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Built on Value pp 329-346 | Cite as

Service and Oversight Functions of Accounting

  • Weiwei HuangEmail author
Open Access
Chapter

Abstract

At Huawei, accounting is about keeping centralized records and is managed from the top down. Over the years, the company has kept accounting an independent function, hoping that it can serve as a “dam”, overseeing business activities and applying checks and balances. Accounting does more than just provide services – it also takes on an oversight responsibility. Its oversight responsibility even outweighs its service function. Accounting must ensure that data is accurate and reliable, with the motto of “answering only to the truth, not to customers, business personnel, or managers”. Accounting is completely separate from business management organizations. The accuracy of financial data depends on standard processes and clean data at the source. Only by regulating business activities at the source can we improve the quality of financial data.

At Huawei, accounting is about keeping centralized records and is managed from the top down. Over the years, the company has kept accounting an independent function, hoping that it can serve as a “dam”, overseeing business activities and applying checks and balances. Accounting does more than just provide services – it also takes on an oversight responsibility. Its oversight responsibility even outweighs its service function.

Accounting must ensure that data is accurate and reliable, with the motto of “answering only to the truth, not to customers, business personnel, or managers”. Accounting is completely separate from business management organizations. The accuracy of financial data depends on standard processes and clean data at the source. Only by regulating business activities at the source can we improve the quality of financial data.

Financial oversight means firm commitments to process management. We must build oversight into every part of our processes. We must dare to expose problems and push for improvement. Oversight is not just the responsibility of Accounting. Every link in the process must play an oversight role. Managers of business departments are the primary owners for business authenticity and reasonableness. However, managers must not intervene in process operations. Instead, they can initiate or propose process improvements.

The company has made it clear that fund security is a clear requirement for the payment division. Sustained high work quality is the most important criterion for appraising the performance of payment personnel. The implementation of the daily reconciliation mechanism at three organizational levels ensures greater business authenticity and compliance.

Accounting personnel must get close to business, understand business, and oversee business, so that they can better serve and manage business. When serving business, accounting personnel must remember that business plays a leading role. However, this doesn’t mean they have to be reactive in this process.

Institutional oversight and ethical constraints are complementary to each other. Accounting personnel must always observe professional ethics during their day-to-day work. Of course, professional ethics do not conflict with the company’s oversight rules. Compliance with job-specific code of conduct is a prerequisite, and observation of professional ethics is the bottom line. No matter what, accounting personnel must not cross the bottom line during their routine work.

This chapter delves deep into key points of accounting management.

12.1 Keeping Accounting Independent from the Top Down and Letting It Serve as a “Dam”

12.1.1 Roles of Accounting: Service and Oversight, with the Latter Being More Important

For years, we have kept Accounting independent from the top down, hoping that it would serve as a dam, overseeing business activities and applying checks and balances. What does oversight mean? Let me give you an example. Accounting personnel should be fully aware of the delivery cost of a project. If there are abnormal fluctuations and discrepancies in the data provided by business personnel, accounting personnel should identify them and ask more questions or require business personnel to offer more supporting information. Accounting should make it clear to business departments that it does more than just provide services – it also takes on an oversight responsibility. Its oversight responsibility even outweighs its service function. Accounting’s mode of vertical operations is like a sieve within Huawei’s internal operating mechanism. This sieve lets compliant, well-grounded business activities pass through, but blocks those that are non-compliant and erroneous. Through approaches such as communication, asking for instructions, and reporting, Accounting helps us reduce errors. These errors are not incorrect financial data, but errors caused by improper business operations. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

On multiple occasions, Mr. Ren has stressed that Accounting does more than just provide services; it also takes on an oversight responsibility. The revenue recognition issue of the China Region indicated that Accounting has failed to fulfill its oversight responsibility. To ensure accuracy of financial data, you not only need to do calculations, but also need to ensure that financial data truly reflects business on the ground. (Meng Wanzhou: Minutes of a Meeting with Accounting Managers, 2011)

Accounting must operate independently and ensure data is accurate and reliable. Even when business personnel tell you there is no need to check the data, saying that they have indeed spent 3000 US dollars. You must still check. Otherwise, how can you ensure that the data is accurate? If the upstream unit that provides financial data alleges water (meaning the financial data) is not polluted, will you agree to drink the water? What if the water has been contaminated? That’s why we require our accounting personnel to remain independent when it comes to understanding data. If water in the upstream is not polluted, then why won’t business personnel drink it? I’ve learned that today’s financial data is much more accurate and up-to-date. This is based on your assumptions that business data is reliable and that the approvers are responsible. However, if business data is unreliable, your assumptions won’t hold. So it’s still possible that accurate financial data may not truly reflect business on the ground. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

Two things about oversight need to be distinguished. First, oversight-oriented subsidiary boards deal with the oversight of internal and external compliance and this is not procedure-based. We should also move our oversight function forward while delegating the business decision-making authority to the field. Second, we must never transfer our central authority over treasury, accounting, and auditing to lower levels. Of these three, treasury management authority is not about managing, blocking, and exerting pressure. Instead, it should be about providing fast and flexible services, so that representative offices can use funds flexibly. Accounting management authority is about keeping centralized records, with the motto of “answering only to the truth, not to customers, business personnel, or managers”. Accounting is completely separate from business management organizations. Field operations services and shared services centers (SSCs) are divisions of these three types of authority, not centers of authority. Auditing is oversight after things have happened. (Ren Zhengfei: Speech at a Briefing on Improvements and Future Planning for Carrier and Enterprise Regional Organization Transformation, Huawei Executive Office Speech No. [2017] 030)

12.1.2 Oversight by Accounting: Comprehensive Oversight Throughout All Processes

If we want everyone to follow processes and systems in their work, we have to sell the idea and convince people. The SSCs should post the management issues they identify on Xinsheng Community1 or publish them in Improvement.2 It doesn’t matter if their findings turn out to be right or wrong. If they’re right, you’ll need to resolve the issues; if they’re wrong, the findings will serve as a warning. Without them, the company won’t be able to make progress. You’d better send the cases you find to Huawei Executive Office, too. You don’t have to dress them up, just explain them clearly. The Executive Office will forward and publish them to help our business managers understand the importance of data quality and process compliance. (Ren Zhengfei: Speech at a Meeting with Staff in Mauritius, Huawei Executive Office Speech No. [2013] 016)

The most important thing for Finance is to expose problems and to tell the truth. Where is there overstocking? Where are bad debts? Finance needs to expose problems with our internal operations through oversight reports. Managers will feel the pressure, and will improve their management and coordination to make internal operations more efficient. That is what Finance can do for them. Accounting must be bold enough to oversee; otherwise, it will not be the “dam” it is supposed to be. When you find issues with documents, you should ask business personnel to explain. If secret or sensitive information is involved, Accounting must check with the original approver’s supervisor before performing accounting. Accounting cannot handle expenses without all necessary information. When providing accounting services, do not forget your oversight responsibility. (Ren Zhengfei: Speech at a Meeting with Staff in Mauritius, Huawei Executive Office Speech No. [2013] 016)

Financial oversight means firm commitments to process management. We must build oversight into every part of our processes. We must dare to expose problems and push for improvement. (Ren Zhengfei: Speech at a Meeting with Staff in Mauritius, Huawei Executive Office Speech No. [2013] 016)

12.1.3 “Accounting Plays an Oversight Role”: Incorporating Service and Oversight into End-to-End Processes; Exercising Oversight While Providing Services

By saying “accounting plays an oversight role”, I mean we exercise oversight in the process of providing services according to laws and regulations. Laws and regulations are like a sieve. By having everything go through this sieve, we exercise oversight. Every effort we make must aim to help grow our business. When you have doubts, you need to ask for instructions, not just block it. Simply blocking others is not oversight. Service, service, service! We ensure smooth business operations through delivery of standardized services. Everything we do aims to serve business. That’s what “business plays a leading role” means. (Ren Zhengfei: Speech at a Briefing on Four Unifications and 2000 Work Plan of Finance, 1999)

Oversight is not separate from financial activities. All financial personnel are also oversight personnel. Financial personnel manage business through payment, collection of payment, budgeting, and other activities. They are not performing business activities. In fact, they are overseeing the operations of business processes. Accounting’s oversight of business processes is like a big sieve. This sieve lets compliant business activities pass through, but blocks those that are non-compliant. Accounting then will ask involved departments to assess these non-compliant business activities. After the assessment, clear rules will be set on how to standardize these activities so that they can pass through the sieve in the future. This way, the sieve will more rapidly allow more business activities through, and our standards for fast, accurate, and secure services will be more powerful. Most business activities will be compliant, only a small proportion of activities require further assessments. This is how you should oversee business operations through processes. (Ren Zhengfei: Speech at a Briefing by the Finance Management Department on Manager Appointment, 2005)

Accounting must establish a business credibility system. If a business department has a low credit rating, Accounting may spend more time checking every piece of its data and respond slowly to its requests. If a business department has a high credit rating, Accounting may respond quickly and check business data afterwards. This enables Accounting to ensure responsiveness and fulfill its oversight responsibility. Accounting is to business what a nose is to the sense of smell. Accounting personnel who are unfamiliar with business data is like having a stuffy nose that is unable to smell a rat. The Internal Audit Department is like a water inspection department, occasionally checking water quality. Therefore, Accounting must exercise its oversight responsibility. This is the only way for you to become more outstanding employees. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

What does oversight mean? Oversight plays a role in every node of a process: Regional presidents have the primary oversight responsibilities in their regions. Directors of account departments have the primary oversight responsibilities of their departments. Remember that oversight involves more than just Accounting. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

First, Accounting is Huawei’s steward, so I don’t think there’s anything you should not have a hand in.

Second, business departments are accountable for risks and Finance must remind business departments of possible risks. When a business issue is identified, Finance should report it not only to the person responsible for the business, but also to other individuals related to the business. In this way, everyone, rather than business directors, has the authority and obligation to comment on the report.

Third, oversight naturally conflicts with efficiency. We could let things pass quickly and examine what happens afterwards. We could also exert controls before things happen and ask business departments to explain them clearly before they can be passed. The approach we choose depends on our own judgment and understanding of the risks we face.

Fourth, SSCs should prepare and post risk reports, which resemble a bulletin board and show what issues have been identified in business operations and how they have been resolved. Don’t make these reports too lengthy. All you need to do is release several of these reports each week or month to reveal the risks, and the departments involved will take care of them, so that you are not hard pressed to coordinate on their handling. You should divide the reports into several parts: improvements made by business departments after the previous report was released; new issues, conclusions of communication, and improvement opportunities. These risk reports, together with the operation analysis reports, should be regularly incorporated into each business unit’s business management mechanism.

Fifth, business organizations are responsible for making improvements, and SSCs also need to take partial responsibility. Business departments should prepare action plans for improvement and SSCs should check whether the expected results have been achieved. If not, SSCs should stop providing financial services to these departments. We advocate sticking to principles and maintaining our stance when providing financial services.

Sixth, it is better to report risks than to sweep them under the rug. Our intention is to uncover risks, not to accuse anyone. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

12.2 Accounting Must Get Deeply Involved in Business Operations and Implement Integrated Financial Management While Serving Business

12.2.1 Accounting Must Be Proactive While Serving Business

When important market opportunities emerge, Finance is one of the important teams to support our efforts to seize them. Finance can also participate in the decision-making process. You must extend your reach from the most basic level to every link of the company’s processes. You must exert appropriate control. When your control is inappropriate, you can loosen the string a little bit and exert control in areas you find appropriate. This way, you will move in the direction of appropriate management. (Ren Zhengfei: Speech at a Meeting with Financial Staff, 1997)

When establishing financial rules, we need to be realistic. We must ensure that the procedure is impartial before we aim to produce impartial results. At the current stage, we must not pursue absolute accuracy and should be a little bit flexible and tolerant. (Ren Zhengfei: Minutes of a Meeting on Audits of Write-off and Payment Collection Activities, 2004)

Financial personnel must proactively serve business personnel. First of all, financial personnel must proactively guide and communicate with business personnel. Second, financial personnel must give more training to business personnel during the process of oversight. Third, financial personnel must not arbitrarily let violations slip through. (Ren Zhengfei: Minutes of a Meeting on Financial Transformation Projects, 2004)
  1. 1.

    When serving business, accounting personnel must remember that business plays a leading role. However, this doesn’t mean they have to be reactive in this process. CFOs are the most important decision-makers of companies around the world. While serving business, Finance uses standards as a sieve to execute financial processes.

     
  2. 2.

    To better serve and manage business, financial personnel must first understand business. You need to establish and implement a closed-loop backtracking mechanism and a flexible management mechanism that cover planning, budgeting, and accounting. This is the best integrated financial management.

     
  3. 3.

    Financial personnel must fulfill their management responsibilities and shift their focus from accounting to real management. You must accurately calculate profits and losses, unearth what’s really going on in business, and support business management. For example, you need to figure out the costs of labor outsourcing.

     
  4. 4.

    Business data and information must be made accessible to pertinent financial personnel, so that they can accurately calculate and better explain data about output (revenue and profit) and input (costs and expenses). This will enable financial personnel to better serve business improvement and decision making.

     
  5. 5.

    The priorities of financial personnel lie in guidance before, service during, and management after business activities. They must promote correct corporate values, ensure the smooth execution of major business processes, and encourage business to forge ahead.

     
  6. 6.

    Internal controls (including financial oversight) teams need to go out to the field and work closely with field teams to ensure efficient operations and appropriate oversight. Engineering inspection teams are currently tasked with combating widespread corruption. Internal controls teams need to work with engineering inspection teams to develop policies and methods that ensure scientific oversight. The purpose of oversight is to ensure smooth business operations. Oversight is the means to our end goal – business success.

     
  7. 7.

    Business departments are the primary owners for business authenticity and reasonableness. Finance must oversee business activities. Only when everyone plays their own part, can business run smoothly.

     
  8. 8.

    Financial personnel must spend their spare time on sites to gain engineering experience, get to know the basic parts of a site as well as procedures and issues about cost baselines, logistics, and engineering. They should be aiming to improve. You can go to sites near our Bantian campus in Shenzhen to learn or engage in hands-on practice in Songshan Lake, Dongguan. (Ren Zhengfei: Speech at a Meeting with Financial Managers, Improvement Issue No. 369, 2010)

     

First, how do we define a “competent CFO”? A competent CFO has the ability to take over the job of the CEO whenever there is a need. That’s what we expect of a competent CFO. CFO is what accounting personnel should aim to become. Accounting personnel who don’t have adequate business knowledge are unlikely to become business savvy and are only likely to provide basic accounting services that lack flexibility, creativity, and principles, and can add no value to business. This is fine if you just want to be an accountant. But if you want to move up the ladder, you must learn the ropes of the business; otherwise, your career development will be limited. We have raised requirements for financial personnel. The bottom line is that they must be able to understand contracts. I’ve asked the Romania Representative Office to select several standard contracts to help financial personnel gain insight into different commercial terms, acceptance criteria, and product configurations. This time, I am introducing many colleagues from Sales and Services to you. I hope that you will get to know them, visit their sites, and lend them a hand on weekends. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

Accounting personnel must get close to business, understand business, and oversee business. That’s when we can start discussing what your function as a dam really means. This dam not only needs to ensure that water moves in the right direction (correct attribution of revenue and accrual), but also needs to guarantee the cleanness of water at the source (reliable asset quality and accurate accounts payable and payments). (Ren Zhengfei: Minutes of a Meeting with Accounting Staff, Group Finance CFO’s Office Meeting Minutes No. [2015] 081)

12.2.2 Accounting Must Get Close to Business and Establish a Multi-level Shared Service Model Based on Business Scenarios

In the past, financial departments served as “scorekeepers” when they performed basic functions like accounting, receipts and payments, and financing. They were handlers of data. However, today, our requirements for financial departments are to effectively execute key financial activities, actively collaborate with business departments to manage business performance and risks, provide fair and accurate financial information to help business departments continuously improve business performance, and balance the expansion of business with suitable controls. (Meng Wanzhou: Finance – From a Scorekeeper to a Value Integrator, Improvement Issue No. 396, 2012)

If we look back at the growth of financial departments, we will find that management transformation and process reengineering are important driving forces behind the growth. In 1998, KPMG helped us implement the “Four Unifications” project. This project ensured the unifications of financial processes, rules, codes, and oversight across the company, laying a solid foundation for our management transformation initiatives afterwards. In 2005, with guidance from IBM consultants, Accounting established six SSCs around the world. These centers not just improved operating efficiency and oversight quality, but also provided sound accounting support for the rapid development of our business outside China. In 2007, Huawei started to work with IBM on the IFS Program. Under this program, we rolled out the IDS1 on payment collection, revenue, and project budgeting and accounting among global offices, aligning finance with business from two perspectives – the sales contract and the procurement contract. In the meantime, we are steadily advancing IDS2 and IDS3. IDS2 aims to improve project operations management and IDS3 aims to streamline planning, budgeting, forecasting, and accounting to support business management of the responsibility centers at different levels. (Meng Wanzhou: Finance – From a Scorekeeper to a Value Integrator, Improvement Issue No. 396, 2012)

Accounting must get close to business and establish a multi-level shared service model based on business scenarios. When building financial departments, we must focus on what contributions they can make to the company rather than how much operating costs they can reduce.
  1. 1.

    During the process of building SSCs, there are many factors for consideration, including costs, religious beliefs, time differences, and talent acquisition. When Western firms establish an SSC, their major aim is to create economies of scale and save on costs. When we do this, we should also consider how to ensure our internal controls and preventative systems are effective, as these are also the responsibilities and contributions of SSCs to the company.

     
  2. 2.

    We need to establish multi-level shared accounting services centers that are tailored to our particular businesses. (1) Where comprehensive processes have been defined and related data is relatively accurate, we can take steps to gain cost advantages. We can establish one or two global SSCs to centrally deliver accounting services and build up disaster recovery and backup capabilities pertinent to accounting services.(2) For businesses where processes and rules for business operations have not been standardized, we can establish small teams near business departments to provide accounting services. If you stay far away from business departments and know next to nothing about their businesses, how could you ensure your accounting is clear and data is accurate? (3) Built on our existing SSCs, we can also establish shared accounting services centers in regions, focusing on accounting solutions and compliance with local tax laws and regulations. These centers mainly aim to provide capability support.

     
  3. 3.

    Outstanding managers from these SSCs must actively get close to business and apply their knowledge. The biggest shortcoming of our outstanding young talent today is that they lack hands-on experience. If they work in a project to accumulate experience, they might get promoted. If they then participate in a larger project, they may get promoted again. Things never look tough until you do it. Genuine knowledge comes from practice. (Ren Zhengfei: Speech at a Meeting with Staff in Mauritius, Huawei Executive Office Speech No. [2013] 016)

     

12.3 Payment Management

12.3.1 Basing Performance Appraisals of Payment Personnel on the Quality of Their Work and Maintaining Appropriate Redundancy in the Headcount

  1. 1.

    We have made it clear that fund security is a clear requirement for the payment division. During the performance appraisal for payment personnel, we should focus on the responsibilities they assume and the results they deliver. Sustained high work quality is the most important criterion for appraising the performance of payment personnel.

     
  2. 2.

    The quality of our work must approach the highest level possible. Even if our quality of work is higher than financial institutions, we should keep on improving. However, operating efficiency cannot be increased indefinitely and we should also avoid blind pursuit of improvement. Excessive pursuit of improvement might cause tension among our employees, which may result in mistakes. We should know where to draw the line for improvement. Proper resource allocation is a prerequisite for high work quality.

     
  3. 3.

    Currently, a payment employee needs to process 60,000 documents on average each year. This figure is 120,000 for a member of the treasury management team. We have roughly 250 working days each year. That means a payment employee processes 240 documents each day. Finance must adjust headcount for these two teams to be better aligned with our future oversight plan. That is to say, their workloads must be reduced to 70%–80% of the current level in the future.

     
  4. 4.

    Business is evolving and industry is changing. Payment personnel need to finish their day-to-day work and effectively plan how to keep abreast of advanced payment technologies, so that they can leverage technological advances to ensure work quality and boost operating efficiency.

     
  5. 5.

    The payment system needs to bring in conscientious, responsible, reliable, and meticulous employees from the GTS and supply department, and allow them to create value in new posts. (Ren Zhengfei: Speech at a Meeting with Payment Staff, Huawei Executive Office Speech No. [2017] 042)

     

12.3.2 Establishing a Mechanism to Ensure Daily Reconciliation at Three Organizational Levels

  1. 1.

    Daily reconciliation at the first level must be achieved during business operations. Financial departments must consider how to fulfill their oversight responsibilities while serving business. Business managers must be responsible for business authenticity and reasonableness. While serving business, CFOs at different levels must ensure that data generated from key business activities is accurate and reasonable. Financial teams of business units must work with their respective units to nail down the responsibility fulfillment plans for ensuring daily reconciliation at the first level and effectively implement the plans.

     
  2. 2.

    The responsibility for ensuring daily reconciliation at the second level lies in the Accounting Management Department. When performing accounting, this department must check whether all business documents are provided, whether they are fully in compliance with laws and regulations, and whether the company can start the payment procedure based on these documents. The department also needs to check whether all information about our accounts receivable is clearly documented, and then performs account reconciliation with customers.

     
  3. 3.

    The Treasury Management Department ensures daily reconciliation at the third level. This department needs to check all payment records of all our accounts to see whether they are consistent with accounting records. Any amounts paid must be reconciled the same date. Any errors made must be identified and corrected within one working day.

     
  4. 4.

    The consumer and enterprise businesses involve many scenarios and customers and highly-frequent payment and collection activities. Once an error is made during the payment or business process, it is difficult to recover losses. That’s why we need to assign more people to these two businesses to ensure daily reconciliation.

     
  5. 5.

    The accounting team must build up its capabilities for identifying business risks that arise from massive amounts of data. It should also have the courage to alert business teams and regularly report to the company on these risks. If the work quality of a business department is low, we will give them time to improve, but we won’t tolerate or tacitly approve the behavior.

     
  6. 6.

    The implementation of the daily reconciliation mechanism at three organizational levels ensures greater business authenticity and compliance. This demonstrates greater value of the financial departments, and is the greatest opportunity for you to develop. The three levels must build effective channels of communication, promptly notify business departments of issues, and push for the resolution of the issues.

     
  7. 7.

    We must orient ourselves towards responsibilities and quality, and give decent pay to employees working on daily reconciliation, if circumstances permit. (Ren Zhengfei: Speech at a Meeting with Payment Staff, Huawei Executive Office Speech No. [2017] 042)

     

12.3.3 Having a Correct Understanding of Error Rates

  1. 1.

    We must respect errors instead of fearing them. Zero errors are an ideal situation, so a certain proportion of errors is inevitable. Aiming to achieve zero error is not realistic. We must respect errors. When an error is detected, we must reflect on ourselves and try our best to improve and avoid the recurrence of this error. We must not fear, dodge, or cover up errors.

     
  2. 2.

    As long as payment errors can be corrected, they are not real errors and won’t be included in employees’ performance records. Only by doing so can we encourage employees to expose and report on errors. This will also help us leverage concerted efforts to correct errors and reduce losses, rather than covering up errors until losses are irretrievable.

     
  3. 3.

    How an error is made must be documented in the system. The purpose of doing so is not to penalize people, but to improve the process. Every error teaches us a precious lesson. We must draw a risk map that includes error types and causes. We will then drive improvement and strengthen enablement training to gradually put out fires on this risk map.

     
  4. 4.

    Employees with low work quality over an extended period must be transferred away from payment positions. However, we cannot attribute each error to a specific individual and punish them. This is the basic logic behind total management. If a single error occurs, we need to invest our efforts in making improvement and avoiding recurrence. If an employee makes errors frequently, we need to reassign them promptly. (Ren Zhengfei: Speech at a Meeting with Payment Staff, Huawei Executive Office Speech No. [2017] 042)

     

12.4 Complying with Accounting Ethics and Rules

12.4.1 Being Bold and Able to Stick to Principles

Finance must improve its organizational capabilities and strike the right balance between the stringency of rules and flexibility. The standard for you to handle things should not be a thin line, but a belt of certain width. This belt tests how well our business managers and financial personnel handle things. It is understandable, given the costs, that a certain margin of error exists when you build the financial division. Approvers can be flexible when judging whether an issue is reasonable. However, financial personnel must not randomly perform accounting or make decisions all by themselves. Any flexibility or relaxation must be approved by a superior and must be recorded. Accounting personnel can be dogmatic or rigid, but cannot be flexible. You are more like a sieve and must strictly follow rules and business processes. You should not just let non-compliant activities slip through. However, you should be warm and amiable when engaging with people. We must stress rules and at the same time flexibility at the front end. However, the financial function at the back end must be rule-based and even dogmatic, allowing little flexibility. Managers at different levels must be aware of this, be decisive, and avoid becoming hands-off bosses. (Ren Zhengfei: Building a Professional Financial Team That Has Solid Integrity, Dares to Shoulder Responsibilities, and Sticks to Principles, Huawei Executive Office Speech No. [2006] 038)

Sticking to principles is the bottom line for all our financial personnel. Being adept at sticking to principles must be the direction in which we are moving. (Ren Zhengfei: Minutes of a Meeting with Accounting Staff, Group Finance CFO’s Office Meeting Minutes No. [2015] 081)

SSCs deliver a wide array of routine accounting services in accordance with corporate rules and policies day after day. These rules and policies are applicable globally, so it is inevitable that some rules or specific requirements are not applicable to certain scenarios. When such issues arise, accounting personnel in the field must proactively provide feedback and help establish a transparent issue resolution mechanism. (Ren Zhengfei: Minutes of a Meeting with Accounting Staff, Group Finance CFO’s Office Meeting Minutes No. [2015] 081)

Business organizations are responsible for making improvements, and SSCs also need to take partial responsibility. Business departments should prepare action plans for improvement and SSCs should check whether the expected results have been achieved. If not, SSCs should stop providing financial services to these departments. We advocate sticking to principles and maintaining our stance when providing financial services. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

Accounting should establish a correct view of service and stick to principles while providing services. Accounting personnel must proactively serve business departments and the company as a whole. For business departments, we stress high efficiency and premium quality. For business teams at different levels, we stress accuracy and reliability. In other words, Accounting must not give up on its oversight function just because it provides services. Accounting must stick to principles while offering standard services they promise and must ensure that services are delivered on time and with promised quality. Regarding one-off tailored services, you must not blindly roll them out without any careful analysis of the value they may bring and the resources they may require. The company has a clearly-defined process-based requirement review and management system. Why do we often choose a smaller path instead of the highway? We have recently reviewed the use of tailored reports and found that most of them have very low utilization rates. I don’t know why we need to invest resources in them. Accounting must stick to principles and follow rules when responding to service requests. Otherwise, the massive amounts of requirements will cause you to drift off course. (Meng Wanzhou: Minutes of a Meeting with Accounting Managers, 2011)

You must apply huidu and become good at sticking to principles. We aim to leverage accounting to unearth loopholes in our management, seek inflection points for improvement, and make financial data more accurate and business requests more rational. Our aim is not to judge people. (Meng Wanzhou: Minutes of a Meeting with Accounting Managers, 2011)

12.4.2 Complementing Institutional Oversight with Ethical Constraints

Discipline must be made part of our CIAG efforts, with both an accountability system and an award system put in place to widen the income gap for different employees. We will begin to crack down harder on account falsification and business fraud, and impose stricter disciplinary action against violators. The falsified amounts must be repaid 120% higher. If everyone falsified data, achieving CIAG would be impossible. (Ren Zhengfei: Speech at the Report on the Integrated Management Transformation in Small Countries, Huawei Executive Office Speech No. [2014] 062)

Institutional oversight and ethical constraints are complementary to each other. Accounting personnel must always observe professional ethics during their day-to-day work. Of course, professional ethics do not conflict with the company’s oversight rules. Compliance with job-specific code of conduct is a prerequisite, and observation of professional ethics is the bottom line. No matter what, accounting personnel must not cross the bottom line during their routine work. (Ren Zhengfei: Implementing Oversight with Care, Huawei Executive Office Speech No. [2011] 013)

We must calculate expenses after completing a project to check how much money was spent and how much money was provided – this is the essence of oversight. Personnel who engage in a project don’t care who spent the money or how much money was spent; they really have no idea or inclination to care about this in the heat of the moment. However, if no breakthrough is made in the project even if 101,000 US dollars is spent and a project manager puts an end to the project because the Internal Audit might be on its way to investigating excessive expenses, it is a sheer dogmatist. When a small project succeeds by using 3,000,000 US dollars, far more than the usual 101,000 US dollars, Accounting needs to check whether the data is well-grounded and uncover possible risks. To do so, Accounting has to ask the business directors responsible whether that 3,000,000 US dollars was really spent and whether the spending was well-grounded. If so, we would think that things are reasonable and compliant with rules and regulations, so accounting personnel can go on to offset the costs. However, if only 500,000 US dollars was spent and the remaining 2,500,000 US dollars is still unaccounted for, accounting personnel must ask more questions and offset the costs only after data is clear – this is what we mean when we talk about oversight. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

Financial data that does not reflect the true state of business is inaccurate. Accurate data can only be extracted from business activities that have occurred. (Ren Zhengfei: Minutes of the Meeting with Staff of the Romania Accounting SSC, Huawei Executive Office Speech No. [2011] 021)

Footnotes

  1. 1.

    Xinsheng Community is a company-wide open online forum at Huawei.

  2. 2.

    Improvement is an internal publication at Huawei.

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Authors and Affiliations

  1. 1.School of BusinessRenmin University of ChinaBeijingChina

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