Walking the FD tightrope

FINANCE DIRECTORS, more than most board directors, have a complex balancing act to perform. Other directors may have clear roles defined by their business streams, but FDs have to balance a bundle of different skills. And that is what enables them to do two very important things: to safeguard the business and to set its course for the future.

It is not an easy task, or one to be taken lightly. FDs can be hugely successful and eventually step into the chief executive role. But this aspiration can become a distraction. First they need to get a grip of the different components of their role. And there is no success if they do so on some of the necessary skills and try to wing it on the others, particularly on the fundamental steward skills of the FD. Without nailing this aspect, an FD will not be credible in any of the other areas of responsibility of today’s finance director. The need to conquer all aspects of the role is increasingly important as, for many boards, all or nothing is the only game in town for the FD.

To many outsiders, the finance director has, logically, been seen only as the finance person. The cliché has been the geek from the finance function, full of the techniques of keeping the figures in immaculate and obsessive order, nose stuck firmly to the spreadsheet on the screen. But to the insider, it has been a very different story for the last decade or so.

In the last few years, during which we have navigated our way through the financial crisis, that story has become ever more sharply defined. FDs have had to bear the brunt of heightened levels of scrutiny, increased accountability, growing regulatory burdens and much greater awareness of risk. And they have had to do this in a business arena where credit and equity markets have become complex and challenging, where the landscape in terms of economic recovery shifts almost daily, and where the pressures to look for future growth in ever riskier places ratchets up.

Clear-eyed FDs see they have four different roles that make up the ideal of a complete business persona. Two of these relate to traditional roles of safeguarding the company’s assets and financial integrity, and managing its finance function and processes. The other two involve moving the business forward and ensuring the company’s strategy is delivered.

FDs are, by tradition, operators and stewards. And they are, or should be, strategists and catalysts. The first two underpin the last two. Without the first two, the efforts of the last two will end in failure. Corporate histories are full of the tales of FDs who made a mess of their efforts at grand strategic projects because they were tripped up by their neglect of the basics back in the finance function.

So FDs need to keep their skills finely honed across management and financial reporting, the management of cash and costs, regulatory change, corporate governance, compliance, and providing an effective and efficient finance function. Those are the foundations.

But the catalyst and strategist roles are the exciting responsibilities. This is what financial controllers dream about: using financial stability and credibility as a platform for taking the business onto a larger stage. But those dreams depend on FDs being on top of the operator and steward roles and acknowledging that they will still have to spend more time than expected on traditional roles. Without this, they will not be able to ensure that financial leadership determines the strategic business direction, and then stimulate behaviours to achieve the strategic objectives, aligning the financial strategies to fit that dream. Without all this being in place, FDs simply don’t get a seat at the table.

The boardroom support is there. FDs are undoubtedly rising to greater stardom than ever before. But this is based on a very solid understanding of how to recognise, balance and deploy all the skills that are required, and how to fulfil all four roles. ?