Managing Change, People, and Transparency: An Interview with Former FASB Chairman Robert Herz

In a memoir published this spring, former FASB Chairman Robert Herz, CPA, provides an insider's view of many of the important developments in accounting over the past 15 years.  Chronicles of Convergence, Crisis, and Complexity in Financial Reporting describes Herz's background and almost 40 years in the accounting profession, his experiences during the financial crisis and international convergence efforts, and his ideas for the future. In a recent interview with the JofA, he discussed his views on change management, leadership, convergence, and complexity. Here are excerpts from the interview: to FASB's operations. Do you have a few guiding principles that you believe drive successful change management?  I would say it's a collective effort. We had a number of successes, and we had some areas where we weren't as successful, and I'll take responsibility for some of those where I may have misjudged things. With the benefit of hindsight, and as I touch upon in the book, I might have done some of those differently. But I think, first of all, the environment around you matters a lot. When I came to the FASB, it was on the heels of Enron, WorldCom, and a whole spotlight on the financial reporting system, including accounting standards, so there was a case for change. That presented a challenge, but I also thought it presented a great opportunity. I had a lot of ideas, and talking through them with my colleagues at the FASB, we refined those ideas, added some new ones, and then from the ideas you develop some actions. It's important, though, that you have to make the case for changes. What's the existing issue? Why would the change you are suggesting make the world better? Then, human beings, as we are, need time to absorb the change. So you need timelines. And you need good communication throughout the change management process. It's important to get buy-in both internally within the organization, and very importantly, to be able to make the case externally to those who will be affected by the change. There are always going to be some people who agree with a proposed change and some people who don't, but if you get enough of the stakeholders to agree that it seems to make sense, you're going to be much better off. What, in your opinion, is the secret to managing people successfully?  To me, leading and managing groups is about one L word and then lots of C words. The L word is "leadership." You do have to have confidence in yourself as a leader to gain the confidence of those you deal with. And I find there are a lot of C words that help you do that. There's "collegiality" I've been fortunate to largely be able to work with--and I use the word frequently--colleagues. Great colleagues, people who work with you and try to help and pull toward the common mission. It's about "communication," and in that communication, it's about being "candid" and being "clear." And it's two-way communication: "Here's what I'm thinking. What are you thinking? How can we make this better?" And I think it's just generally about "common sense" in the way you deal with people. You have to have some leadership, and you have to have a vision, but you can't just operate in a command-and-control manner. Transparency, which you worked to improve at FASB, is a big issue today. Everybody wants to be as open as possible, and yet there are some things people don't want to share, too. Do you have any advice for leaders of businesses who struggle with how much to reveal and how much not to reveal? Herz: I believe they've got to regard financial reporting and their whole corporate reporting as not just compliance, but really as an exercise in communication. And in that communication, you've got to convey to the audience what you think is important and what you think they need to know and understand. I always was a fan of Warren Buffett's approach to his annual letter to shareholders. …

Field of study: Business