I HAVE a few favourite themes. Finance has developed hugely as a function over the past three years. The right CFO makes a great chairman. Liverpool will win the Premier League again one day. I could chart a path for an obedient, numerate 18-year-old to become a plc FD by the age of 45. Losing your hair is not, I repeat not, something to worry about. And losing your reputation for integrity is the only thing a finance director struggles to come back from.
The last point is so important I wanted to explain why I believe it to be so, and to discuss some points that may stop you finding yourself in that invidious position and that may help should you do so.
The role of CFO has many different responsibilities. Clearly it plays a leadership function within the business. It has developed a commercial skill set that allows it to act as a partner to the business. There is a substantial external relationship management element to it as well. And clearly at the very core the role has a responsibility to guarantee the accuracy of the information it provides to the business and to any external shareholders, potential investors and so on.
Let’s think for a second about what this implies. Any investment decision is made, in part, on the forward-looking numbers a CFO provides. Any internal investment decision is made on the same basis.
Decisions about performance today are made on the basis of the numbers the finance team produce to detail actual performance. The statutory results which show the business did what it said it would do are clearly built on the numbers provided by finance.
Face the facts
If you take away gut feel, intuition, feeling things in your water, witch doctory and runes, the only clear factual information you have that lets you run a business, or invest in a business, tends to be provided by the finance function. As the head of that, the CFO stands for the accuracy of that information. It is imperative their reputation is unquestionable, because what other than their reputation guarantees the accuracy I have just mentioned.
Therefore it stands that if that reputation vanishes, all sorts of problems arise. In essence, how can you risk trusting someone who has broken your trust before? And in today’s era of Google and Twitter and name search, it is just too easy to find the stories that show your reputation has been tarnished. And when you work in a market as filled with competitors as the finance director market, it is all too easy to focus on people who do not have that issue.
So point one is simple. If you ever find yourself in a situation where you feel things are happening that may result in your reputation for integrity being tarnished, scream. Scream loudly and to as many people as you can. To the CEO, the board, investors and so on. Not all at once, but incrementally. The people who will resent you for doing it will have no power over your future career and the people who will thank you for doing it will.
Point two is equally simple. Surround yourself with world-class people and systems who care as much about their own reputations as you do about yours. Demand excellence and accuracy as a right, and ensure the function feels the same way. Especially when you buy and integrate something into your organisation.
But clearly, in spite of all of your efforts, you may find yourself in this situation. And when it really is not your fault, that is the hardest situation to be in because the reputational issue sticks.
Clearly there are things you can do. Several finance directors have hired PR advisors to help them navigate through the murky world of business journalism (it did not used to be this way, he writes wistfully in a business magazine). The problem with this is ultimately that it is expensive, it creates more stories, which create more things for Google to return on searches, and no one believes the good bits.
Alternatively, you can work to rebuild your reputation. This is far easier in America, where failure is treated as a rite of passage. In the UK however, it is not so easy. Businesses with external shareholders, especially in a market where risk is being mitigated in every area, are unlikely to hire someone with a reputational issue. Especially when there is an abundance of excellent CFOs to choose from.
So instead you have to focus on roles, businesses and ownership structures where this is not going to be an issue. Clearly, taking a non main board role solves this issue somewhat. And a private equity owned or privately owned business is less likely to see this as an issue – they focus on performance more than reputation. And over time you can work to rebuild your reputation and start again. ?
Mark Freebairn is head of the CFO practice at Odgers Berndtson