Attending a conference earlier this year, I was lucky to meet Lior Segal of Partner Communications, the Israeli wireless operators who market themselves under the Orange brand. I was lucky because Lior is a CPA, MBA and Attorney at Law, as well as being chief of his company’s SOX & Revenue Assurance Department, thus making him the ideal person to challenge with one of my favourite questions: how to balance responsibility for accurate reporting with the pressure to improve the bottom line. I will not try to reproduce from memory the elegant and considered reply he gave, as I doubt I could do it justice. But I will state that Lior did not shy away from the central problem: that there is the risk of conflicts between those goals. Lior instead took the time to explain how he ensured those risks were managed and mitigated. Step one in risk management is, of course, identifying the risks that need to be managed. That is why I have so little patience with consultants who talk about revenue assurance as a panacea for all leakage and governance ills, without highlighting that a seeming cure for leakage may make governance worse, or vice versa; see here for more on that.
So whilst I was lucky to meet Lior, he was rather less lucky to meet me. As well as asking awkward questions, I lack the elegance to jump straight to a good answer. Instead I just try to bulldozer my way through all the options and see which one gets damaged least. The simplistic solution to potential conflicts between reporting and assurance is to have a strong separation of duties. Everyone can agree that is ideal, especially if you want to live in a communist society and employ ten people to do a job slightly better than one person would have done. Whether to separate responsibility for the integrity of reporting from the job of closing revenue leakages is a similar problem to whether to have the people assuring billing separated from the people doing billing. Separation is great in an ideal world, because in an ideal world everybody works hard, knows what they are doing, is competent and knowledgeable and trained. That sounds a bit like a communist utopian dream because it is: getting lots of people to work hard, have sufficient knowledge, skills, training etc usually means spending lots of money. If you can get a similar calibre of job done at much less cost, most people will be happy with that. One complication is that although the knowledge needed for revenue reporting and revenue assurance may have many overlaps, the skills needed can be very dissimilar. For example, revenue reporting does not require imagination, unless you work for a company like Enron. Assurance, however, should involve some imagination, because of the need to anticipate what might go wrong before it does, or to guess where to employ resources looking for leaks. Without imagination, assurance may end up as useful as health and safety checks on the Titanic. Another complication is motivation. I have seen more than one revenue assurance department become deflated after they were excluded from competitions asking employees to suggest ways to cut costs or boost revenues. The people in revenue assurance spend much of their time inventing and executing similar ideas, but their only reward is their regular pay packet and not much thanks. However, if you give them financial incentives, that can cause problems for reporting, because they have the incentive and detailed inside knowledge to find ways to cheat the system. For a start, they are usually the only people able to report on the benefits they add. In fact, their knowledge may be so detailed and so specialized that nobody else may be able to identify when they cheat the system.
The trick here is to strike some kind of balance: realize cost benefits for educating and developing staff together, wherever possible, but make sure assurance and reporting have different objectives and the people who work at each goal look at the world differently. Try to avoid people assuring the things they also report on, and where it is too costly to avoid, make sure somebody else is checking that everything is fine (and that they have no motivation to cheat either!) By all means allow people to move jobs backwards and forwards, making for strong cross-fertilization of ideas and know-how, but ensure that the rewards and expectations for each kind of job are distinct and do not get confused. All of these are easier said than done. Which is why I am glad it is Limor’s responsibility and not mine. CPA, MBA, Attorney… he needs to be the lot ;)