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
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