CONTROLLER LEADERSHIP

A BEAN COUNTER AND BUSINESS PARTNER CASE STUDY

University of Groningen Faculty of Economics and Business

MSc. BA: Organizational Management & Control

The purpose of this paper is to explore the relationship, if any, between controller’s role within the organization and the associated leadership style, a phenomenon not studied until today. Comprehensive controller role literature and transactional and transformational leadership school are used as a starting point for research. Using interviews from a multiple-case study, two controllers were investigated within two different Dutch SME’s, allowing for a bean counter controller and a business partner controller observation in their natural setting. The findings imply that that the presence of controller leadership towards the business is dependent on the organization’s need for controller involvement. Transformational and transactional leadership school can therefore, in a business-wide context, be only applied to business partner-type controllers. Incorporating leadership not directed towards operational managers, bean counters too display leadership. Yet, the two roles cannot be associated with a unique leadership style. Leadership characteristics induced by personal background, however, may be developed or enforced by the enactment of a role.

KEYWORDS: Control, Business Partner Controller, Bean Counter Controller, Transformational Leadership,

PREFACE

The thesis that lies in front of you is the final product of my Master’s program Business Administration: Organizational Management & Control, at the University of Groningen. Challenged by the opportunity to study controllers and their activities, the center of discussion during my studies, in practice, I started this project five months ago. The study has the objective of providing insights into controller’s leadership styles. This case study investigation has been an educational journey during which I gained much knowledge about conducting this type of research, about controller orientations within organizations and about leadership in this context.

This was possible because of the help and support provided by several people, to whom I owe a great deal of thanks. My university supervisor, Wouter Moossdorff, provided me with quick, concise feedback and useful comments on my work during the research process, which challenged me to get the most out of the study. In addition, this research would not have been possible without Erik Schat, whose research suggestions during the first research phase motivated me for the field of study and who introduced me to the research sites. Finally, I would like to thank RSM Niehe Lancée Kooij and Pluripharm Groep B.V. for allowing me an in-depth look inside their company walls and for providing with me with an opportunity to conduct case study research. Thank you, I could not have produced this thesis without your cooperation.

Mariëtte Rieter

TABLE OF CONTENTS

Table of Contents ... 3

1. Introduction ... 4

2. Literature Review ... 6

2.1. The Role of the Controller ... 6

2.2. Leadership Styles ... 9

2.3. Leadership Style and the Controller ... 10

3. Methodology ... 12

3.1. Research Method ... 12

3.2. Case selection process ... 13

3.3. Case Settings ... 13

3.4. Data Collection ... 14

4. Case Study Results ... 16

4.1. RSMNLK ... 16

4.2. Pluripharm ... 19

5. Discussion and analysis ... 22

1. INTRODUCTION

In the light of current globalization and increasing environmental uncertainty, much of the controller literature has elaborated on the role of the controller within the organization (e.g. Hopper, 1980; Sathe, 1983; Granlund & Lukka, 1998; Burns & Baldvinsdottir, 2005; Järvenpää, 2007; Byrne & Pierce, 2007; De Loo, Verstegen & Swagerman, 2011; Lambert & Sponem, 2012). Antecedents, characteristics and consequences of the role of the controller have received much attention in academics (Hopper, 1980; Sathe, 1983; Russell, Siegel & Kulesza, 1999; Byrne & Pierce, 2007; De Loo et al., 2011). Desired skills and activities performed in certain roles and their related consequences for organizational performance, information impacts and role interfaces are discussed in detail.

Similarly, several authors have distinguished specific roles of controllers, such as the scorekeeper, also known as bean counter or corporate policeman, and the decision-maker, also known as the business partner (e.g. Simon, Guetzkow, Kozmetsky & Tyndall, 1954; Sathe, 1983; Lambert & Sponem, 2012). Historically, the controller typically assumed a bean counter role; maintaining first and foremost the scorekeeping accounting function, but in the past decades there appears to be a shift in focus, towards this role of business partner; directed at problem-solving and decision-making (Järvenpää, 2007; Lambert & Sponem, 2012). Within each role, emphasis lies on different types of activities. Sathe (1983) found bean counters, which he calls independent controllers, to focus on financial reporting and internal control activities, such as the assurance of financial compliance and the control of internal policy and procedures. Business partners, whom he calls involved controllers, emphasize management-service responsibilities such as the planning and budgeting process and decisions concerning pricing, advertising, distribution, new products and acquisitions. Consequently, each role and emphasis asks for specific behaviors and activities (Sathe, 1983). Yet, how controllers within each of these roles behave and how they interact with their organizational followers remains entirely overlooked by current literature.

accounting students develop leadership skills, such as the abilities to communicate, influence others, and manage change, this can only be considered a step in the right direction. Further research on controller’s leadership skills is obviously required.

In the last decades various schools of leadership theory emerged (Cannella & Monroe, 1997; Turner & Müller, 2005), such as the personality trait school, contingency school, strategic leadership school and transformational leadership school. Transformational leadership theory, as first introduced by Burns (1978) and Bass (1985, 1990a, 1997) has proven particularly useful to describe how top manager’s transformation of followers, for a large account, determines organizational performance. Where transactional leaders motivate employees by transacting promises of reward and punishment for good or poor performance, thereby enforcing organizational structure and strategy, transformational leaders broaden and elevate the interests of their followers by generating awareness and acceptance of the purpose and mission of the group and stimulate to seek beyond their self-interest for the benefit of the group (Burns, 1978).

Nevertheless, much of the leadership theory today focuses specifically on CEO and top management level employees (Cannella & Monroe, 1997; Waldman, Ramírez, House, & Puranam, 2001; Vera & Crossan, 2003) or project managers (Turner & Müller, 2005), and their significant effects on organizational outcomes. CEO leadership, for instance, appears to be very influential to performance (Waldman, Ramírez, House, & Puranam, 2001). However, transformational and transactional leadership within a controller context has not received much attention until today.

It is relevant for business practice: firms may adapt their recruitment policy to find the right controller for the organizational controlling role to fulfill.

Altogether, the above gives rise to the following research question:

How can the relationship, if any, between the controller’s role and the controller’s leadership style be described?

In the sections that follow, this paper investigates the research question by studying the relationship between the concepts of controller role and leadership style. Thereby, this paper contributes to both controller role literature and leadership theory. Using the bean counter and business partner distinctions and Burns’ (1978) and Bass’ (1985) transformational and transactional leadership theory, we use a multiple-case study of different controller settings to answer our research question.

examined. Furthermore, empirical results will be analyzed and discussed. Finally, conclusions are drawn and recommendations for further research will be proposed.

2. LITERATURE REVIEW

The first who explored the concept of controller roles were Simon et al. (1954), who proposed three different controller responsibilities; that of scorekeeper, attention-director, and problem-solver. Whereas the first two are associated with assuring financial compliance and internal control issues, the last focuses on providing relevant information for management decision-making and even being involved in business decisions themselves. Other authors have arrived at similar basic responsibilities (i.e. Sathe, 1983; Jablonsky & Barsky, 2000; De Loo et al., 2011). For example, Sathe (1983) mentions two responsibilities of the controller: i) to help the management team in the business decision-making process, commonly referred to as the management-service responsibility; and ii) to insure that reported financial information, pertaining to the relevant organizational unit, is accurate and that internal control practices conform to corporate policy and procedures - in short the financial reporting and internal control responsibilities. A focus mainly on the management-service responsibility results in the involved controller whereas a focus on the financial reporting and internal control responsibilities results in the independent controller. In short, management faces a trade-off between involvement and independence and must decide which type is best suited for its own situation.

Although the terms used differ from study to study, role types distinguished by literature can be traced back to two clear and distinctive ones: the bean counter and the business partner. Table 1 provides a short overview of the different terms used in literature. In the following section, we will elaborate on each role. Each role type differs in terms of operating philosophy (mindset), influence, involvement, activities and responsibilities. Although a controller can clearly be assigned one role, these roles represent two sides of a spectrum (Granlund & Lukka, 1998).

“Bean Counter” “Business Partner”

Sathe (1983) Independent Controller Involved Controller

Jablonsky & Barksy (2000)

Corporate Policeman Business Advocate

Byrne & Pierce (2007) Bean Counter / Bookkeeper Business Partner Lambert & Sponem

(2012)

Discrete role

Safeguard role

2.1.1. The Bean Counter

The bean counter controller is defined in literature as one that “appears as a mere information collector and processor who emphasizes the past, clinging to an amount of formality. He or she is limited in cross-functional appreciation and his/her responsibilities are rather narrow outside the accounting realm. He or she is not expected to have a deeper knowledge of the business itself” (Granlund & Lukka, 1997). This type controller provides oversight and commentary, maintaining a functional perspective of the business (Jablonsky & Barsky, 2000). The bean counter is valued for retaining objectivity and independence from affiliated management for the purpose of financial reporting and internal control responsibilities (Sathe, 1983). He or she provides information to operational managers, plans and analyses the business, and is focused on the past (Lukka & Granlund, 1998; Jablonsky & Barsky, 2000). The major influence of the bean counter takes place in serving senior line managers. His or her involvement, however limited, is mostly associated with technical financial support, independent reviews and internal financial expertise. Specific knowledge of the business is not expected, nor is the ability to analyze and draw conclusions upon market data. Consequently, the bean counter’s main activities incorporate monitoring the progress against the budget and the subsequent budget and variance reporting, cost control and preparing accountability reports. Formal reports function as the main channel of communication.

Benefits of this bean counter role are comprised of the increased focus on financial reporting accuracy and integrity of internal control (Sathe, 1983). Even though the internal audit staff of an organization might be strong and committed, the local controller has the depth of knowledge about local systems, people, and practices to be able to detect subtle misrepresentations or inadequacies. However, a clear risk involves the danger of the controller’s reputation of ‘corporate spy’, resulting in distrust of and increased distance between operational managers and controllers (Sathe, 1983). Moreover, bean counters can even be regarded as harmful to the organization, because of their short-termism and their single-minded concentration on costs (Friedman & Lyne, 2001). Nevertheless, an important thing to note is that these traditional bean counter activities, in a contemporary setting, cannot be executed with a pure traditional bean-counting mentality (Vaivio & Kokko, 2006). The typical analytical nature of the bean counter function requires and builds on skills related to socially scattered pieces of information and judgment and market observations in order to process complex quantitative data. These skills help to guide the controller to question, combine, connect, marginalize and to investigate deeper into their data.

2.1.2. The Business Partner

decision-making and control of companies”, where ability refers to the more relevant accounting systems, personal competences and overall business knowledge of the accounting function (Järvenpää, 2007). Willingness in this context refers to the personal and organizational desire to accomplish this goal and to take part in the management of business. In this role, he or she is required to be actively involved in division business decision-making (Sathe, 1983). He or she is expected to provide financial discipline for the business operations, maintain cross-functional links with other staff support functions and integrate business operations throughout the firm (Jablonsky & Barsky, 2000). Additionally, the business partner operates from a management responsibility. This controller is involved in the business by means of models to support business operations and dispersed financial expertise, helping to meet financial targets and held mutually accountable for business results. His or her major influence regards the provision of financial information and advice to operational managers, thereby enacting financial leadership and serving the business teams. Improving bottom line cost, profitability reporting, overseeing the budget process and preparing business models comprise important activities (Jablonsky & Barsky, 2000).

Benefits of this business partner role include the contributions resulting from operating expenses control and capital expenses control and increased profits resulting from firm strategies that better incorporate financial scenario analyses (Sathe, 1983). Solely providing certain financial reports and analysis does not naturally initiate correct implementation by operational managers. Business partner controllers will fulfill the bridge between information and implementation. However, the organizational downside of this involvement may inhibit stifled and uncreative operational management. In addition, increased empowerment of financial functions with operational business may position the financial agenda above that of creative management.

Antecedents

Secondly, triggers from within the organization are extracted, such as firm size, firm financial status, management’s expectations, managerial style, discretion, corporate culture and dominant institutional logic. In addition, the company’s concern over the accuracy of financial reporting, its confidence in the integrity and good judgments of its managers and the financial expertise of other top-level managers are influential (Sathe, 1983).

Thirdly, person-related triggers such as personal characteristics (including communication skills) and years of experience, can be classified and the capacity for controllers to shape their own roles, “how they interpret their role” is associated with their attitudes, personalities and initiative (Byrne & Pierce, 2007, pp 479).

2.2. Leadership Styles

Like stated before, the concepts of transactional and transformational leadership are important for the purposes of this paper. Transformational leadership theory, as first developed by Burns (1978), mentions that “performance is, in part, determined by the (top) manager’s transformation of followers” (Cannella & Monroe, 1997). On the one hand, transactional leadership emphasizes the transaction that takes place between leaders and followers, involving the distribution of rewards and punishment according to performance (Bass, 1985). Transactional leaders exchange rewards for efforts, emphasize accomplishments, look for deviations of rules and standards and even avoid making decisions. Here, explicit agreements are set regarding efforts and rewards and constructive feedback is provided to keep everyone on task (Bass & Avolio, 1993). On the other hand, a transformational leader is someone who “raises his awareness about issues of consequence, shifts followers to higher-level needs, influences them to transcend their own self-interests for the good of the group or organization, and to work harder than they originally expect they would” (Bass, 1985, pp. 29). Transformational leaders provide mission, gain respect and trust, express important purposes in simple ways, promote intelligence and coach followers (Bass, 1990a).

more satisfied with the organization’s performance appraisal system and more likely to resemble transformational leadership characteristics when moving up in the organization. Later studies by Bass (1995, 1997) and Graen & Uhl-Bien (1991) urge a hierarchy of correlations between the various leadership factors and effectiveness and satisfaction outcomes. Measures of transformational leadership add to measures of transactional leadership in predicting effectiveness and employee satisfaction outcomes, but not vice versa.

Despite Bass’ arguments for superiority of a transformational leadership style, this style is not a universal remedy. In many situations transformational styles are inappropriate and transactional processes are more obvious, for instance in cases where managers control stable markets, environments, workforce and technology (Bass, 1990a). However, when facing a turbulent and highly dynamic marketplace, when technology requirements change briskly, learning needs are high and product life cycles are short, transformational leadership may be vital throughout the organization (Bass, 1990a; Coad, 1999).

2.3. Leadership Style and the Controller

As briefly discussed in the previous section, bean counters and business partners differ among others in their communication focus and skills, and their internal finance, number focus. Further investigating transformational and transactional leadership attributes and controller roles induces the generation of expectations regarding leadership. A bean counter’s personal communication is typically limited to the accounting function and communication outside of the accounting function concentrates on written, formal reports (Granlund & Lukka, 1998). Therefore, bean counters are not expected to possess high communication skills. Additionally, a typical bean counter is methodical, conservative and primarily engaged with precision and form. “Counting beans” is a mechanical process dedicated to living within the budget, and separated from the business (Jablonsky & Barsky, 2000; Vaivio & Kokko, 2006). As a consequence of this strong internal and budget focus, bean counters are more focused “making the numbers add up”, pursuing these performance standards, and may pass on to asking the same of their followers: promise them rewards or punishments in exchange for good or bad performance. Top management with an initial1 leadership style prefers using the firm’s performance measurement systems for promotion and compensation decisions as they favor formal structures and processes (Abernethy, Bouwens & van Lent, 2010). The above gives rise to the following proposition:

Proposition I: A bean counter controller is associated with a transactional leadership style On the contrary, business partners are not only required to have financial expertise, but also have “a good understanding of the firm’s business, to have fluent communication skills and an ability to run change projects.” Consequently, they are more likely to have advanced communication skills than do bean counters. Moreover, business partners with this company-wide perspective are likely to look beyond meeting their individual (division) performance and transform others to pursue organizational interests than do bean counters. Business partners help to set and meet the financial objectives of the business, provide leadership and service to the business units, are close to the business, serve the business teams, and are held mutually accountable for the financial performance of the business (Jablonsky & Barsky, 2000). They focus on both finances and the business and associated operations. Top management with a consideration2 _{leadership style uses the firm’s planning and control systems as an interactive} communication device to informally reveal its preferences to subordinates and to obtain input from subordinates. In the pursuit of successful transformation of followers, communication skills are highly useful to facilitate awareness and acceptance of the purposes and mission of the

1

Initial leadership style as mentioned by Abernethy et al. (2010) is comparable to a transactional leadership style.

2

organization and to move followers to transcend their own self-interests for the good of the organization (Bass, 1990a, 1997).

The above reasoning leads to the following proposition:

Proposition II: A business partner controller is associated with a transformational leadership style.

In this chapter, an overview of controller roles and responsibilities to date was provided. A different focus on each of those responsibilities determines the involvement and independence in a controller’s role. In the determination of this role, triggers outside the organization, inside the organization, and person-related triggers play parts. Concepts of transformational and transactional leadership were additionally clarified and the applicability on controlling was highlighted. Finally, expectations were created with respect to the research question.

3. METHODOLOGY

The following chapter elaborates on the research methodology used in this study. First, the research method is discussed, then the case selection process is described and selected case sites are introduced. Finally, data collection methods are presented.

3.1. Research Method

like to explore it within a specific context; and this method makes it possible to observe, analyze and compare different types of controllers.

3.2. Case selection process

Case selection was based on preliminary interviews, resulting in a bean counter case and a business partner case in order to draw a complete image of leadership styles within different controller settings. Subsequently, interviews were set up within both firms, which will be discussed more in-depth in section 3.4. In order to filter out the detailed interactions between the two concepts of this study, impacts of variables already established by literature such as organizational size and level of employment are not researched in detail and kept to a minimum level. For this reason, both case study firms are SMEs employing just over 200 employees within the North-Holland province of the Netherlands, and both controllers are the highest-level controllers employed within their company. First, studying two firms of comparable size results in comparable influence of person-related triggers to the controller’s role: controllers within large firms are less capable to define their own role than controllers within SMEs. Second, similar firm size results in a comparable size of the accounting function (Byrne & Pierce, 2007).

3.3. Case Settings

The following two firms were finally selected for investigation of their controllers’ role and the leadership styles they display.

RSM Niehe Lancée Kooij Holding N.V.

The first company, RSM Niehe Lancée Kooij Holding N.V. (RSMNLK) is a Dutch accountants and tax advisory firm, offering specialist financial and fiscal-juridical services. It is the 23rd _{largest accounting firm in the Netherlands. RSMNLK knows six operating companies:} Accountancy, Tax, Business Valuations, Wage Advisory, Risk Advisory Services, International Services and Administration Consultancy. At the four branch offices all operating companies are at work, with staff functions (personnel, administration, system administration, and marketing) located at the Haarlem office. Employing around 225 people, RSMNLK is owned by 14 partners who are responsible for all strategic decisions. Operations focus mainly on Dutch small and medium-sized companies. Since 2011, RSMNLK is part of the RSM network, with presence in over 100 countries generating $4 billion over 2012. Organizational structure is displayed in the organizational chart (Appendix A).

Pluripharm Groep B.V.

and started cooperative association PACT3 _{and service divisions Pluripack}4 _{and Pluriplus}5_. Operating from four branches located throughout the country, including corporate headquarters in Alkmaar, Pluripharm currently employs over 200 people. Daily management is executed by six directors: a General Manager, Director Purchasing & Commerce, Director Health Care, Director Phardis, Director Planning & Control and a Financial Director. The Commercial Director and Financial Director are also shareholders of Pluripharm, together with a third shareholder not employed by the company. With 2012 revenues of €200 million, it is the smallest player in the Dutch market. Yet, considering revenues of only €50 million in 2008, the company is growing at fast pace. Increased pressures from competitors and health insurance companies in the market contribute to market dynamics. In Appendix B Pluripharm’s organizational chart is depicted.

3.4. Data Collection

Interviews

Within these firms, semi-structured in-depth interviews accounted for the majority of the data collection. The advantage of interviews is their provision of a flexible method, allowing for examination of the answers of respondents to understand the underlying motives and perceptions of people (Emans, 2004). More specific, in-depth interviews are appropriate for studies in the explorative fashion. The semi-structured nature of our interviews on the one hand provides structure, enabling comparability of both cases and mitigating reliability issues. It allowed the respondents to elaborate on issues of importance in specific cases. On the other hand, as this research studies human behavior, interviews might reflect a subjective, colored perception of reality. In addition, in-depth interviews can be biased by socially desirable answers, resulting in overly positive images of reality. By questioning both the controller and multiple colleagues this respondent bias is reduced.

Interviews conducted lasted between 30 and 60 minutes each. The questions were largely based on Bass’ (1985, 1990a, 1995, 1997) original MLQ and existing (closed-end) survey questions from literature (Coad, 1999; Jablonsky & Barsky, 2000; Turner & Müller, 2005). Questions asked regarded the controller’s role within the company and his or her leadership style. The MLQ contains six factors extracted by principal component analysis, which in concert determine transformational and transactional leadership styles: Charisma/inspiration states that a leader provides followers with a clear sense of purpose, functions as a role model for ethical

3

A pharmacists collective that helps pharmacists mediating in concluding contracts with health insurance companies. 170 pharmacies currently participate.

4

The full-automatic central filling, baxtering (the packaging of medication up to the intake time of the patient) and warehousing of medicines.

5

behavior and creates a feeling of identification with the leader and his or her vision. Individualized consideration emphasizes the understanding of the individual needs of each follower and attempts to stimulate their growth by acting as coach or mentor. Intellectual stimulation refers to a leader that makes followers question the existing ways of problem solving and encourages the development of methods to improve these ways. Contingent reward is a factor that includes a leader that sets performance targets to be achieved and the resulting rewards to be obtained. Management-by-exception concerns a focus on whether performance targets are met, together with the correct execution of tasks, and making alterations where problems arise that may bring current levels of performance into jeopardy. Finally, laissez-faire describes a leader that only reacts to take punitive action in case problems have taken seriously dangerous forms, if any action is undertaken at all. Appendix C provides an overview of the interview questions asked during the site visits.

To control for personal bias, in addition to controllers themselves their interaction partners were interviewed. Eight in-depth interviews were conducted in the last week of October and the first week of November 2013: the highest-level controller within each organization and his or her interaction partners. Table 2 provides an overview of the selected respondents.

RSM Niehe Lancée Kooij Pluripharm

Controller : Head of Administration & Control Controller: Director Planning & Control

Partner / Treasury manager General Manager

Administrative Employee 1 Financial Director Administrative Employee 2

Administrative Employee 3

TABLE 2: SELECTED CASE RESPONDENTS

The aforementioned interviews were recorded with the consent of the interviewees. In this way, all information could be captured and taken into account when performing the result analysis. Interview output was transcribed and consequently analyzed, using a list of key concepts established from literature (as noted in Appendix D). Firm documents served as an additional source of data: the company websites offered general company and sector information, and organizational charts provided comprehensive overviews on organizational hierarchies. In the following sections, the case companies receive further introduction and research findings are presented and analyzed.

companies were briefly introduced, interviews were presented as the main method of data collection.

4. CASE STUDY RESULTS

The following chapter presents the results of the case studies and describes the role of the controller within each case company and his or her personal leadership style. First, the specific role of RSMNLK’s controller and his leadership style will be examined. Second, the role of Pluripharm’s controller and her associated leadership style of the controller are described. Selected quotes from the interviews are additionally used to clarify results obtained.

4.1. RSMNLK

The controller’s role and function

The controller at RSMNLK, currently in his 50s, initiated a career in the field of accountancy. During his accountancy studies, he started at RSMNLK as an assistant-accountant, where he worked for several years, attracted by the opportunity to peek into the financial kitchen of many types of business. A growing aversion of continuous visits to other companies and the failure to complete the chartered accountant-program led him to accept a job at RSMNLK’s Trust department. After the controller’s position opened up, he was asked to fill this vacancy, now ten years ago. Within his current job, he gains energy firstly from being the person that is the first and best one to know about the firm’s financial situation, and secondly from “solving the puzzle” each budgeting period. In terms of personality, the controller within RSMNLK can be described as analytical, precise, and calm. In some respect he is very easy-going: as long as tasks are finished in time.

Here, the independent view that the controller provides is important. He provides the financial information to allow the partner group and daily management to make grounded decisions both on operational and strategic levels. According to the controller:

The partners are the owners of the company, so they themselves can invest their funds where they see fit. I merely paint them the financial picture. Based on this the partners can decide on their strategic moves.

Following increasingly strict rules and regulations in accounting firms, internal and external compliance are important tasks. He enforces compliance both internally and externally, and thereby unmistakably remains a functional perspective. Focused mainly on past and current firm performance, he is not expected to make recommendations, let alone question plans and actions proposed by either daily management or the partner group. The controller stresses:

I expose where it goes well inside the firm, and where it does not. What I show is key to the organization, but my personal opinion is not. The partners interpret what I present them. I do not have decision-making powers and do not add recommendations to my reports. Especially this independence of my numbers and me is crucial.

The following example provided by the Treasurer additionally illustrates the limited decision-making powers of the controller, but still his indispensableness:

Let’s consider the choice of a new corporate financial system that I have been intensively involved with, a large decision. We, a number of partners with an affinity with ICT and some relevant staff department employees, looked at packages offered by different system providers. After we altogether came to a shortlist of two or three systems, we asked the respective providers to create a simulation for us. Based on some predetermined and weighted criteria we each individually rated the different systems. The system with the overall best rating was finally chosen. The controller had a voice within this process. For the administrative and compliance related part of the system, his voice obviously weighted heavily. For other functions, other people were a lot more important. Yet, in the end, the partner group takes the decisions.

the controller’s workload, as do the preparation of liquidity overviews, operating statements and cost & profitability reporting.

Leadership style

As established before, the controller within RSMNLK interacts with the Treasurer and the Partner Group on the one hand and manages the Administration Department on the other hand. Contact with operational managers such as branch office managers, senior advisors, etc. is limited to informal occasions. Consequently, leader – follower relationships involving the controller could potentially be observed at two different levels.

On a first level, interactions between the controller and the Treasurer lead to a potential leadership situation. Yet, the controller does not demonstrate any leadership characteristics. The Treasurer indicates:

I manage him, in the way that I tell him what information I expect from him in order to prepare decision-making in the partner group. I do ask him about his opinion, which is valued, but in this relationship (between the partner group and the controller); he is not the boss or director, but rather a cooperative front man. Daily management has, and takes, leadership over staff functions.

The controller is not in control of exchanging promises of reward and punishment for performance with respect to the Treasurer, nor is he the one in the position to detect and point out mistakes made by daily management or the partner group. Additionally, in his relationship with the partner he does not act as a charismatic frontman to the partners, nor does he act as an inspiration to them. Furthermore, he does not display a sense of mission explicitly or coach or motivate the Treasurer or other partners. Contrarily, the method for him to challenge the (in)appropriateness of current methods is the data in the reports he prepares.

Second, the controller acts as a manager towards his Administration Department, resulting in a potential hierarchical leadership situation. He is not the one to set performance targets for his team, as this is up to the partner group. Every employee knows what is expected of him/her and clear agreements on task distribution are in place. Therefore, the controller is not in control of the promise of reward and punishment in exchange for performance. Many transactional characteristics appeared present here. Nevertheless, although all employees indicated that the controller does not proactively suggests promotions or performance rises, which he is not able to provide, they assume in future requests for promotions he would support them and recommend them to management. Evidence is mixed on whether his team members feel monitored: one of them indicated that

As I work here for over 10 years, he has faith I will complete my tasks without making mistakes, therefore he does not check upon me regularly.

Whenever I report incorrectly, he will notice and will come to me on the same or the next day to discuss the mistake I made.

The administration team is allocated a high level of freedom in completing their tasks. Things have to go seriously wrong for the controller to take action, as one team member indicates that:

Something has to go wrong badly before he intervenes or changes anything. As long as all goes well and there are no complaints about my work, he will be satisfied and I will not hear from him.

In general, the controller asks no more of his employees than necessary and barely tries to make improvements as long as everything goes as planned. Nonetheless, he does not avoid decision-making. He simply awaits the development of a problem until it emerges before acting upon it.

Transformational characteristics are also scarce in this relationship. For instance, RSMNLK’s controller is inconsistent in spending time on coaching and motivating his employees. Although his most senior team members indicated never to be asked about their needs, he puts in effort to discuss the junior employee’s progress and to teach working methods and their appropriate use. Employees do not see him as a true role model or inspiration. He motivates indirectly by showing them benefits of certain methods and setting a good example. Contrarily, all of his team members indicated that he makes them “see matters from a different perspective”. For instance with the introduction of different systems or methods of working he convinces his team about its efficacy before implementation, first he challenges them to bring a solution instead of forcing his methods upon them. In addition, the administration team members show a level of respect for their leader, created by making time for them, being a friendly, kind and helpful superior, and setting a hard working example himself:

He can sometimes find himself in hectic situations where he, if necessary, may be making 12-hour working days, which you will not hear him complain about. When he then ultimately accomplishes the result, this asks for appreciation.

4.2. Pluripharm

The controller’s role and function

new working environment. Her colleagues describe her as structured, analyzing, trustworthy, persistent and precise. According to all case interviewees, someone in this controller position should have affinity with, and ability to analyze numbers, have excellent communication skills for translation of analysis, be precise, reliable and sound. In July of 2013, she became part of management team when she was promoted the first Director Planning & Control, the top-level controller of the company.

This function was created for two distinct reasons. First, Pluripharm’s Finance function has grown enormously the past few years. Traditionally, the management task distribution was different: there was a Commercial Director, a Purchasing Director and a director responsible for everything remaining (mostly finances and logistics), which has evolved into the current Financial Director function (the current Financial Director has been with the company since its infancy years). Following the company’s fast growth the past years, one and a half years ago the General Manager was hired from another company in the pharmaceutical industry. All tasks have expanded in general, including the financial and control tasks.. Additionally, as the firm’s core business changed from purely logistics-oriented to service-oriented, ICT rose in importance and increasingly asked for the Financial Director’s attention. Second, within the near future the current FD is expected to pursue career ambitions outside of this company. A successor for the FD was to be looked for and gradually introduced into Pluripharm’s management.

The recruitment of a separate Director of Planning & Control in addition to the presence of the Financial Director within Pluripharm has generated a twofold, ambiguous leading financial function. The Financial Director is concerned with the revenues; she is mostly concerned with the costs. The Financial Director here fulfills the more entrepreneurial side of the function consisting of detecting investment opportunities, whereas the controller takes the responsibility of financial anchor and reporter to management. Thus, on the one hand the controller delivers financial reports, accompanied by her solicited and unsolicited advice, and ensures compliance. According to the General Manager:

She acknowledges risks and insecurities, thereby functioning as a brake on wild commercial management plans.

On the other hand, she is not solely a planner and independent financial reviewer of the firm’s financial position. Rather, during board meetings where she is present and outside those, she is consulted on any matter of importance, financial and non-financial. Her opinion and advice are imperative and she actively participates in the decision-making process. Within this process, she provides advice and scenario analyses with associated risks:

Figuratively speaking she has a glass sphere, which enables her to tell us what the financial consequences of our policies are, taking into account our current policies and the financial market trends. (General Manager)

In the boardroom, her opinion is considered equally valuable to that of other directors and discussions in the boardroom are no exception. According to the controller herself, this benefits the company:

Because I also have an advising responsibility, the management team is better able to make grounded decisions. If someone in my position would only deliver the numbers, the rest of the team would make decisions on a much more superficial level in my opinion.

Together with the other directors and the shareholders, she sets the financial targets: she sets the budget, is responsible for the end-of-year budget variances and has to justify whether budget is met or not. Once every fortnight the board meetings take place. In addition to those, she has meetings of another division that she heads. In general one and a half day a week she spends on meetings and managing others, while the other three and a half day is spent on administration, handling contracts, preparing and managing budgets and maintaining relationships with bank representatives. As Pluripharm is a medium-sized company, the Directors’ activities are all still rather operational in nature, as opposed to strictly board activities. All decisions are finalized at bi-weekly meetings, however nearly all issues are agreed upon beforehand.

Leadership style

She mainly works together with the Finance Director and the General Manager, with whom interactions lead to potential leadership situations. The General Manager describes the Management Team, after many changes in recent years, now as a stable group, with typical entrepreneurial members. During board meetings, the General Manager acts as the ‘Coach’ of the team, where all cooperate as equals. The team together decides on the targets and effort in order to reach those targets.

that during these sessions she will hold each director accountable for obtained results and will require justification for any deviation from targeted numbers. The Management Team together defines the performance that is expected in return for financial rewards.

Although she will often have to consult with other Board Members first, the controller is not afraid to take decisions. If an issue is solely her responsibility and can be taken care of without conferring others (such as meetings with bank representatives), she will manage it as soon as possible. Like the Finance Director described:

She definitely knows how to take action, that is indisputable.

In decisions that concern non-controlling areas she attempts to convince her colleagues based on her financial arguments, after which plans will or will not come into action. Motivation for realizing their objectives is done all based on agreement with the targets at the start of the year. When performance targets are met, she does not act to stimulate follower’s personal or professional progress.

According to the Finance Director, personal attention, training or explicit motivation are not her style:

Motivating others with a future vision is not something that our controller does. Of course she just arrived and is still figuring out her position, but ‘boosting the troops’ would not be something I expect her to do.

In any way, she attempts to convince the others by the use of financial and performance facts rather than by motivating the others for the organizational interests. She does not encourage others to take initiative, nor does she take the time to focus on personal attention, training and attention to the needs of her fellow team members, as

She has enough on her own plate for now in order to think about what others can achieve. (General Manager)

Nevertheless, the controller does aim to improve processes and structures within the organization that are not necessarily in need of fix. The General Manager describes that

With her precise, controlling and organized view, she convinces us to look upon matters in another way: she makes sure we consider risks much more than before she came.

Besides, she does pursuit to yield efficiency improvements and attempts to reexamine critical assumptions to question whether they are appropriate.

5. DISCUSSION AND ANALYSIS

5.1. Within-case discussion

RSMNLK

In shaping the controller’s role within RSMNLK, antecedents related to the firm (outside or inside the firm) were most influential. From outside the organization, increasing demands concerning regulations and compliance emphasize the company’s requirements for controller independence (Sathe, 1983, De Loo et al., 2011). From within the organization, the financial expertise of the partner group and daily management substitutes for the benefits that are obtained from controller involvement in decision-making, thereby decreasing the need for involvement (Sathe, 1983). Altogether, management expectations represent strong antecedents to an independent role (Byrne & Pierce, 2007). The controller’s background focus on internal control and “number crunching”, analyzing tasks in the in the Trust department after his accountancy career resulted in a preference for a more independent controller role. Although Byrne & Pierce (2007) stress the strong influence controllers have on their roles, at RSMNLK the controller’s role was mostly shaped by the firm environment and firm infrastructure. Thereupon, the current controller was recruited to embody this role. The above-mentioned pressures for controller independence and low pressures for involvement, cause the firm to favor a controller focus on financial reporting and internal control responsibilities over management-service responsibilities. (Sathe, 1983; Jablonsky & Barsky, 2000). The controller in RSMNLK is mainly engaged with the delivery of timely and correct information by means of formal reports, performing financial analyses and overviews, determining risks and ensuring compliance: a typical bean counter (Jablonsky & Barsky, 2000). He is concentrated on the past, concerned with periodic preparation and monitoring of the progress against the budget.

Contrary to Proposition I, that suggested a bean counter type controller association with a transactional leadership style (Granlund & Lukka, 1998; Jablonsky & Barsky, 2000; Vaivio & Kokko, 2006), no leadership with respect to operational management was demonstrated. This lack of a leadership style is explained by the low need for controller involvement that is associated with this bean counter. The antecedents reducing the need for involvement, such as the amount of financial expertise present, at the same time diminish the amount of leadership needed from the controller. The partner group here brings the leadership needed to modify the competencies and expectations of others in the group. They themselves already have awareness and acceptance of the purposes and mission of the organization, since they are the owners as well as top management of the firm.

financial information with the partner group and daily management, and further down into his department (Jablonsky & Barsky, 2000). However, following the absence of interactions with management on a horizontal level, the controller’s interactions with respect to the business are limited to his interactions as a subordinate to management. The extremely limited authority resulting from this subordinate relationship deprives him from the means to exchange promises of personal reward and punishment for good or poor performance. The partner group and daily management together possess access to all such promises, thereby disabling the controller to demonstrate transactional leadership in general.

Partly due to the presence of sense of mission and organizational goal attainment, transformational leadership attributes such as inspirational powers, sense of mission or providing coaching to the partners are absent, as are attempts to make them less critical of new ideas. Moreover, the personal accounting background discussed prior may have caused not only this controller’s preference for a bean counter role, but also contributes to deeply analytical mindset where budget attainment is crucial. The high-level communication skills that lack in both study and career background further ads to the absence of dominant transformational attributes.

The low emphasis on cross-functional communication skills that result from the bean counter role, together with the formal structures and processes further accentuate and encourage his transactional style (Abernathy et al, 2010). It are these advanced communication skills that allow leaders to transform their followers in order to transcend their own interests for those that benefit the organization (Bass, 1990a).

Only in his function as the formal head of the Administration Department, the business partner demonstrates leadership, as required from his superior position. Even though the bean counter is not required to, and not displaying, leadership to the business, he is a transactional leader towards his department, as expected by Proposition I. Management-by-exception is obvious, for as far as his authority allows him to influence promises of reward and punishment. Additionally, in this relationship transformational leadership characteristics are not (consistently) reported. He does not specifically interfere with employees’ work or methods unless mistakes come to light. Respected by his colleagues, the bean counter shows motivation by role modelling, and Bass’ (1985) individualized consideration and intellectual stimulation occasions are occasional. Transactional leadership in this context, although not directly influencing operational management, emphasizes the importance of individual goal attainment.

Pluripharm

strengthened by the anticipated future absence of the Finance Director. In addition, the increasingly competitive and dynamic market for pharmaceutical increases the importance of financially sound decision-making within management. This, in turn, yearns for controller involvement (Sathe, 1983; Byrne & Pierce, 2007). Person-related antecedents to the role concern Pluripharm’s controller’s background. As she focused on grant-application activities within a smaller organization, with more business interaction after her accountancy career, she favoured a more involved controlling role. Altogether, her role was formed by management; however, her pro-active attitude and eagerness to interfere with business are indications of her aspirations to shape an increasingly involved role within the organization.

These pressures for involvement highly emphasize the management-service responsibilities of the controller, resulting in a business partner role (Sathe, 1983). On the one hand, the firm’s need for structure underlines also the internal control responsibility. These internal control and financial reporting tasks require her to provide planning, structure and information to operational managers, ensure company compliance to external reporting requirements, and monitor the progress against the budget. She is responsible for cost reporting, as opposed to profitability reporting. On the other hand, her management-service responsibilities require absolute utmost of her attention (Sathe, 1983). Increasing needs for controller involvement and the resulting business partner role are associated with Management Team interactions, where horizontal flows of financial information between managers are stressed (Jablonsky & Barsky, 2000). She provides financial discipline to the Management Team, where she actively participates in the decision-making process and helps to set and achieve financial and non-financial targets for which she is held accountable. Her opinion on the internal financial models and budgets is even crucial within the Management Team negotiation process. This illustrates the high need for controller involvement within Pluripharm, and is the catalyst of requirements of leadership manifestation.

Contrary to Proposition II set out earlier in this paper, although partly displayed, she does not predominantly demonstrate transformational leadership. In her interactions with other members of the Management Team, on a horizontal level, this business partner demonstrates mostly transactional leadership. She motivates based on financial facts rather than based on followers’ identification with their leader and the organization’s mission. Additionally, considering her primary interest in attaining and setting budgetary targets and contentment in case of budget attainment, Bass’ (1985) contingent reward is explanatory in characterizing her leadership style. Partly, also management-by-exception is apparent.

to communication skills and dedicated to “making both sides of the balance add up”. Working as a chartered accountant (RA) did in her case not produce a bean counter role, more related to her original field, but personal discontentment with increased regulations and accumulating business concerns encouraged a business partner role. Employed in her role only recently, her background nurtures a mindset for transactional leadership.

The business partner role she enacts may result in a wider, more company-wide perspective and the development of cross-functional communication skills (Bass, 1990a, 1997). Despite her display of provocation of followers to think in new ways, and her emphasis on problem solving before taking action (Hater & Bass, 1988), she does not explicitly stimulate learning experiences, provide coaching and teaching to followers, or act as an inspiration to them. Hence, her style cannot be considered transformational. This may originate from her short history of employment within a business partner role. Cross-function communicative skills and a multidivisional focus (rather than an internal financial), which could contribute to a dominant transformational style, might be underdeveloped. Conversely, they might be present, but their display has not been taken notice of by others (yet). In addition, existing demands of internal control and reporting activities within her Planning & Control function could stifle her in developing transformational leadership characteristics.

In other words, business partners are not necessarily transformational leaders, as was stated based on literature (Bass, 1990a, 1997; Jablonsky & Barsky, 2000). Pluripharm’s controller displays transactional leadership in her business partner role, yet may (now already or) in the future develop a transformational leadership style, as she grows in her new role as a business partner.

5.2. Cross-case discussion

Comparing both controller cases, our findings support the dominance of triggers relating the firm in shaping the controller’s involvement and independence. Rising regulations and compliance demands raise importance of independence, while enlarged market dynamics stress controller involvement. Most importantly, as already discovered by Sathe (1983), the amount of financial expertise present on a management level determines the controller’s level of involvement. Management expectations, incorporating market triggers, create certain role specifications, which are illustrated by firm structure. Person-related characteristics such as experience in a financial position (De Loo et al. 2011); do not specifically determine involvement within the role.

interacts with top management in a vertical, subordinate relationship, whereas the business partner’s interactions take place on a horizontal level (Jablonsky & Barsky, 2000). As a result of this disparity, a bean counter arrives in a subordinate position with respect to management, where no leadership is required. A business partner, on the contrary, is positioned at an equal level with respect to operational management, where his or her opinion is highly valued. Therefore, we argue that the higher the need for controller involvement, the more leadership is required – predominantly in order to fulfill top management’s requirements for financial expertise.

Yet, when incorporating the bean counter’s interactions regarding his department, both controllers show transactional leadership. Neither of them is exclusively transactional, but both display elements of transactional and transformational leadership. Consequently, other (personal) factors could be more influential in determining the leadership style. Accountancy backgrounds function as a common base for their (transactional) leadership styles. As both are trained, skilled and experienced in the field of accountancy, certain behavior, attitudes and beliefs, may cause a focus on the exchange of valued outcomes for performance and result in transactional leadership styles. This implies that business partners with different backgrounds can either be predominantly transformational or transactional leaders.

However, the role the controller adopts may still affect this leadership style. Transformational leadership characteristics already present can be developed, under the effect of the controller’s role. By truly adopting and gaining experience in a business partner role, our business partner might develop those advanced, cross-functional communication skills that facilitate transformational leadership Bass, 1990a, 1997). In addition, a bean counter’s focus on internal control and financial reporting activities at the part of our bean counter may enforce his focus on an internal finance, “meeting the budget”, performance focus, and thereby encourage transactional leadership. It would then seem likely to propose that the controller’s leadership style displayed, regardless the follower’s level or department, is affected by the controller’s personal background before enforced or weakened by the role assumed.

5.3. Implications

must be able to provide the leadership that is expected from him in business and be able to increase the value, use and quality of accounting information (Byrne & Pierce, 2007). Furthermore, it was found that other (personal) factors could be more influential in determining the leadership style implies that business partners can either be predominantly transformational or transactional leaders with respect to business. Consequently, as Bass (1990a) argues that concerning different business environments, in some instances transactional and in some cases transactional leaders represent a more suitable fit, organizations should consider the match between external, business environments and a (potential) controller’s background in order to establish effective leadership.

In the previous chapter, the results of the case studies were analyzed and discussed. One bean counter controller was identified and one business partner. Triggers relating the firm appeared dominant in shaping controller involvement, which in turn is decisive in the need for and presence of controller leadership in business. When considering the bean counter’s leadership with regard to his department, both controllers employed similar styles.

6. CONCLUSIONS

In this section, the study’s general conclusions are presented, followed by explanations of limitations. Finally, suggestions for further research are provided.

6.1. Conclusion

This study was initiated to investigate the relationship, if any, between controller roles and controller leadership. Using controller theories and transformational and transactional leadership theory as a guidance and tools for interpretation, two case studies were performed to study this relationship. Interviews at two medium-sized, Dutch firms functioned as the main source of data in this investigation, proving insights to a bean counter-type and a business partner-type controller leadership. In answering the research question, several issues were uncovered.

Triggers relating the firm, principally the presence of financial expertise within management and market or regulatory demands, are dominant in shaping controller involvement (business partner role) or independence (bean counter role). Person-related triggers are not necessarily decisive in this role determination.

organizations that demand high involvement from their controllers should examine candidate’s leadership attributes in their recruitment process.

When also a bean counter’s required leadership style with respect to administrative employees is considered, the bean counter and business partner show similar styles of leadership. Therefore, the two distinct controller roles cannot be associated with an individual leadership style. The controller’s personal and professional background may be more influential in explaining leadership styles, implying that business partners can be either predominantly transformational or transactional with respect to the business.

Nevertheless, the role that the controller adopts may still affect his or her leadership style. Transformational or transactional leadership already marginally present may be developed or enforced by the enactment of these roles, or new attitudes, skills and beliefs regarding these styles may be shaped.

At last, organizations should consider a match between business environments and a (potential) controller’s background in order to establish effective leadership within a controlling role.

6.2. Limitations

6.3. Further Research

7. LIST OF REFERENCES

Abernethy, M.A., Bouwens, J., & van Lent, L. (2010). Leadership and control system design. Management Accounting Research, 21, 2–16.

Avolio, B.J., Bass, B.M. & Jung, D.I. (1999). Re-examining the components of transformational and transactional leadership using the Multifactor Leadership. Journal of Occupational and Organizational Psychology 72, 441–462.

Bass, B.M. (1985). Leadership and performance beyond expectations. Free Press.

Bass, B.M. (1990a). From transactional to transformational leadership: learning to share the vision. Organizational Dynamics 18 (3), 19–31.

Bass, B.M. (1990b). Bass & Stogdill’s handbook of leadership: theory, research and managerial applications, 3rd edition. Free Press, New York.

Bass, B.M. & Avolio, B.J. (1993). Transformational leadership: A response to critiques. In M.M. Chemers (Ed.), Leadership rhectry lrnd research: Perspectives und directions. New York: Academic Press

Bloch, J., Brewer, P. C. & Stout, D. E. (2012). Responding to the leadership needs of the accounting profession: a module for developing a leadership mindset in accounting students. Issues in Accounting Education 27(2), 525-554.

Burns, J.M. (1978). Leadership. New York: Harper & Row.

Burns, J. & Baldvinsdottir, G. (2005). An institutional perspective of accountant’s new roles – The interplay of contradictions and praxis. European Accounting Review, 14(4), 725 – 757.

Byrne, S., & Pierce, B. (2007). Towards a more comprehensive understanding of the roles of controllers. European Accounting Review 16, 469–498.

Cannella, A.A. & Monroe, M.J. (1997). Contrasting perspectives on strategic leaders: toward a more realistic view of top managers. Journal of Management, 23(3), 213–237.

Carmichael, P. & Brewer, P. C. (2009). Financial leadership at Cintas. Strategic Finance, 91(2), 25-30.

Chossudovsky, M. & Marshall, A.G. (2010). The global economic crisis. The great depression of the XXI century, Global Research Publishers, Montreal, May.

Coad, A.F. (1999). Some survey evidence of the learning and performance orientations of management accountants. Management Accounting Research, 10, 109-135.

De Loo, I., Verstegen, B. & Swagerman, D. (2011). Understanding the roles of management accountants. European Business Review, 23(3), 287-313.

Eisenhardt, K.M. (1989). Building theory from case study research. Academy of Management Review. 18(4), 532-550.