latter will have to spend hours on the data verification. Number crunching is not sufficient to generate value from the new data (the fifth V), so the work remains close to a traditional, ‘technical’ one.  
• High Maturity: Companies in this group have succeeded in fully organizing Big Data collection, structuring it with powerful tools, in a reliable way. Switching from digitization to digital transformation, the companies of this group are, at this stage, implementing customer-centric business models while introducing new products and new services. They now sell clicks. These companies have successfully reached the Fifth V of Big Data: they use it to support decision making processes and ultimately, to increase business value. Due to streamlining routine tasks management controllers have more time for ad-hoc and advisory activities. Instead of struggling with a yearly budget, management controllers get systematically updated automated rolling forecasts. Those are much more responsive to an increasingly volatile business environment, which can help making a controller an augmented business partner. 

Always forward

Logically, the challenge is particularly high in the early stages of the digital transformation. However, the implementation of the latest information technology does not necessarily lead to becoming a business partner. Despite the fact that many controllers give positive feedback on the advisory part of their job, not all of them have the ability to go through the digitalization shift and to assume a completely new role on a corporate scene. They risk being taken to the far corner rather than being positioned as owners of these new tools. 

As such, by leveraging opportunities which arise from the digital age, management controllers can increase their influence on managerial decision-making and become ‘augmented business partners’. However, in this sphere a basic principle makes no exception: no pain, no gain. Whenever control becomes more dispersed within companies through digital tools, controllers need to prepare themselves for the challenge and ensure that they act as proactive owners of the emerging ‘data treasure’. 

Useful links:

• Link up with Florence Cavélius and Adrian Zicari on LinkedIn
• Read a related article: Ethics in Control Systems: Let’s go beyond simple compliance!
• Download the latest CoBS publication Responsible Finance & Accounting
• Discover and study at ESSEC Business School, France–Singapore–Morocco.

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The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.  

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