The controller’s work has become too specialized. Analyzing an organization’s financial records and balance sheet, although important, does not provide management with an accurate assessment of the firm’s capabilities. In an increasingly turbulent environment, in which organizations are becoming more dependent on external constituencies for resources, the role and activities of the controller need to be reconsidered.
In a recent executive development program, sixty participants described their organizations’ top three resources.1 Only five respondents mentioned balance-sheet assets, such as cash or plants and equipment. Most of the other assets they mentioned were not only off the balance sheet, they were also intangible: the quality and experience of personnel and management, corporate culture, corporate mission, distribution channels, brand equity, technology, knowledge, and so forth. In short, what the majority of these executives considered the most valuable assets were not the kinds of assets that controllers and corporate planners usually assess.
We believe that it is time for a new kind of controller: the off-balance-sheet controller.2 Such a person would analyze and control all of the organization’s off-balance-sheet resources. Typically, responsibility for such activities is scattered throughout the organization. By assigning responsibility for these activities to one person, management can assure that adequate attention is paid to these resources.
The Nature and Scope of Resources
At the root of this change in the controller’s job is a new understanding of organizational resources.3 Resources are anything one can draw on for support or aid. They are not things but functions that things can perform. Consider these characteristics of resources:
- They can be tangible or intangible. For example, the concept of total quality management has been one of the strongest competitive resources of the second half of the twentieth century.
- They are not inherently valuable; they become valuable when we know what to do with them. Mineral deposits were not resources until people learned how to recover and use them.
- They are not static but dynamic. An employee, for example, becomes more valuable with training.
Drucker has argued that knowledge “is the primary resource for individuals and for the economy overall.”4 Clearly, the traditional tools of control and the traditional work patterns of controllers do not fulfill organizations’ needs for assessing knowledge or the other intangible resources that have become so important.