There was a time, not so long ago, when the Finance Director was purely a technocrat and, consequently, unfairly derided as a simple ‘bean counter’—so those who passed their chartered accountancy exams looked forward to a career of being gleefully ‘narrow and ‘deep’.
During the times of certainty, they had very specific questions to answer and they did just that, perfectly. They provided essential technical expertise and policed the processes and procedures of the organisation with zealous control.
They were not in the business of being popular but, apart from the Chief Executive Officer, they appeared to wield the most authority and power at the top of the organisation. The profession appeared to attract those of a more scientific bent with a head for numbers and with, perhaps, little interest in the ‘softer’ skills. In many respects, they were the original geeks.
With the rise and rise of computer power during the 80s and 90s, IT had not yet become strategic to the organisation, but it was a huge and rising cost. Consequently, fledgling IT functions found themselves uncomfortable reporting to the Finance Director.
This was during a period where most opportunities or challenges for the organisation could be dealt with in a vertical, neat and tidy manner. It would either be an HR issue, a marketing issue or even a finance issue but, on the whole, these could be dealt with purely and solely by that function.
With the changing nature of business and the advent of more enterprise-wide IT systems, it soon became very rare for any challenge and opportunity to be so neat and tidy. Instead, nearly every opportunity or issue cuts right across the organisational structure. Most new initiatives now demand cross-functional activity and cross-functional teams—and nearly all of them require the attention and input of the corporate finance function.
This demands essential collaboration right across the organisation that, in turn, has placed new demands on the capability and behaviour of the Finance Director. There was a time when the data alone would provide 100% of the answer, but in today’s fast moving and unforgiving markets—where uncertainty has become the norm—the data rarely provides as much as 70% of the solution.
In order to keep the organisation moving and functioning at pace, we can no longer wait for the data: we now have to make judgement calls—this is what we call leadership.
Along with the need for collaboration, this has started to paint a new requisite profile for the new age FD and, in many respects, this is what breeds the term Chief Financial Officer (CFO).
In recent history, when any business goes through difficult times, which lead to a change in the incumbent CEO, there tend to be two different types of candidates. If it is assumed that the business outlook will be difficult, then the preferred choice tends to be a Senior Executive from one of the control functions. This is nearly always Finance.
If the business outlook is more positive (or requires transformation), then we tend to see the CEO usually coming from one of the revenue-generating business units.
In quite simplistic terms, in times of change or growth, firms tend to go for the most enterprising CEO. In times of difficulty or constraint, it is highly likely that the appointment would be a practising CFO.
In recent times, we have seen the appointment of a number of new banking CEOs and, after the difficulties of the global financial crash, we witnessed the appointment of a number of former investment bankers. This appeared counter-intuitive and, indeed, a few banks have already paid a heavy price for their audacity.
However, with Deutsche Bank making the media headlines for all the wrong reasons, what appeared to be a safety-first appointment of their CFO to the CEO’s office appears to have backfired quite dramatically.
The CFO will always remain a key player, both for the Executive Team and the Board of Directors, but nowadays being a technocrat alone is no longer enough. What is needed is a little less management and a lot more leadership. The new age CFO needs to be an expert communicator, strong team player with the ability to influence and persuade not just use the blunt instrument of command and control. Their increasing influence and ownership of the corporate strategy require a more rounded business leader.
Those thinking of studying accounting and hoping to become a CFO, should not be put off by the new demands placed on the CFO, as this has now become the price of entry to all who would wish to sit in the top executive teams.
And, oh, by the way, you still have to be a quality technocrat but nowadays, that is secondary to the ability to lead and influence.
“Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.”