As an IoD course leader who delivers the “Role of the Finance Director” leadership programme to large numbers of finance chiefs, it is abundantly clear to me that a significant majority aren’t able to articulate – succinctly – what financial leadership is, and therefore what it means in practice.
On one occasion, a CEO who attended the course asked me precisely this question, in order to assess if his finance director was practising financial leadership or not! The look on faces of others in the room – all of them fellow FDs – was one of deep concern. Perhaps they were pondering how they might respond to such a question, or indeed if they were “on watch” too?!
In today’s world, with leadership so high on the agenda and boards focused on driving value, it’s a question that no finance director can afford to duck.
So, imagine for a moment your CEO or a non-financial board colleague asks you that question; how might you respond? Would you be able to articulate the key components of financial leadership, wholeheartedly and free of technical jargon?
Be mindful that such questions go to the heart of your role, and could easily be asked in a board setting. My advice would be to give it considerable thought now if you haven’t already done so. Nothing less than your reputation and personal credibility are on the line!
So, how might we start to define, articulate and demonstrate financial leadership?
Consider the following themes and reflect on their current status versus what your desired state might be – by which I mean try and relate each theme to your own organisation’s expectations, culture and values.
1. Map the future, including strategic input. Keep an eye on the outside world, in particular, but not exclusively, around financial issues. Use this to provide top quality input for decision-making.
2. Set out the financial philosophy and ethics of the organisation, including whether the organisation is risk averse or risk taking. Are the repercussions that would follow in the event of fraud, or by providing misleading information, clear to all?
3. Have a “vision” for finance, including articulating the best possible service that you and your team can deliver. How is this service organised?
4. Provide a performance framework and benchmarks, including challenging the organisation for superior performance. Communicate the underlying “touch points” in a digitised world.
5. Set standards, including relationships within the finance department, as well as externally and with the wider organisation.
6. Lead the finance team and invest time in their development. Aim to create a high-calibre team that you can trust and delegate to, thereby freeing up valuable time for you to focus on imperatives.
7. Provide the business with a safety net, ensuring there are no ‘black holes’, and be completely on top of cash, funding, working capital management and profit forecasting.
Crucially, financial leadership is about helping the CEO, the board and the wider organisation by getting behind the numbers and informing everyone what’s really going on in the business. It’s about transcending normal finance functions to provide more business intelligence, rather than being the historical accumulators of data.
I should say that by end of the course, the CEO who posed the question was fully on-board, as were the finance directors in the room. There was a palpable feeling of empowerment.
Raj Gandhi is an IoD course leader for ‘Role of the Finance Director’ and chief executive of GGV London. Prior to GGV, he was the chief financial officer of London Capital Group, global treasury audit manager & business analyst for Royal Dutch Shell, and treasurer of Empire Stores Group.