Do you need an FD?

To attach the need for an FD purely to turnover or profit is not a robust guide and, my experience tells me, it’s better to think in terms of staff numbers, and the management of such, to gauge whether the time is right to make an appointment.

To stick my head above the parapet and say an actual staff number puts me at risk of getting it wrong – but my approximate measure would be 35 employees. When you reach this number, systems and procedures need to be more structured, and communication more formal.

The entrepreneur who has, to this stage, run the business on the hoof with a good dose of intuition, may find the shift to a more substantial business model puts him out his depth in terms of analytical skills and, almost always, financial communication skills. 

The need could have come as a result of a third party, possibly an investor or funder, requesting that systems are moved up a notch or it could be born out of a personal realisation that actually ignorance is no longer as blissful as it once seemed.

So, who to choose? What skills are desirable and which are essential?

The FD is the most important executive on the board, after the CEO and is often hated and revered at the same time by the other board members. It’s a difficult role to sustain when the business doesn’t perform well as often the FD is blamed.

Financially trained, interpersonal skills are not top of the list of must-haves for the usual ACA student. Yet, to be a great FD, the ability to talk to, and understand, others who may not have the same levels of interest financially, or the ability to interpret numbers, requires tact, diplomacy and exemplary communication skills .

A great FD will be a problem solver as well as one who can identify problems in advance of them becoming insurmountable – someone who is not afraid of being the whipping boy or girl when needed but can stand and hold their ground when everyone else falls apart.

The FD of this decade needs to be flexible in how they work in an owner-managed business. They may have more operational duties than, for example, in a multi-national business. As funds remain tight for the foreseeable future, rolling up their sleeves more than they may wish to may also be essential. 

A full-time FD is often an over indulgence and portfolio FDs are becoming very common – just make sure they can give you their time when you most need it, as often their real value is cyclical rather than constant.

Research by Deloitte says the FD of today has four vital roles: catalyst; strategist; steward; and operator. Some of these skills are literally poles apart, so much so that getting, and importantly keeping, the right person is a challenging task in its own right, never mind finding the person with a split personality that you can actually understand.

So, if you want your finance director to stay with you, recruit based on business acumen and skills rather than pure numerical accuracy.

Conformance, as they say, is important but performance so much more.

Jo Haigh is head of corporate Finance for MGR. Email her at Jo.haigh@mgr.co.uk

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