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The seven hats of the FD (Second part)

Last month we looked at how FDs should be good co-pilots (sitting alongside the CEO) and storytellers (turning the numbers into narrative). This month, Richard Young explores the next three ‘hats’ they must wear, and discovers how a mastery of processes and systems, being a business arbiter and acting as trusted counsel are also crucial to the FD role.

Most FDs agree that one of the defining aspects of their role is the ability to see both right across and deep within their organisations, in a way no other director can. Not even the CEO routinely surveys the kind of granular data the FD must – while at the same time taking a strategic view of operations.

Our next three ‘hats’ for FDs – ‘engineer’, ‘magistrate’ and ‘consigliere’ – speak to this breadth of vision. ‘As FD, you see the business from start to finish,’ says Andrew Lewis, group FD of Avon Rubber and winner of Young FD of the Year at the FDs’ Excellence Awards 2011, supported by ICAEW.

‘All those different elements come together in the profit and loss (P&L). Unless you have a handle on that breadth of activity, you’ll only ever know the numbers superficially – and a board is right to expect the FD to know the organisation a bit more deeply than that.’

So while it’s important to be a great engineer – having a feel for the mechanisms that allow the organisation to operate and taking delight in designing them for maximum efficiency – a good FD marries that to broader objectives.

‘You shouldn’t micro-manage processes,’ says Stuart Bridges, CFO of FTSE 250 insurer Hiscox. ‘And it’s not just about delivering a business case – a good FD can make a decent business case out of anything. It’s whether the reality of it at a higher, commercial level makes sense.’

So being an arbiter of smart decision-making is also key. A good magistrate listens to the evidence, evaluates it in context and makes judgments that everyone can respect. ‘It’s important to be fair and for people to recognise that,’ Bridges adds. ‘You should be seen as someone with the influence to change a decision if it’s wrong – and be approachable enough to have others challenge your view.’

Finally this month, we have the consigliere – the trusted advisor and close confidant(e) of those in power. The word derives from mafia families – it was popularised in the Godfather movies – and hints at a need for the FD to be a discreet, wise and knowledgeable counsel to both their board colleagues and managers more generally.

The engineer

In many organisations, the FD takes board responsibility for a wide range of departments. And they’re often the only director with formal business training. So understanding how the business functions – how its systems and processes knit together to deliver a platform for value – is an essential part of the role.

This is an extract from the Finance & Management Magazine, Issue 195, January 2012.

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