Introducing Benchmarking for Small Companies

In response, The Hackett Group has developed for AICPA members a Small Company Benchmark study to help smaller organizations gain an understanding of the best practices of world-class organizations and see how they measure up. "This new benchmark study makes best practices from the more than 1,050 companies participating in our benchmark studies available for the first time to smaller companies," Gattenio said. "Its our way of helping the AICPA respond to the needs of its membership for companies of all sizes."

"The Small Company Benchmark tool is available to AICPA members at a cost of $750 each," said Hadassah Baum, AICPA technical manager and small company liaison. Any company with revenues up to $100 million is eligible to participate with no minimum revenue required. The $100 million cap will enable other eligible small companies to participate who may not have benchmarked in the past because of the complexity of the data collection process.

Companies taking part in the study will be required to participate in a kickoff conference call before receiving their data collection tool. The tool is an easy-to-use, automated survey that is completed by seeking information from budget reports, organization charts, transaction records and management interviews. After the information has been collected, the data will be analyzed and a customized report prepared comparing the company to average and top performers in the study. Benchmark results will be distributed to participants in advance of group results discussion meetings, with the 1998 schedule now being finalized. In addition to discussing the implications of the data, the best practices of leading-edge companies will be shared, as well as how they successfully implemented a change program. The entire benchmarking process will take about eight weeks to complete.

The new study was developed by considering how small companies are organized and how their staffs and work flows are structured. For example, the customer interface is probably handled by one person, so the new benchmark is designed to address processes at a higher level, rather than broken down into small component parts.

The whole thrust of benchmarking is to measure what your company is doing, compare it to other companies and then steal their learning curves. Most best practices — such as streamlining and simplifying processes and procedures, reducing transaction volumes with tools such as procurement cards and direct deposit and changing materiality policies —work for companies of all sizes.

Future growth is another reason for the importance of benchmarking. Many small companies are growing very quickly. If they learn and implement best practices today, theyll be able to absorb greater growth without adding people as they expand. Also, its easier to put these practices into place before growth takes place, rather than after.

Be prepared for the future. Sign up now for a multi-track program offering sessions on the auditor as consultant, innovative auditing techniques, auditing super strength systems and business issues.

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Benefits of attending the AICPA/IIA NATIONAL VALUE-ADDED AUDITING SERVICES CONFERENCE

• Powerhouse Opener: Anthony Ridley on: Reshaping and Redirecting Strategies for Value-Added Auditing.
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Written to help companies wanting to develop an internal code of ethics, Issues Paper 13, published by The Society of Management Accountants of Canada:

• Summarizes the approach, content, structure and effectiveness of 200 corporate codes.
• Highlights points that have come up repeatedly and should be considered.
• Identifies 45 issues commonly addressed in corporate codes and organizes them by stakeholder group.

Theoretical Foundation Approach. The guiding principle approach relies very much on the employees self control, moral character, and commitment to the organization. The act and disclose approach says, in effect, Use your best judgment, but let us know what you are doing." Seek advice" statements rely more on externally imposed controls. Rules, in this framework, focus on specific behavior that is required or prohibited.

Types of Codes. There are three basic types of codes, differentiated by the dominant source of control.

• A code of ethics states the values and principles that define the purpose of the company.
• A code of practice interprets and illustrates corporate values and principles, and is addressed to the employee as individual decision maker.
• A code of conduct is a statement of rules: This is what you must (or must not) do. In practice, corporate codes tend to include elements of all three.

Code Content
A code that is consistent in purpose, approach and content with the organizations values, culture and business objectives is more likely to be seen as credible than one that does not ring true with those who are asked to adopt it.

These elements have been found in the codes that were analyzed and are essential for them to be effective:

Introductory Letter. An introductory letter from the CEO endorsing the code unambiguously and conveying top managements support of it is recommended.

"Company-centeredness." Codes are often overly "company-centered" with an emphasis on responsibilities owed to the company. Attention should be paid to responsibilities owed by the company to other stakeholders.

Clarity. Credibility and commitment may be enhanced when important issues are given adequate treatment and when clear, precise definitions of key concepts are provided.

The Law. Codes almost always contain a section referring to adherence to the letter and spirit of laws and regulations. Accompanying this section could also be the inclusion of a duty to act honestly, fairly, and with integrity, guiding principles that are not necessarily captured in the requirement to abide by the letter and spirit of the law.

Discrimination. Discrimination and harassment in employment are ethical issues that often tend to be approached in an excessively legal fashion that does not promote the desired behavior. The preferred approach offers credible reasons why such desired conduct should be practiced.

Conflicts of Interest. Conflicts of interest should be defined and the focus should be on educating and communicating how a conflict can occur.

Compliance Provisions. A well-drafted and effective code simplifies the process of compliance.

Observations on Development and Implementation Processes Structure and Content of the Code. Many codes seem to be based on lists of issues that have developed over time rather than on a meaningful structure.

Ethical and Other Values. Most codes refer to the values and principles of the company, but they do not articulate the values or clarify how the code is consistent with these values and principles.

How Codes Are Developed. Codes usually have their organizational Home in the legal department, the human resources department, or the public affairs department. When simply asked if the code was part of the culture of the organization, all the companies who possessed codes responded affirmatively. When prompted further, however, only a handful of companies were able to say precisely how the code was a living and practiced document.

Promulgation and Access. Most companies interviewed have issued their code to all of their employees at some point over the last three years. Annual compliance sign-offs are also common for most of the companies.

Administration. The study indicated that the code is most frequently administered by the legal departments of corporations. Human resource departments also oversee and enforce them.

Subjectivity in responding to breaches of the code was predictable, as very few companies had written and formalized procedures for dealing with breaches. Disclosure and reporting procedures were not linked to the nature of the breach, nor were definite sanctions associated with particular breaches.

Organizational Advantages. Of the companies interviewed, none identified organizational advantages of a code. Put simply, codes may not contribute directly to the bottom line of the company.

Where to Go From Here? Codes may be of great assistance to management accountants in discharging their responsibilities of controlling the corporation, ensuring reliable financial reporting systems, safeguarding assets, identifying and mitigating against known risks, and providing the management control systems to assist in corporate decision-making.

Books to Help You

Create a new, forward-thinking corporate financial framework that stimulates business performance! This reference takes you, step-by-step, through the entire reengineering process with current, comprehensive information. Youll understand all your corporate financial management options, and see how to put them into action. Learn how to link traditional hands-on accounting with the new management tools to result in corporate financial management that runs at todays accelerated pace of business, and increases shareholder wealth.
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Target Costing and Value Engineering: Strategies in Confrontational Cost Management
by Robin Cooper, Ph.D. and Regina Slagmulder, Ph.D.

Get the bottom-line results you want with target costing — produce quality products your customers demand at a cost that gives you profits you want. Remember, as much as 90-95% of a products costs are designed inthey cannot be avoided without redesigning. With the right combination of target costing and value engineering, you can ensure that the products launched by your company are successful, creating added value for your company as well as your customers.
PRODUCT NO. 090431CLB11
$45 member/ $50 non-member

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