The role of the advancing FD

You probably haven’t met many people who dreamed of being a finance director when they were younger. Indeed, the number-crunching aspect has ensured there are long hours spent hunched over spreadsheets and the traditional concept of the beancounter has done little to enhance the job’s image. But now it is time for a change – for FDs to alter their image.

This is already well underway. Gone are the days when FDs were perceived as fusty maths geeks hidden in a dimly-lit corner, somewhere away from all the actual business being done. And amid the recession, we have heard much more about the work FDs do than usual: they have had more headlines than usual and headhunters have been busier placing them in ever-more prestigious finance roles. The past few years certainly changed things irrevocably. But has the recession been a blessing or a curse?

“CFOs must prepare their organisations to live in a world dominated by powerful forces of half-dead, half-alive zombies”, says Simon Tennant, finance specialist at PA Consulting. Banks, governments, consumers and companies are all entities that appear to be recovering but are only half-alive, he believes, and it will be at least two years before CFOs can hope for ‘business as usual’. Even then, it will not be the same business as usual, he adds.

The recession has put the spotlight on the FD and many have stepped up to that increased attention, performing a wider, deeper and more visible role.

The recession has made FDs better at their jobs, says Nick Jarman, partner in the finance effectiveness practice at PricewaterhouseCoopers. He attributes this to old disciplines being forced out and FDs being recognised as custodians of the cost-cutting effort. They have effectively been thrust into the ‘central area’ of the business.

The next couple of years will see companies go through a sustained period of belt-tightening and it will be FDs at the heart of this. This may make them inc reasingly unpopular, but in the long term, it will ensure there is a tighter rein on spending which will ultimately see more companies claw their way out of austerity measures and into sustainable profits. The organisations that take heed of any measures or cultural changes the FD is brave enough to implement will be the ones that emerge leaner and meaner.

Advancement in technology will also ensure that FDs are able to provide more timely and accurate information, something they are under ever more pressure to do. More FDs are fashioning systems that bring together bought-in accounting or business intelligence platforms with their own hybrid, in-house creations that enable them to pull out relevant slices of information from across their business, meaning they can get a view on performance, efficiency and future trajectory more efficiently and quickly.

Many FDs have sharpened their communication skills which means they can reach other people around the business to get an explanation of the data. In order to be leaner and meaner there will need to be investment in ensuring that FDs become more efficient at providing management information and lead the provision to stakeholders of ever-more transparent, easier-to-read financial information, audit reports and so on. It is for the FD to take the regulatory conversation around this piece and turn it into lasting action.

But where has the recession left FDs’ reputation? They are still viewed by many as the weak link in a company’s chain. According to a recent, rather damning PwC survey into the effectiveness of the finance function, there is a distinct gap between the expectations of business leaders from their finance functions and the role the functions actually perform. Eighty percent of participants – the executive boards among some 200 of the largest listed businesses in the UK – said they were dissatisfied with the level of management information they were receiving from FDs.

More to do
While PwC’s Jarman acknowledges that the recession has been beneficial for FDs, he says there is some way to go before board members are satisfied with their input. Intense scrutiny of the job will go on.

“As operating models and competitive challenges continue to evolve, the findings from the study clearly show that both chief executive officers and finance professionals have significant hurdles to overcome before the finance function becomes the effective strategic partner the business requires,” he says.

Something Financial Director has championed that is borne out by studies like that of PwCs is the importance in working more closely with other departments that are involved in making business decisions – a field in which they were previously often excluded, Jarman says. As owners of business data, the finance function is already in a powerful position and now that companies have recognised they have not always listened hard enough to FDs, there should be greater scope for FDs to be ever more central to decisions affecting the future of the business.

The post-recession FD
PricewaterhouseCoopers asked boards among FTSE-200 companies about the performance of their FD.
• 63 percent regard their finance function as playing a lead role in strategic planning, by way of supporting the CEO
• 55 percent of time on data is spent gathering, instead of analysing it
• 80 percent are dissatisfied with the level of management information they receive from the FD
Source: PwC