Over the past couple of years, it’s become apparent that FDs have been keen to acquire some of the soft skills that help them evolve their job even beyond the role of strategist, business partner and so on. Leadership, people-management, enabling innovation and, in particular, communication are increasingly popular conference subjects.
The need to communicate effectively may be regarded as something that takes FDs even further away from their beloved spreadsheets but it’s actually squaring the circle: whatever the FD’s ability to develop strategy and create shareholder value, communication lies at the heart of that old fashioned virtue, accountability.
Gordon Grand, who heads up the financial officers practice at executive search group Russell Reynolds Associates, puts it this way: “The CFO is the public face of the company,” he says. It’s the FD who has to communicate with investors, explain the strategy and justify the results. FDs who are bad communicators just won’t cut it with the City. When Robert Brace left British Telecom, investors breathed a sigh of relief: Brace, they thought, was not only too cautious on strategy but a poor communicator.
Grand says that the recent boom in demand for FDs with experience in IPOs was misplaced. You can buy in that kind of expertise from professional advisers, he says. “What was really needed was the ability to understand the business and communicate with investors,” he says. “In fact, the CFO is now expected to know more about the business than even the CEO.”
This, of course, puts the FD in a precarious position. “They are the face of the business,” Grand says, “and probably suffer from the lowest job security of any of the main board directors. When things go wrong, the CEO needs a scapegoat.”
About three years ago, Financial Director interviewed Patrick Ponchon, FD of Xerox Europe, who told us of his experience when he was running Xerox’s French unit. The business needed to recruit finance people, but they wanted to recruit internally – so they accepted applicants who wanted to transfer from sales and marketing. “After some years they had become the best finance people I’d ever seen. Their capacity to communicate, even to impose difficult things, I think, is higher than for traditional finance people,” said Ponchon.
Grand likes this story. “You have to make people feel good about bad news or tough decisions,” he says. A salesman’s communication skills are perfect for the task.
A recent report by KPMG Corporate Finance makes clear that small quoted companies in particular have to battle for access to capital – and “ensure that success is not only achieved, but communicated to investors”.
It’s easy to fall into the trap of assuming that the need to be a good communicator turns the FD role into something like in-house PR. But Grand tells of one client who thought he needed an FD who could face down Wall Street, which had been giving the company’s share price a beating.
“What was really needed was an FD who could sort out the management information system that had been hindering their ability to make effective decisions,” Grand says. So, don’t scrap the spreadsheets yet.
Canary Wharf FD Peter Anderson will speak on “Impressing the stockmarket” at the Richmond Events FD Forum on board the P&O ship Arcadia, 27-30 June 2001.
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