One of the more interesting issues that a finance director faces is when he concludes that the chief executive has to go. That's interesting as in 'may you live in interesting times'. The relationship between the CEO and the FD is an important plank in a company's structure. Most are fine. Most of the bad ones are the FD's fault.
It is important to remember that the FD’s main role is the positive one of supporting the CEO and supplementing his skills. And when there is disagreement there are positive things that a finance director must do to prevent the chief executive making major errors.
Simply saying ‘I can’t support you in this’ is usually enough. The FD has some clout in this. It raises questions if the finance director is arbitrarily sacked.
Style is a common cause of friction. Consultants can talk about the classic alternative management styles and which ones clash. But interestingly they also say that no one style is more effective than any other. Although it may irritate the hell out of you, you can’t sack anyone for his style; it has to be on performance.
And there has to be evidence on performance. It has to be fact not opinion.
It has to be presented at the right time in the right way. In the bad old days the evidence often simply did not appear or the facts were fuzzy.
But post-Cadbury there are tools available.
The Schedule of Matters Reserved to the Board is a good start. All big decisions have to be debated by the full board. A ‘super ego’ exceeding his authority (too often) gives good grounds for removal. As does consistently failing to present the big issues adequately.
It is vital to keep in touch with City forecasts of results. There is nothing like a profit warning to rattle the non-executives. Knowing how you are doing against your banking facilities can also be crucial. And keep good records of meetings – you’ll need them in the fall-out to ensure that it doesn’t backfire on you.
When you move from counting beans to spilling them, playing with a straight bat is the key. Avoid instigating corridor conversations. The finance director’s report to the board can be the key medium for the message.
Factual. Overt. Clear. Unemotional. ‘I have to report that the cash forecasts indicate that we will breach our banking covenants in six month’s time’.
Let the non-execs know how far you are from the cliff and how fast you’re travelling.
And at the end of the day it’s the non-execs who do the dirty work. You simply have to load the gun and pass it to them.