Anne Watson, COO of In Touch Networks, discusses how the role of the financial director has evolved and what FDs need to do to use it to their benefit
There was a time when financial directors were principally thought of as the generators of management information and took responsibility for interpreting the numbers based information for their less financially able, yet more operationally savvy colleagues.
But the 2008 financial crisis and the ensuing recession changed that. Financial directors (FDs) were thrust into the spotlight, relied upon to control costs, reduce overheads, manage risk and maintain liquidity – priorities that dominated board meetings across Europe. There is little doubt that the recession was beneficial for FDs and for their enhanced place at the boardroom table.
Yet the role of the FD has evolved further in the years since the recession, and continues to do so. It’s an evolution that has been welcomed by ambitious FDs, now more confident in their ability to run a business and with some sights set on the top job.
There are more FDs and Chief Financial Officers (CFOs) than ever before who are now taking on the CEO mantle. A 2016 survey of 200 UK CFOs found that 86% aspire to reach the top job. Currently, 55% of FTSE 100 CEOs have a background in finance.
Looking beyond FTSE businesses, a survey by KPMG found that 63% of CEOs believe that the CFO role will increase in significance over the next three years, compared with other C-suite positions, yet only one in three felt that their CFO was up to the challenge.
Today’s FD is a boardroom chameleon who is faced with a unique set of challenges, under pressure to do more with less, make smarter decisions, fuel growth with insightful data and avoid conflicting priorities.
The time when the role came with a neat job spec and the singular priority to maintain financial health has passed. The role of the FD must now continue its evolution from number cruncher to strategic partner, with cementing business growth on the list of responsibilities.
The coming years will be a telling time as the economy moves into the fourth industrial revolution, termed by some ‘Industry 4.0’.
Businesses are operating in uncertain times, both with great opportunity and substantial risk. There’s Brexit and the concerns around the UK’s exit from the single market and customs union (the additional issue of ‘passporting’ for financial services), single currency weakness and global instability, as well as regulatory pressure, geopolitical risks and, of course, cyber security. A survey by EY recently revealed 9 out of 10 large British firms have been hit by information security incidents this year, leaving FDs with very real concerns.
For those FDs with their eyes on the top job, they have to acknowledge the need to embrace a more varied skillset, preventing a backwards slide to the FD role of old.
Great headway has been made in this regard in recent years, with FDs taking on varied responsibilities, including HR and marketing at board level.
In many ways, FDs had been faced with an issue of perception, portrayed over time as introverts and poor communicators – which couldn’t be further from the truth.
Many FDs are outstanding communicators, given that their role involves the explanation of complex figures to individuals with no financial training, in a way that they can understand.
Like all people, successful FDs are often extremely personable, developing excellent interpersonal skills that makes employees feel able to open up to them and readily provide information that is useful in decision making.
The ‘traditional’ C-suite is ill-equipped to deal with the challenges posed by Industry 4.0, with new technology bringing both opportunities and risks.
Concerns that once lived under ‘AOB’ on the board meeting agenda are increasingly taking centre stage – we’re talking cyber and information security, increasingly sophisticated use of data and analytics, and the rise of artificial intelligence and the innovation it offers. These issues all require ownership.
In the same vein that FDs took centre stage during the recession, so too have they as these new opportunities spring up. This brings a plethora of additional responsibilities ‘adopted’ by the FD.
The C-suite will increasingly begin to recognise this shift and begin to assess the merit of appointing additional expertise to the boardroom table. It is with this shift that the FD must take care to ensure their skill set is continually evolving and continuing to offer strategic counsel at C-suite level.
The C-suite of the future will see the introduction of individuals with specific skill sets – among these new roles is likely to be the Chief Automation Officer (CAO), tasked solely with managing a business’ interests in relation to this transformative new technology.
Also taking a seat at the boardroom table will likely be a Chief Cyber Security Officer (CCSO), with large businesses employing the most talented experts to protect their interests from a growing threat that becomes more sophisticated each day. Chief Future Officers (CFuO) are likely to become more mainstream – recently appointed by Cisco and Amazon, the CFuO will be tasked solely with predicting future trends and potential risks.
FDs should use the introduction of these new roles to their benefit, with additional time freed up from anomalous responsibilities now spent on improving their skill set, ensuring that they are continuing to offer much more than number crunching.
FDs now have a real opportunity to step up, not in a reactive sense as in 2008 or filling a vacuum of specialist skills, but in a much stronger position in which the crucial role of the FD has been proven.
The profession now has the ability to use its skills, both hard and soft, to continue to mould the role for the benefit of business, further improving control and visibility of data, enhancing business intelligence and making strategic investments in new technology.
Anne Watson is COO of In Touch Networks, a group of professional networks for senior executives.