Reference no: EM132714946

When Andrew Levine took over as president of Development Counsellors International (DCI), the public relations firm founded by his father in 1960, he was eager to try open-book management. His first step was to add a financial segment to the monthly staff meeting, but employees just seemed bored. Most of them had no interest or skills in finance, statistics, and ratios.

Rather than providing standard training, Levine had an idea: Why not appoint a different staffer each month to be CFO for the day. That person would be required to figure out the financials and then present the financial reports at the monthly staff meeting. His first appointment was the receptionist, Sergio Barrios, who met with Levine and the company's chief financial officer to go over the figures, look at any unusual increases or decreases in revenue or expenses, and talk about ideas to spark discussion. Levine was astounded by the reaction of staffers at the monthly meeting. Unlike Levine or another manager, Barrios was new to accounting and consequently explained things in a way that any layperson could understand. In addition, employees wanted to support Barrios as "one of their own," so they paid more attention and asked more questions.

At each monthly meeting, the CFO of the day goes through a breakdown of the company's sales and expenses, points out irregularities and trends in the numbers, takes questions from other staff members, and sparks discussion of current financial issues. At the end of the report, the person reveals the bottom line, indicating whether the company met its profit goal for the month. Each time DCI's accumulated profit hits another $100,000 increment during the course of the year, 30 percent is distributed to employees.

DCI has been profitable ever since Levine began the CFO-of-the-day program. In addition, employees are happier with their jobs, so turnover has decreased. Clients tend to stick around longer too, because employees put more effort into building relationships. "Nobody wants to see a zero next to their client in the income column," Levine says

1. Why did the CFO-of-the-day program worked for DCI?

2. What is the importance of financial controls in organizations?

3. State the other types of controls.