The Other C’s On The Board

One of the funniest things I’ve heard in a while came from a very unexpected source – accountants not being known for their sense of humour – the ICAEW’s Chief Financial Officer Conference. One speaker got a bit too immersed in management-speak and bought the house down answering a question when he referred to his Board colleagues as “the other C’s on the Board”.

The conference hall erupted into stifled sniggers as the innuendo dawned on the speaker.  Whether or not he meant to do so, he had revealed some CFOs’ attitudes towards other Board Directors, in a debate about whether today’s financial leaders are ready for tomorrow’s demands of their finance function. 

“Times are Changing”, “The Only Constant is Change” – statements bandied around so frequently in recent times that they’ve almost become clichés.   But they are undeniable facts in an era of alternative truths.

They are also realities that carry huge implications for business – and it follows that those implications create new pressures for the leader of any finance function.

The Finance Director or Chief Financial Officer is steward of the company’s resources.  If the CEO is the visionary setting the course, the CFO is navigator – plotting the route and measuring progress.   In times past this was measurement, analysis, planning and forecasting – a role based around four-cornered logic and attention to detail.

But with companies and their leaders subject to ever greater scrutiny from the media, social media and stakeholders, the FD / CFO can no longer contribute to decisions solely from a financial perspective. They must be aware of customer and consumer behaviour and cognisant of the public perceptions of all key decisions.

Dynamics on this scale need different skills, and the FD / CFO to exercise different muscles.  They must consider not only what is financially possible, but also socially acceptable.   As technology exponentially increases the pace of change they must work collaboratively with the IT and HR function to enable the business to adapt to new risks and opportunities.

Their relationship with commercial functions like Sales, Marketing and Product Development changes as the need for agile, dynamic investment is required as opposed to traditional static budgets and cost control.

This requires breadth of understanding and a different perspective / approach.  The old relationships with the bank, then investors and the CEO still remain – but even they change.

Change requires space to think, which requires the finance leader to consider efficiencies within the finance function itself – to create the capacity for creating new insight rather than just financial information.   Which requires a review of skills required from the finance team.  Transformation of the finance function becomes a microcosm of the change required in the business as a whole.

The FD or CFO is typically the person compiling and providing evidence to back up the story the CEO needs to tell stakeholders.  The best finance leaders know their business inside out and can provide valuable information to their colleagues on the board – but just because they know how the business works and how it performs, are they well placed to drive long-term performance?   

At the CFO conference in London there was a very interesting question – is the CFO the natural successor to the CEO?   The answers and debate were very interesting (with a biased audience coming down on the side of ‘of course they are!’).    I was left thinking that only in very rare cases is the typical FD / CFO the natural successor (unless it’s a short-term appointment to maintain status quo).  

For the typical finance leader to truly drive long-term performance they must make the shift from technical expert to commercial leader and assert their leadership.  They must lead the charge on transformation, drive the talent agenda and empower the rest of the business to manage real-time performance.    

Most importantly of all they have to listen to people (and not just the numbers).    A more powerful communicator and collaborator is a more powerful CFO.