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The seven hats of the FD (Third part)

Over the past two issues, we’ve looked at five distinct roles an FD must play in any organisation – from being a co-pilot to the CEO, to an engineer tending the machinery of business. Richard Young rounds out the seven hats series with perhaps the most dramatic roles – rescue service and muse.

In times of trouble, people seek refuge in cold hard facts. If the wheels are coming off, you want to know that a real expert – a disciplined, experienced, knowledgeable manager – is at the controls. Just ask the people of Italy and other European states currently run by teams of technocrats.

That means a finance director (FD) has to be capable, and brave, enough to step into difficult situations calmly and decisively. Richard Pennycook, CFO of FTSE 100 supermarket chain Morrisons, explained the storyteller hat in December’s issue. But as a seasoned turnaround FD, he’s also clear that finance leadership is crucial to rescuing tough situations. In other words, the FD has to be able to provide a rescue service.

“In a turnaround, it can be more complicated because you don’t always have all the facts to hand,” he says. “In a steady-state business, each audience expects you to be able to articulate exactly what’s happening. In a rescue situation, without all the answers, you simply have to be as open and honest as possible. You can’t shy away from difficult messages.”

And it’s not just during extreme situations, such as the one faced by Andrew Lewis when he was drafted in as a rescue service FD to turn round Avon Rubber’s £4.3m loss in 2008. As Stuart Bridges, CFO at insurer Hiscox, puts it, “A large part of any senior job is being a firefighter. You’re there to prevent things going wrong and to do something about it if they do. You have to be sure the ship’s heading in the right direction.”

Steering the ship in the right direction? That brings us to the final hat: muse. Finance is not always seen as a creative role, but it has at its fingertips the analysis and insight to make a huge difference to the way a business is run. That’s evident in the contribution many FDs make to strategy.

But there’s also a more fundamental shift going on. Our muse Siva Shankar, former corporate finance director at real estate giant SEGRO, calls it a shift from accountants who are good business people to business people who understand finance.

It’s a change that’s been noticed from the other side of the fence. BSkyB director of marketing strategy Danny Russell says, “Sky does have a very involved finance function. They’re often driving initiatives, not just evaluating them. It’s a very accountable company and finance colleagues here are very adept when it comes to discussing marketing.”

This is an extract from the Finance & Management Magazine, Issue 196, February 2012.

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Read the previous Seven Hats articles published in December 2011 (F&M 194) and January 2012 (F&M 195).