A business’ finance director and its chief executive are an odd couple. The FD – often ingredient number one to a company’s success – needs to be able to stand up to the CEO who, in turn, might be rather resistant to any challenge on their authority. “It is my business and I know it best”, is a typical mantra.
But the relationship needs to maintain; otherwise, the business will struggle. The odd couple needs chemistry, a balance of personalities and skill sets. Count in the company’s chairman and you have a triangle whose relationships are the make-or-break point of the business.
“You need a team that is pulling together in the same direction. You need camaraderie and you need alignment of interest,” says Robin Pugh, a serial private equity-backed chairman who has sat on over 30 boards. “As chairman, you need people working together without bickering. The worst thing you can have is factions.”
Pugh is speaking at The Entrepreneurial FD conference, organised by Real Business’ sister title Real Deals. Held this week (November 27th) at the London Marriott Hotel Grosvenor Square, over 150 investors, advisers, bankers and finance directors debated the challenges – and opportunities – that life as a private equity-backed FD can bring.
The interplay between FD and CEO was a main point of discussion. Business leaders know that it is crucial – and particularly difficult to get right.
“Complementary skill sets are vital,” says Cate Poulson, who specialises in building senior management teams at portfolio companies for the Business Growth Fund. “Each party needs to understand and appreciate the strength and weaknesses of themselves and others and allow the appropriate person to take the lead at the appropriate point.”
“Finding an FD with the strength of character to gracefully challenge that assertion is very important,” says Poulson. “You need an FD alive to these sensitivities but strong enough to challenge them. That way they can show the CEO the value that a really great FD can bring.”
“I’m always worried when a recruitment process goes too smoothly,” adds Sarah Hunt of EquityFD, which specialises in placing finance directors in exit-driven situations. “If it all seems to simple it is often because the CEO has no intention of listening to the FD anyway.”
Ensuring harmony within the top team, of course, begins with hiring and it is counter productive for either party in a recruitment process to sell themselves at the expense of honest dialogue.
“As a CEO, when you are recruiting an FD, it is vital you are honest with yourself about what you are looking for,” explains Richard Butler, chief executive of ECI-backed Stewart Group. “You need to ensure there are no surprises for that individual. The last thing you want is this person feeling aggrieved at having left their previous position.”
Once the triumvirate of CEO, FD and chairman is firmly ensconced, the trick is communication.
“We work on the principle of no surprises,” says Butler. “If I go into a meeting with shareholders and the FD springs something on me then I am not going to be very happy.”
Indeed, friendly disagreement aside, presenting some kind of united front to investors is important.
“Obviously you can say different things in different forums. You have to plan how you are going to present the business and plan how you are going to communicate with each other,” says Butler.
“That said, I want the FD to be able to pick up the phone to the investor or chairman at any time. Likewise, I want them to be able to communicate down the management team without any fear of trampling on toes.”
“It is all about communication, communication, communication. There shouldn’t be visible disagreements within the triumvirate. Disagreements should happen behind closed doors,” says van Breda. The exception, he adds, is if that disclosure is planned. “Board meeting disagreements can be okay as long as the triumvirate know it is going to happen. You want the other board members to do their job after all. They can help set fair any misalignment.”
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