What Makes a Great Finance Director?

What Makes a Great Finance Director?

October 25th, 2016 // 5:44 pm @

finace-directormhI have had the privileged to work with several first rate Financial Directors, in different countries, cultures and business’s. They all shared a wider understanding of their role within the company and how this varied from how traditionally finance teams were viewed. The conventional historical view of finance teams is that they record the business’s historical financial performance, and report on that.

Good Financial Directors understand their role is much more than historical recording of finances, important though that is.

Accurately recording of how the business has performed, and presenting that information to the board and externally is important, and within that there is not only a need for accuracy there is also room to decide on how best to manage these results for the benefit of the business. Particularly on a balance sheet there is room for discretion on when and how to record results that can affect the business in areas such as tax liability.

Beyond that however good Finance Directors can be critical not only in showing the difference between financial results and the plan, but why there are differences and what is driving them.

The Financial Director I worked with in Hungary when I was Managing Director of H.J.Heinz could “Bridge” between the planned budget and actual financial results. This could often be a complex set of things that had changed, and he was skilled with his team at understanding each thing that had changed and its fiscal impact. He could literally show on one piece of paper a financial bridge between the plan and reality by each change that had happened.

In a complex business such as the business in Hungary which went from buying produce from farmers through producing hundreds of products, and selling across Europe this ability to easily understand what had happened in detail and its fiscal impact was invaluable.

Understand what has happened, why, and its fiscal impact is important, but the best of the Finance Directors can think forward. When making managerial decisions, the ability to understand the options in fiscal terms is critical; in fact without this information one is making decisions too much based on a gut instinct.

The process of looking forward and projecting the financial impact of a number of various options is a real skill, and in many organizations I have run it has been a separate function under the Financial Director, such was its importance.

Forward projections are critical both in setting strategy, and in individual business decisions. I have worked with companies who had very different routes to adding shareholder value, from added profitability in H.J.Heinz, through expanding a companies European foot print prior to flotation with Stepstone, to building companies for sale at Hcareers and Just ask Baby. To have a finance director who understood the best route to building shareholder value and who can model the financial impact of different routes to that goal is invaluable.

Once one has clear financial models of the various options moving forward, agreeing the correct way ahead is normally fairly easy.

I had a boss once who would say “Show me the money” when asked for almost any decision, and what he meant was show me the financial impact of this decision. A really good Finance Team can provide you with that.

I have been lucky to work with many excellent financial managers, and I thank them for their input.

 

 


Category : Blog &Management Technique

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