‘The role needs a commercially focused qualified accountant.’
‘You must be driven, commercial and have the capacity to manage considerable complexity and change.’
‘The successful candidate will have a high degree of commercial acumen and demonstrate a keen understanding of how to make a significant contribution to bottom-line growth.’
These are just three examples from past Financial Times job adverts for six-figure finance director roles. The focus on being commercial will not come as a surprise if you read the jobs pages or have noted the results of an ICAEW survey, where FDs ranked commercial skills as the most important competency for their role.
But what does being commercial mean? We suspect that if we asked 10 different people, we would get 10 different answers. Thinking through what commercial means could both enhance your career prospects and help us better understand the role of the FD and the finance function.
Defining Commercial
The Collins English Dictionary defines commercial as ‘having profit as the main aim’ – simple. Yet the accounting profession from its inception has grappled with defining and opining on what constitutes profit. Maybe getting bogged down in definitions is one reason accountants get labelled as uncommercial. Defining and agreeing performance targets is a key part of the finance function’s role, as is analysing performance drivers. But to what extent should the FD and the finance function get involved in delivering financial performance?
As shown in the last job extract above, the word commercial is often partnered with the word acumen – ‘the ability to judge well; insight‘.
So an FD with commercial acumen would at minimum be expected to provide deep and penetrating analysis of relevant information and make sound decisions that contribute to performance. What is more debatable is whether the FD’s role should extend to the pro-active search for profit opportunities such as new markets or acquisition targets. Is such activity within the remit of the FD? Should the search be left to others so that the FD can maintain his or her independence and therefore better support decision making?
Stereotypically, the FD is often portrayed as the person who needs to put the brakes on over-optimistic CEOs or marketing directors. The FD’s role in ensuring that initiatives are properly thought through and supported by appropriate investment analysis is clearly essential for business success. However, it is easy to see that insisting on such rigour and sometimes saying ‘no’ to proposals may result in the charge of not acting commercially. As an accountant, is your definition of commercial the same as your CEO’s?
When being commercial conflicts with professional ethics
Prior to a recent update, the ICAEW’s code of ethics opened with the following statement: ‘A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. Acting in the public interest involves having regard to the legitimate interests of clients, government, financial institutions, employers, employees, investors, the business and financial community and others who rely upon the objectivity and integrity of the accounting profession to support the propriety and orderly functioning of commerce.’
Not only does this statement suggest a much broader responsibility for commerce – ie, supporting the commercial system as a whole – it also highlights the difficulty of balancing commercial demands with ethical considerations. When does putting a positive spin on the annual report become providing misleading information? Would your CEO have the same opinion? Again it would seem that the FD could risk being called uncommercial due to differences of interpretation.
Implications for finance directors and the finance function
If being commercial is a key competence for FDs and finance professionals then greater insight into the term will be useful. Such insight would promote:
- a basis for finance to have more productive discussions with other stakeholders through the development of a common language;
- greater understanding and support of finance by others as finance demonstrates its commercial understanding; and
- focused training in commercial skills for finance professionals;
Unless we have thought through what commercial means we are unlikely to be able to develop commercial acumen in ourselves and others.
Accusations by line managers of accountants not being commercial often arise when cost savings are being discussed. This can be justified if accountants ignore genuine risks that cost cuts will lead to revenue reductions and a worse bottom line. However, where line managers are defending unnecessary costs, clearly they are the ones not being commercial. Commerciality can be in the eye of the beholder.
Finance professionals have to use professional judgment to strike the right balance between supporting new initiatives and challenging them. When challenge is needed, it helps if there is a good level of trust among the relevant decision makers. Being constructive and using the right language also helps. ‘That looks like a promising idea, how can we work together to develop it into something that is commercially viable?’ is usually preferable to ‘Waste of time looking at that – never going to make money!’
Overall, it's worth taking a step back and thinking through how you and your organisation perceive the term ‘commercial’. Such reflection will help you build your commercial acumen and drive business performance.
About the author
Rick Payne is technical manager of the ICAEW’s financial direction programme.
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