It’s a truism that there is no strategic decision that is not a financial one. I spend my days dealing with organisations that frequently seem to forget this. Such absence of pragmatism is often the death rattle of the start-up, but I have also seen many a management team lose sight of it when times were aplenty and reserves were squandered instead of held against a rainy day. Some would say governments are guilty of this, too!
The silent, unsung hero in all of this is the Finance Director. I really like working with Finance Directors. The majority are accountants by qualification and experience and this carries with them a stereotypical mantle that is not their profession’s due. They are often assumed to be studious and typically introverted by more capricious board members and can cruelly be attributed by some as having a penchant for knowing the price of everything and the value of nothing. They are often the quieter members of the boardroom table. After all, this role is easily ascribed by so many of their board colleagues, who see their role as being in governance and probity on an audit or post hoc approach to the main business of researching, marketing and selling products and services.
This couldn’t be further from the truth.
Dynamic boards value their Finance Director and recruit proactive, interactive individuals whose role is seen as invaluable to the operation. Not infrequently, in these organisations the Finance Director is given the role of deputy CEO or has some other portfolio extension that differentiates him above his peer directors. Finance in this context becomes the strategic life blood of the organisation and can be seen as enabling, facilitating growth, producing a balanced approach to risk, rather than a conservative one and a good FD can have a major role in driving the operation forward in leading class organisations.
Finance Directors, typically coming from an accountancy background, have been reared in a culture and community of practice that espouses concepts such as probity, conservatism, the need for prepared detailed business cases, and the ability to be held to account and to defend the organisation when so held. These roles are not as adrenalin-provoking as the latest new product or the latest new marketing drive, the latest sales win or paradigm shift within the organisation as it pursues its transformational future. However, all organisational roles lead back to a number of simple fiscal truths. Namely: where does the money come from; how is it used to best effect; what is the balanced level of risk for the organisation to take; how does it manage cash flows; how does it remunerate its staff; how does it seek value for money in all of its operations; how does it work efficiently and effectively?
Often, when I coach long-standing Finance Directors, they find the energy and dynamism of not infrequently younger Directors with other board functions a challenge to their skills, awareness and self-image. The reality is, Finance Directors do tend to stay for longer periods of incumbency in companies than other Director roles. I know many Finance Directors who have had single company careers spanning 20 to 30 years, whilst director role incumbents have come and gone. Add this stability and tenure to the natural conservatism and probity requirements of the role and it’s very easy for people, including Finance Directors themselves, to be seen as less dynamic, less critical, in some ways lesser players on a board than those who innovate or directly sell.
The reality is in times of dynamic, strategic change and correspondingly rapid turnover in boardroom careers, the Finance Directors’ stability on a board offers an organisation a number of key safeguards. Longer mean periods of incumbency allow people to have sufficient organisational memory to be able to provide continuity at times of key change. Equally, the maturity and stability of the FD on the board can produce more mature, less capricious debates by progressives who may have brilliant ideas, but are perhaps not as fiscally aware of the impact of those ideas at the time of introduction. The Finance Director, with this fiscal insight linked to strategic process, can produce an individual on the organisation that does not inhibit and restrict but effectively “grounds” a board into an effective, reality tested mind-set that is calculated to deliver success.
Outside of the immediate community of accountancy practice, Finance Directors and accountants are often tarred with the same brush; I can recall the classic joke about those who seek careers as actuaries on the basis that “they found accountancy too exciting”. The real experience is, that the management of finance in a company is an exciting and dynamic interchange that requires a steady hand and a visionary insight if it is to be achieved properly. These qualities, when coupled with the grounding effect of the Finance Director already mentioned can produce the very atmosphere and culture of success that we see in so many world beating organisations.
So let’s celebrate the Finance Director, the often understated hero of the board, the quiet, often unappreciated champion of wealth generation and growth in our corporate lives and communities. It’s time to give them some real credit as one of the corner stones of organisational life and time for all to recognise that they occupy an institutionally august position in any modern business.
David Cliff is Managing Director of Gedanken and Chairman of the Institute of Directors’ Northern Sector Group.