The cream of British industry gathered in the middle of the English Channel late last month. Some 300 finance directors got together aboard the luxury P&O liner, Arcadia, to air their troubles and swap war stories with colleagues at the second annual Finance Directors' Forum.
Given that the organisations represented ranged from the family-owned Blackpool Pleasure Beach to oil giant BP Amoco – a concern whose turnover currently tops £41bn – the extent to which the problems facing FDs in Britain today are similar was startling.
Fear and ignorance is rife in British boardrooms. To say that the role of the finance director in UK plc is changing is something of an understatement: the role has been in a constant state of flux for at least 15 years. But the changes that today’s finance directors face are different: in many ways they are more serious and, in almost every area, identifying how FDs should adapt to cope is proving increasingly elusive.
In a nutshell, the easy answers have been found: with employee share schemes, staff are now incentivised; with rigorous cost analysis, supply chains have been pared; and with Cadbury, Greenbury and Turnbull, corporate governance conundrums have – by and large – been solved. Now it is time to address the tougher questions. How exactly do you measure business performance and success? Is it all about the bottom line, or do companies owe a debt to their environ-ment in the widest sense?
How can a modern company ensure its message is communicated effectively to an increasingly sceptical City, an often-hostile media, and a public whose cynicism is expanding exponentially? And what the hell, most FDs are asking themselves, does electronic commerce mean for my business?
If these concepts seem nebulous, it’s because they are. The role of the FD is no longer about the ‘techy nuts and bolts’ – to use the phrase of the FD of one multinational present – it’s about strategic, board-level thinking decisions.
The extent to which these, and other questions, trouble FDs was evident in spades aboard the Arcadia. ‘With the media and the internet, we live in a global goldfish bowl,’ Mark Goyder, director of the Centre for Tomorrow’s Company corporate think tank, told a workshop.
Meanwhile, at busy discussion groups like the one on innovations in IT a couple of decks above – led by former ICL chief scientist Bill O’Riordan – delegates freely admitted they were there not because they had a grand vision for e-commerce but because they feared their rivals were taking the advantage.
One FD – of a FTSE 100 service company – pointed to the problems of demanding clients. ‘You need to keep half your diary clear,’ he said. ‘It’s no good getting a call from a client and saying you can’t see them until next Monday when the problem needs solving this afternoon.’
Nigel Stapleton, Reed Elsevier chief executive and formerly an FD, agreed. ‘There is the considerable challenge of allocating one’s time to the really important aspects of the FD’s job,’ he said.
That finance directors were so willing to address these questions – and where necessary admit their ignorance – was encouraging. But many fell victim to an all-too-common human characteristic: when uncertain about what to do, concentrate instead on the easier task of identifying what not to do.
In this vein, probably the most talked about company of the weekend was one that was not represented: Marks & Spencer.
Much-envied just a year ago, the past 12 months has seen the retailer provide some object lessons in how not to run a business by failing to detect that its range of goods was simply unpopular.
‘Today at every lunch and dinner party conversation, everybody says my wife hasn’t bought anything in Marks & Spencer for 12 months,’ said Goyder. It wasn’t the fact that the company had made a mistake with its range, he added, it was the fact that it did not have adequate mechanisms in place to pick up its mistake that provided a good sharp business lesson for those present.
This wave of uncertainty about the exact role of the FD is understandable. It takes an FD up to 18 months to become fully effective in their post, said Stapleton, and for the past 18 months, most have been preoccupied with millennium bug-related problems.
This phase has also seen the rise of the concept of shareholder value – a worthy idea but already something of a cliche. It was a phrase conspicuous by its absence aboard Arcadia, however. And that’s probably a good thing, suggesting that FDs are now worrying about the reality, not the abstract concept.
If the forum was about anything, it was about how to learn from the best of your peers and how to avoid making the mistakes of others.
As one attendee said: ‘There was nothing earth-shattering here, but there were a few things that will make me go home and think.’ Turning that thought process into concrete action is easier said than done. But, with FDs leading somewhat iso-lated lives – compared to, say, accountants in practice – securing 300 on board a cruise ship at sea offered perhaps the best chance of achieving that ideal.