Role of the finance director: split personality required

Finance directors could be forgiven for having split personalities. On the one hand, their role requires them to exercise stewardship as chief risk officers, steering their companies around potential dangers on behalf of shareholders. They also need to be diligent administrators, crunching costs in transaction processing and back office operations.

Yet FDs are also expected to demonstrate a flair for creativity and strategic vision, particularly if they have an eye on the chief executive’s job. Psychologists might argue that these roles require such personality traits that they are better performed by separate individuals. Unfortunately, the corporate world expects one person to execute both.

Roger Coveney, director of business psychologists Kaisen Consulting, agrees. ‘There’s a friction in finance departments between the need to get everything right, not make mistakes and manage risks plus the requirement to be a business partner who helps take forward and transform an organisation,’ he says.

Contradiction in terms

So is the role of a good FD contradictory? And if so, how do successful finance executives overcome this little psychological hurdle to fulfil all the roles expected of them? What is the psychological profile of a good FD? And how can that be expected to develop as technological and management advances change the very nature of the job?

Actually, the split personality metaphor can get a little more complex. FDs need to have four separate faces. In a perfect world, they have to be custodians and operators but also catalysts and strategists. Not many individuals manage to be all four; the most important ones to get right are custodian and strategist.
Custodians have to make sure a company’s assets are secure, keep the books in perfect order and ensure that everything is in place and up to scratch. They don’t necessarily need to be the best managers, delegators or ‘people’ people. They may even be somewhat introverted and inward-looking.

Outside the box

Strategists, however, need long-range vision and the ability to think outside conventional parameters. They also need to be able to communicate their picture of the future and where the company is going. They can tend to be extroverted, intuitive types with big personalities and charisma.

Of course, FDs actually need to be both. So how can they be highly competent, dependable risk-averse men and women while also adding value through their creative flair and strategic support?

Lest it sound impossible, it is worth reminding finance directors that they don’t always have to be both at the same time. As business climates change, different skills are in demand. The sparkling ingenuity of a dot.com boom whizz-kid FD is not what’s required when the boom turns to bust and companies are coping with the stringent regulatory world post Enron and WorldCom.

What’s needed then are financial control, risk-management skills and the ability to reassure worried investors. In the current climate, however, the requirement is switching back towards more emphasis on strategy and being a good business partner to the chief executive.

Requirements also differ from industry to industry. Companies in regulated sectors like financial services tend to look for stronger custodian skills than IT or media companies. Equally, not all chief executives want their second-in-command to be much more than a solid financial sideman.

It depends on the type and personality of the CEO and also the nature of the FD. If the CEO is a wild, extroverted figure, his right-hand man or women is more likely to need to veer towards the opposite extreme. Brainy but shy CEOs may choose a more charismatic FD to take on some of the pressures of communicating and executing charm offensives.

There’s also the issue of FDs wanting to become CEOs. A conference board survey found that 53% of finance directors wanted to move up to chief executive, yet only 15% made the transition.

So how do FDs make sure they have both skill-sets in their armoury?
One answer clearly lies in training. The issue is not quality of people; on the contrary UK accountancy firms have no problem hiring from the top 10% of graduates, in contrast to the situation in the US, where the top achievers are more likely to go into law or medicine. However, accountancy training still tends to produce qualified individuals who have excellent technical skills but tend to be risk-averse.

This is probably the correct approach. People seeking to make their careers in finance do need to ensure that they are on top of the numbers and adept at managing risk. No company wants a wacky FD who’s a bit behind on the figures.

Standing at the crossroads

FDs who want to redress the balance, however, have several routes to take. They can study for an MBA, which typically gives a better understanding of business strategy than an accountancy qualification. They can undertake on the job training and they can learn from covering for the chief executive and picking up communications and strategy skills.

They can also use the freedom given to them by the latest enterprise resource planning systems to hone their business development abilities. In contrast to their predecessors, today’s FDs are in charge of automated machines that provide most of the details they need to have good controls.

Their job involves less bean-counting and more strategic oversight and coordination. They can consider setting up offshore and shared services operations, structuring the finance function in a way that puts it at the heart of their company and embedding a performance culture within the finance department. They can also spend time recruiting the right people, identifying high performers and developing long-term succession planning.

In short, they can develop all the skills that will stand them in good stead to succeed the chief executive one day. And not waste any time believing anyone who says that finance directors cannot become excellent chief executives, however split their personalities may have to become.

Peter Moller is a partner in consulting at Deloitte