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The switched-on FD: five top tips

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7th Jan 2013
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A recent study of technology and media FDs by BDO revealed some of the secrets of wielding quiet influence within the boardroom. John Stokdyk shares some of their tips.

“Finance directors take on a lot of different roles and responsibilities in addition to their day job of recording figures. Amongst this group are a lot of reluctant IT, property, facility and HR directors,” explains BDO partner and head of technology media and telecommunications (TMT) Julian Frost.

“We wanted to celebrate some of the unsung heroes of the finance world.”

Five top tips for FDs

Act like a co-CEO Work in tandem with CEO, if necessary acting as the voice of reason, telling them how things really are. When managing upwards, the FD’s job is to guide rather than dictate.

Build a strong team Try to assemble a collection of people who bring slightly different perspectives to the table. Symbiotic relationships where people contribute different aptitudes aren't good for business. If everyone agrees too easily, the assumptions driving them are unlikely to be challenged.

Keep an eye on the fundamentals - Having an up-to-date handle on the cashflow and credit situation eases the firm’s path to finance and other opportunities. The FD should have good systems and people in place to allow them to delegate day-to-day tasks, but still stay on top of the figures.

Learn to share Talk with people who have been there before and done it in your sector. Business cycles and models are becoming ever shorter, so with less time to learn and react, it can be a big help to ask around to find people who are willing to share their experiences.

Stay curious Being an FD means being on a permanent learning curve, as there will always be a technical issue or task that other executives are not able to take on. Good FDs welcome the opportunity to keep on learning and to grow different aspects of their role, particularly in strategic areas such as M&A.

Source: BDO Hot 20 FDs in TMT report

Frost and his team did so by undertaking a research study on the Hot 20 FDs in TMT. The fast-moving TMT sector might be something of a financial hot house, but successful techniques there might be applied very productively in other industries. This article draws on suggestions from the BDO team that compiled the report, and from some of the FDs who took part.

Good people skills are an essential for an effective finance director. But the “Hot 20” TMT FDs all shared these qualities with financial competence and a measured entrepreneurial spirit that allowed them to strike a balance between facilitating innovative ideas while steering more aggressive colleagues away from unnecessary risks.

“The FDs we studied understood that and felt a strong responsibility to balance risk. They recognised you have to take some risk, but you can’t bet the whole business on one gamble. You have to take calculated risks - and it takes some unsung heroes to do that,” said Frost.

An overriding passion

The Hot 20 TMT FDs were fascinated with corporate strategy and had “an overriding passion and fascination for their sector, and an unfailing desire to want their companies to succeed”.

Frost described how the best FDs engross themselves in the sector in which they do business and make it their job to know what’s happening  and what their competitors are doing. “Sector issues were more top of mind than general management theories,” he noted, adding that some of those his team talked to were so into expanding rapidly that he imagined them to be up until 3am some nights searching for acquisition targets.

Relationships matter

Professional relationships were the next most notable feature of the TMT FDs’ working lives - with their chief executives, finance teams, bankers and investors.

“There are quite a lot of stakeholders they need to interact with and each of those groups requires quite a different set of skills,” Frost noted.

One of the FDs interviewed thought that managing upward was his most important skill, bringing a quiet influence to bear on a more gregarious, confident CEO.

“A big part of the role is influencing other board members. Sometimes the chief executive does need to be controlled to a certain extent. The FD needs to have confidence to stand up to them and challenge them on whether the best decisions are being made,” said Frost.

Acquisition - when companies can afford it - is a very popular route to growth in the TMT sector. CEOs see it as an easy way to add to the top line, but the FD may also be able to see other impacts that do not add to profitability - for example by taking too much out of cash resources, Frost explained.

“The FD has to look behind the headlines and perform a check. They have to trust their gut feel and actually challenge those decisions. We heard fairly consistently that FDs find that part of their job rewarding.”

But just as important - and perhaps more so, according to the report - is the FD’s relationship with their finance team

In an economic climate where companies cannot afford to throw money at people to gain their loyalty, they need to create a good culture and an environment where people enjoy being at work, Frost continued.

This can be hard to achieve in larger organisations where the finance chief may sit away from the rest of the finance team, but many successful FDs are approachable. As well as sitting within their teams, good FDs act as mentors to their people and get involved with their training. The ethos among them is on sharing information, not hoarding it.

The best FDs have very good relationships with their controllers - so that if they left the company someone would be able to take over right away, said Frost.

The Hot 20 report, meanwhile, commented: “Those who had the best working relationships were also those who were the least egotistical.”

Financial competence

Successful finance chiefs need soft skills, but the BDO report also noted that the best FDs are those “who do not lose their ability to manage the finances of the business”.

Several of the executives interviewed frequently frightented their colleagues by their ability to spot errors in accounts in an instant, and sought to ensure the accounts were ready for inspection at all times. Good housekeeping plays an important part in ensuring that they are able to cope with the higher profile aspects of the job. Michael Black, CFO at Nexeon, spoke of a meeting with a venture capitalist that turned into a five hour-grilling. The FD needs to be able to answer such questioning to provide confidence.

Keeping things tight in the finance department means companies can be better placed to respond to problems and opportunities. Attenda’s Paul Howard, for example, was closely involved in a £50m management buyout arranged with a private equity. The deal went though within two months and the FD carried out the due diligence himself. “Darwin found no issues with the business and said it was the best example they’d seen,” said BDO’s Julian Frost.

But once again, the FD’s capabilities operated on two fronts. As well as demonstrating his financial competence, Howard had maintained a close relationship with the financiers. Both factors helped him to get the required funding.

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