Build or burn?

What to expect from your Finance Director

Speaking at his leaving do, I once heard a CEO describe his Finance Director (although I’m cool with CEO, I can’t get used to CFO yet) as having ‘kept him honest’.  As a new recruit I hadn’t had time to get to know my new boss before his departure was announced, but I remember thinking what a shame to be described in such constrained terms.  I interpreted the CEO’s remark as ‘I’m the star.  He’s the help’.  This interpretation probably says more about me at that time, than any insight into their relationship, but the FD who was leaving had a reputation for being quite formidable, and he was leaving because he was being promoted – strangely, to an HR position in our head office – so it was a surprise to hear him introduced in this way.  No one should be appointed to the position of FD unless they have the potential, at some point in the future, to be the star.  The same is true of course of any functional director but, keeping the discussion to finance, what should a CEO expect from his or her FD?

As in any profession, there are different flavours of Finance Director.  It is indeed part of the function’s role to keep an organisation honest, literally.  It’s the management’s job, not the auditors, to guard against fraud, put in place controls that safeguard the company’s assets and ensure corporate governance is strong, but most Boards will expect the Finance Director to own these issues.  Within the profession, this is known as the ‘stewardship’ role.  Over time, it’s not really done our profession many favours.  When misinterpreted, it has encouraged a certain type of person that hides behind ‘rules’ and ‘procedures’ to stray beyond ‘stewardship’ into downright unhelpfulness.

I’ve heard it said of modernist artists that you need to know the rules of painting in order to break them successfully.  I’ve often thought this analogy could be applied to the stewardship role of the finance function.  You should expect your Finance Director to know ‘the rules’, and keep you honest, but to do so in a way that helps you achieve what you want to achieve.

The other function-specific duty of the Finance Director is the simple one of knowing how well the company is doing.  Having a firm grip on the company’s finances means, firstly, making sure its cash flow is under control, secondly, having a deep understanding of what drives profitability, and being able to reliably predict how both of these areas will behave in the future.  This is, so to speak, the score-keeping role of finance.  However, simply knowing the score isn’t enough.  You should expect your Finance Director to be able to explain what is happening – and what will happen – to your business in terms that are easily understood.  If he or she is unable to do this, beware!  It probably means they don’t really know themselves.

Being capable in these basics will have developed early in a Finance Director’s career.  The more exposed a finance person is outside the relative safety of the boardroom, the more their skills continue to develop.  Initially, with auditors, banks, lawyers and tax authorities, but expanding to include major shareholders, and, if relevant, regulatory authorities and City analysts, you should expect your Finance Director to have the communication skills and gravitas to build your company’s external reputation.

A reputation for competence and being a good corporate citizen is important, but you’re in business to make money and the Finance Director needs to contribute as much as any other Director in this respect.  The skills to do this are not unique to Finance Directors but they are ‘roles’ frequently expected of them.

It goes without saying that you’d expect your Finance Director to be decisive within the sphere of their own responsibility, but when it comes to Board level decision-making there is a particular role the FD should play.  It’s best characterised as being ‘the practical one’ of the team.  ‘Yes, it’s a lovely idea to modernise a manufacturing plant, but can we afford it?’ It sounds rather dull and ‘worthy’ but it’s not.  I’ve lost track of the times I’ve joined a group considering a course of action that never gets beyond a high level discussion of principles, with arguments for and against aided by a few seemingly randomly collected facts that are difficult to anchor in the wider context of the business’s performance. Often the true worth of their proposals is not apparent to them until a price is put on it.  ‘I’d love the benefits of a new manufacturing plant, but not so much that it would be worth paying that much.’  It’s enormously rewarding to feel you are helping the decision-making process along.  It’s more than worthy, it’s being part of a team that gets things done.  It’s a great feeling.

At the top of the food chain of skills you should expect of a Finance Director is a willingness to take action on their own authority.  This is the prototype CEO skill that you should be looking for at the selection interview.  The role around the Boardroom is of an ‘initiator’ and ‘deal maker’, someone who leads the team that gets things done.  The best feeling of all!

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