From CFO to CEO: FDs take the tiller

Three recently promoted FDs tell us why their background makes them ideal leaders in troubled times.

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Last Updated: 09 Oct 2013

If there's one group of senior executives who are doing better out of the recession than most of their boardroom colleagues, it's finance directors. In good times, FDs often have a bad time. When business is booming, growth is all and marketers and dealmakers are in the ascendant. Against such a go-getting backdrop, being the one holding the purse-strings is not going to win you any corporate popularity contest. Chances are that everyone, from the CEO down, has a list of winning wheezes on which they are eager to splash cash. As FD, it's your job to stop most of it being spent: a vital but often thankless role, described by one old hand as like being 'the one who turns the music off just as the party is getting started'.

But as times change, so the demands on organisations change. These days, big deals are off the menu, belts are being tightened and cash is indisputably king once again. And so FDs have moved upstage, out of the shadows, and are doubtless relishing the expectant hush that descends on board meetings as they produce, with a theatrical flourish, the latest cashflow forecast.

The ultimate expression of the rising fortunes of the nation's FD class is the number of former finance heads who have stepped up to the top job in recent months. Jeremy Darroch, now CEO of thriving BSkyB, was previously CFO there. Peter Voser, who takes over as CEO of Shell this month, is another. So eager was Voser to make his mark that he announced a huge restructure several weeks before officially starting the job. David Smith, former CFO of Ford Europe, is now tackling the uphill task of steering Jaguar Land Rover through the downturn. And as for BT, the troubled telecoms giant is now littered with beancounters in high places. Group CEO Ian Livingston is a former BT CFO, and Hanif Lelani, who is in charge of getting BT's loss-making Global Services division back on an even keel, is both boss and number-cruncher combined. Not only has he been chief exec of Global Services since last October, but he is also BT's overall CFO too.

So why are FDs taking pole position just now? Well, in hard times they have some big advantages. The first is that, after the CEO, they are the only people in senior management who can see the business as a whole. Secondly, finance is the first language of business, and FDs are the native speakers. The CEO who came from engineering or sales has had to learn that language as an adult, and some may never achieve quite the same level of fluency.

Then there is the fact that many of the issues at the top of the corporate agenda at present are smack in the middle of an FD's field of expertise. The availability of credit has been drastically reduced in the past year, to the point where even well-managed profitable companies are having to think very hard about how to maintain sufficient liquidity. Who is the person best equipped to manage this? You guessed it: the FD.

Similarly, lenders and investors take a hard line on funding these days. So if you need cash, you have to find it within the business. It's not a case of schmoozing bankers but of educating colleagues. You'll need to deal with the purchasing manager, who wants to buy four years' stock of a particular line (because it reduces the unit cost), or the salesperson who sees offering extended payment terms as a painless, cost-free way of closing the deal.

There's probably quite a lot of pruning to be done, too. In good times, it's easy to move into markets that don't really make sense, or that make money only at the top of the cycle. Many businesses have been living with a number of such drags on profitability, which they now cannot afford. A good FD won't need to be told what they are - he or she will already know.

When it comes to thrift and saving money without fatally wounding the business, FDs are good at that too. Indeed, many will be relishing the opportunity that tough times offer to crack down, finally, on the waste and inefficiency that have been driving them crazy for years.

But perhaps the biggest challenge for FDs - especially those who want to make it to the very top - is the same as it ever was: handling the relationship with the CEO. No matter how good they are with the numbers, no FD will show themselves in the best light if they can't keep the CEO onside. But they also need to avoid being seen as a bag carrier for the big boss. Constructive tension is the name of the game. The FD of a FTSE-30 company expressed it thus: 'Leaders are not normal people. They are powerful, but often flawed. The FD has to be the department of hard questions.'

The final feather in the FD's cap is his or her value as an educator. If everyone in the business understands the financial reality that they're in and why they need to act with discipline, control is maintained but friction is reduced. This is a job that calls for the ability to communicate in non-financial language, as simply and as persuasively as possible, and FDs who can pull this trick off really have got it made.

So don't be too surprised if you see a certain spring in the step of the best finance directors at present. Even if they haven't got their eyes set on the ultimate boardroom prize, they're enjoying their time in the spotlight. They know what's required of them. It's what they were born to do.


GAYNOR COLEY, MANAGING DIRECTOR, EDEN PROJECT

'I believe in education, empowerment, giving people from all walks of life the chance to make the best of themselves,' says Gaynor Coley. So why train as an accountant with a City firm and then take a job in a bank? For Coley, managing director of Cornwall's famous Eden Project eco-park since 2001, it made perfect sense.

Accountancy wasn't her first choice. She'd originally trained as a teacher, driven by a belief in education as the key to economic empowerment; but there was a missing piece in her view of the world. 'I became fascinated with the idea that if you couldn't get your hands on resources, you would just be an idealistic dreamer and not an agent of change.'

Her involvement with the Eden Project began when, while working as FD of the University of Plymouth, she was invited to meet 'three madmen who want to build the eighth wonder of the world in an old clay pit in St Austell'. She asked the obvious FD questions: 'How much will it cost?' 'Eighty million pounds.' 'How much do you have?' 'Three thousand pounds,' came the answer.

Undaunted, she left her secure job and solid pension in 1997 to set about raising the remainder. The project has been a resounding success, with visitor numbers way over forecast and an estimated contribution to the local economy of £900m. The Project may be a charity but Coley has no problem with the profit motive. 'I don't like the term "not for profit" - it's "profit for a purpose".'

Coley is clear that information - particularly financial information - is power, and is determined to share that power. She believes that even the most idealistic campaigners have an innate understanding of financial basics, if these are properly presented.

'It's very rare to find someone who is truly determined who won't take on board the practicalities,' she says. 'If you can distinguish between money as an end and money as a means, and explain things with as much simplicity as you can muster, you can bring a lot more people with you.'


CARL FRANCIS, CEO, P2i

US-born Francis has been CFO of several large companies - including Ireland's largest textile business, Adria. A turnaround specialist, he is characteristically direct about the benefits of a financial background in this line of work. You need a crystal-clear view of where you want to be and an obsession with control, he says - things that come naturally to accountants.

But his career took a different turn when he was approached by P2i. This was an opportunity to be grasped, not a problem to be solved. The company is a leader in liquid-repellent nano-coatings, a technology originally developed for military use as a defence against chemical weapons. It now has civil applications in markets as diverse as footwear, electronics and manufacturing.

Francis admits that the P2i job has required a big change in his style - it's a young, knowledge-driven company with only about 30 staff, of whom nearly half have PhDs. As a consequence, says Francis, 'I needed to turn my volume control down a few notches to reflect the culture. This company needed steering towards commercialisation, not turning around from disaster.'

It's a change that has been reflected in his own choice of FD, too - he has gone for someone approachable and collegiate rather than an executive from the boot-camp branch of financial management.

If his style has changed, his overall approach has not. Focus is crucial, just as it was in a turnaround. In its early days, P2i explored many different markets, but Francis is now seeking to develop only the most promising opportunities. And with himself and his FD on board to sprinkle pixie dust over the commercial side, P2i's R&D boffins can get on with working their own, very particular brand of nano-magic in peace.


MICHAEL QUEEN, CEO, 3i

Having been 3i's group FD from 1997 to 2005, Michael Queen is in no doubt as to the benefits of a finance background when stepping up to the hot seat. 'The most important advantage is that, as FD, you see the whole of the business. It gives you a top-down view of how things work and why,' he says. Especially beneficial if, like Queen, you have to assume control of the organisation in a hurry - his appointment in January came after the abrupt departure of previous incumbent Phil Yea.

The FD also has an unrivalled opportunity to make great contacts, he says. 'As FD, you can build relations with the company's shareholders and advisers, and you have more board access than anyone else, apart from the chief executive.'

What's more, he adds, FDs are expert at handling what the Americans call 'granularity' - another key aspect of operating in a recession. 'The emphasis now is short-term and detail-oriented. NEDs (non-execs) want more detail, regulators want more detail, auditors want more detail.'

His familiarity with the nuts and bolts of the balance sheet doubtless helped Queen pilot 3i through the ticklish negotiations that preceded its £732m rights issue in May.

But being good with detail doesn't mean you should hide behind it. Leaders need to be seen to lead, especially in hard times. 'You need to communicate more as chief executive. The most important thing I can do now is to get out there and talk to all the constituencies across the business - employees, shareholders, analysts. Everyone is anxious right now, and it's very easy for people to get the wrong impression if you aren't talking to them.'

Queen also thinks it's crucial to get some front-line time under your belt - as he did, running 3i's high-profile infrastructure business for the past four years. 'It's not enough simply to have been the FD.'

Queen says he is less ambitious than he was, but thinks that, paradoxically, it will make him a better CEO. 'Ten years ago, I would have brought a lot of energy to the role, but would probably have done all the wrong things. I will do the job much more effectively now.'


Alastair Dryburgh has been FD of six firms, albeit at one for only 10 days. He is now head of Akenhurst Consultants, and works with the Institute of Chartered Accountants as mentor to future financial stars.

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