Pick up any summary of the modern finance function and a list soon emerges, in various guises, that defines what it takes to be ‘world class’. At their best, such lists are useful in evaluation, both for recruitment and benchmarking capabilities of an entire function. But at their worst, they can reinforce feelings of self-negation, an affliction perhaps seen more in the middle-to-senior levels of finance than in the more ostensibly glitzy functions of strategy or marketing.
The challenges of the role are increasing and the growing compliance needs and profit-affecting changes in reporting standards only add to the complexities. Finance professionals increasingly find themselves caught between the historic need to reduce risk and the current need to manage it. It is little wonder that few have real clarity as to how to develop themselves or the broader function.
Career and succession management, training, and experience have their part to play. But their effectiveness will be more powerful if parallel effort is taken in developing the right attitude, outlook and confidence.
The CFO role cannot be underestimated, particularly by signalling the successes of the function and recognising the people behind them. Find ways of strengthening this ‘mindset’ of the modern finance professional, and world class becomes more inspirational than pie-in-the-sky.
Mindset one: celebrate your (analytical) strengths and spikes
A year or so ago, whilst acting as a coach on a development programme for high-potential managers, I observed a thirty-something finance manager presenting some views to a marketing colleague. There were lots of ideas, but no numbers and little analytical rigour. In a coaching conversation afterwards, the justification was something like: ‘I want to position myself as commercially minded manager, not a narrow finance specialist.’
Such a mindset overlooks one of the essential strengths of the function – that of numerical and analytical strengths. Often, this ability puts the finance professional ahead of the rest – it’s what we refer to as a ‘spike’ ability. High levels of intellect are, of course, needed to pass the various professional exams.
Our research has shown that levels of intellect in a group defined as world class were far higher than a control group, and amounted to the top 15% of all executives. The typical CEO’s expectation of the finance function – of real analytical penetration, coupled with independence – affirms the need for the right mindset, that is, to maximise value through the application of analysis.
Mindset 2: Self-insight. use strengths to counter weaknesses, both personally and in a team
It is often said that finance people lack creativity, and in YSC’s experience, this is a stereotype that has some validity. The analytical power of most finance professionals lies in a somewhat linear and logical approach to problems, reinforced by training and the application of models. As a result, ambiguity can be over-simplified, problems framed too narrowly and problem solving more computer-driven than involving of others.
The modern professional takes active steps to manage the impact of his naturally convergent style, typically through a range of activities that harness natural strengths of logic. He or she may find a structured way to generate options, or always think of more than one option before making conclusions.
All this, of course, requires a high-order mindset – that of understanding the self and accepting personal weaknesses. This in turn requires a deep inner confidence to accept who you are and recognise and draw on the complementary strengths of others.
Mindset 3: Make commercial decisions your own
Commercial judgment is what it’s all about these days. It is often said that this requires the finance professional to get close to a business and add value to decisions. To many, this brings meaning to work and can pave the way to line management roles.
In YSC’s research, many of the finance professionals drawn from a sample defined as world class had worked in overseas roles. Many of these roles were market or country roles, which allowed close proximity to commercial decision-making and, perhaps more importantly, general managers with profit responsibility.
Such roles increase confidence and cultural awareness. Other ways of increasing commercial skills include: taking roles requiring quick decision making (eg deal-making components of treasury) or getting closely involved in trade negotiations.
Although such experiences help, they do not create the required mindset of owning commercial decisions. This is more to do with a sense of being responsible, with others, for the outcome of decisions – not simply providing data, analysis or advice.
Keith Sherrin, CFO of GE, in a paper from headhunter Spencer Stuart published last year, talks about being a ‘peer on the team, as important to results as the rest’. There is no blaming others for results. Rather, the function shapes all commercial thinking and holds itself fully to account.
Mindset 4: Surprise others by adopting an approach without boundaries
At a psychological level, finance people like boundaries that define, amongst other things, what they are responsible for and what they are not. Boundaries help manage emotion, often much suppressed in finance professionals, and focus effort. But with boundaries come constraints, often more perceived than real.
For example, it may be perceived that advertising spend is under the ‘control’ of marketing, and thus not seen as an area to be subject to the scrutiny of the finance function.
It is up to the finance profession to define the boundaries as broadly as they wish, while recognising that they need to be seen to be helping business partners, not threatening them. I once asked an FD of a top company an irritatingly simple but illuminating question: what did he see as his responsibilities in the role? His reply was simple: he saw no limits, there was nowhere he couldn’t go in the business to ensure proper rigour. He was also showing complete psychological ‘ownership’ of commercial decisions.
Defining boundaries broadly often jars others perceptions of the function and the people within it. In coaching finance professionals, a highly motivating target is to create surprise in a business partner with the quality of commercial and strategic ideas. Adopting the mindset of trying to surprise others is perhaps the best way to shift entrenched stereotypes such as ‘she’s not proactive’ or ‘he’s not strategic’.
Mindset 5: Gain personal confidence that supports business risk-taking
In the field of risk reduction, the finance professional has great credentials. He has undertaken a qualification at an early stage of his career (‘I wanted a professional base to build on’) to reduce career risk. He is somewhat cautious, adept at identifying risks to be avoided. He is often seen as that valuable member of a team with sobering advice and a keen eye for detail – what Belbin has described as a monitor-evaluator.
Yet, today’s demand is for the management of risk: the delicate balancing of risk, opportunity, innovation and reward, in a post-Enron environment of increasing need for compliance and accountability. So, the finance professional finds himself wrestling with a paradox – how to manage risk credibly and in a balanced manner, while being personally somewhat risk averse.
The required mindset is one of confidence – deep, inner personal confidence – to enable the possibility of errors, what has been referred to as the freedom to fail.
But this can only be achieved over time, particularly for those with more emotional temperaments, and needs to be worked at.
Mindset 6: Think followership, then leadership
Talk to a modern CFO about functional leadership and before too long most will talk about the talent agenda – and they do it for good reasons. Driving a talent agenda from the corporate centre allows the best people to be retained and their loyalties to the function strengthened, encourages learning across a business and lowers recruitment costs.
Indeed, our research shows that finance people from world-class companies remained for an average of eight years (in contrast to three years in the control group) demonstrating that world-class finance functions develop their own people.
Driving a talent agenda requires coordination, excellent administration and time. Sherrin reckons he spends a third of his time on human capital issues.
Aside from the talent agenda, however, many CFOs have relatively little to say about their own leadership or what leadership of the finance function looks like. One reason may be that some are not comfortable with their own leadership style, and feel that, somehow, leadership is for others – perhaps the larger-than-life and sometimes charismatic characters around them.
When coaching such individuals, my advice is to think about how to create followership. This can usually be reduced to two questions – who looks to you for leadership and what do they need/expect from you?
I ran a 360 deg feedback review on a CFO, perhaps the most systematic means of gathering the perceptions of key followers. One comment ran: ‘He’s superb at business strategy and financial appraisal. Unfortunately, only 30% of the company’s capital is spent in acquisitions. The rest results from the sum of smaller decisions in the operating companies hidden from the executive committee.
‘Somehow, he needs to raise the standards in the businesses to be near his own.’
Action planning embraced the FD allocating his time to enable him to spend more time in the businesses, to support a stronger talent management agenda, and the periodic pulling together of the whole function to assess priorities and act on them.
In short, the FD had begun to create a finance agenda for the whole business, and by enlisting a broader body of followers, had created leadership.
Introduce into your business a new analytical tool, for example game-theory
Continually sharpen your skills of financial analysis
Put numbers to everything – with pride, not apology
Feel confident of your analytical skills – chance is, they are higher than your colleagues
Find a structured way to greater options, such as brainstorming with others
Always think of more than one option before making conclusions
Work closely with an instinctive or creative thinker
Create time to allocate to the big issues
Take a role close to the commercial coal-face
Feel more responsible for the provision of value-adding ideas
Think and act as the majority stakeholder
Get close to line managers and share their problems
Draw up a fresh organisation chart of who you want to influence to maximize value – prioritise your time accordingly
Imagine your business without boundaries: think of one area where you could add real value. Then go and do it
Where ambiguities of responsibility exist, clarify them
Move roles to acclimatise to new situations and demands
Develop positive thinking about what goes right, as well as learning from what goes wrong
Build personal confidence outside of work through family, activities, or paying off the mortgage
Push yourself to the edge of your comfort-zone – daily
List your key stakeholders – what do they need from and expect of you?
Recognise that leadership comes in many guises: it’s not all about larger-than-life presence
Spend time with each direct report discussing how you can bring out the best in them
– Work towards leaving a better team in place before your next role. Leave your imprint
Robert Sharrock is a director of Psynergy