5FACULTY OF FINANCE AND MANAGEMENT

THE FINANCE FUNCTIONFINANCE & MANAGEMENT June 2005

From practice to industry –from product to overhead

Speaking first, HelenJesson – KPMGtrained, a formerFD within UnitedBiscuits and groupdeputy FD with ESAB– outlined the cultureshock that accoun-tants can expectwhen moving from practice to indus-try.

As she revealed, the ‘good news’ of nolonger having to fill in time sheets iscounterbalanced by more challengingchanges. Less welcome is the fact thatthe accountant in business is no longer‘the product’, but an overhead. And, assuch, he or she will find it much moredifficult to prove their worth.

Also, on the whole business organisa-tions are less able than accountingpractices to provide smooth jobprogress. In the profession you workfor the partner and have staff workingbeneath you helping you to deliver aresult. In industry, however, the users

of the information you provide cancome from any function and have noorganisational control over – orresponsibility for – you. You may berequired to supply information to sev-eral thousands of people and to havesome understanding of what their jobsinvolve.

In business, too, individual/depart-mental responsibilities are less clear.For example, in the event of carryingobsolete stock, who is at fault? Theheads of purchasing, marketing, logis-tics and production are all possiblecandidates, who have their own repu-tations to defend and will vigorouslydeny responsibility. Nevertheless,wherever the buck stops, the bottomline is that if the necessary cash is notgenerated, the FD will not be able topay salaries. So it is most crucial forfinance that the mistake does notrecur.

Meanwhile, the organisational culturecannot be ignored. It is important toknow who is ‘really’ in charge, and asJesson put it “to try to tag on to them”.Contacts, she added, can be just asimportant as skills for promotions.

Further, although it is important tounderstand what others do, you willfind – unlike in practice – that you areno longer able to do the job of all yourstaff. For example you may not knowhow to process invoices correctly forvalue added tax or intrastat (theEuropean Union trade data collectionsystem), how to deal with the comput-er systems your staff use, or all the pos-sible reasons for an invoice not beingpaid – you will need to listen to thosewho do.

At the same time, once you have leftpractice, others around you will not allbe accountants, and you will need tolearn to express the numbers in a waythey understand. In turn you mustunderstand their knowledge andresponsibilities to be able to help them.

As she concluded, the transition toindustry means you need to adapt tobeing an overhead, be flexible in amilieu where roles, responsibilities andaccountabilities are more blurred, besensitive to the culture, listen to staff,and promote understanding of whatyou do while developing understand-ing of what others do.

Finance directors – the reality

What is the reality of operating as a finance director (FD) today? At aspecial Faculty event, five Faculty committee members, all FDs with awide range of experience – and chaired by a management consultantspecialising in transforming finance – gave their own perspectives onwhat to expect in the job, and the skills required to do it well.

How to make the move from financialcontroller (FC) to FD? What particularskills to cultivate and deploy oncethere? Where to strike the balancebetween the book-keeping and strate-gy-setting elements of the job?

These were just some of the questionsaddressed by the five speakers – all FDsof considerable experience – speakingto a packed hall of present and puta-tive FDs at March’s ‘Finance directors –the reality’ event.

Chairperson PennyBickerstaff – formerFD of IndependentTelevision News,now a consultantwith clients includ-ing many FTSE 100companies – imme-diately established aconvivial air to theproceedings, inviting those present todo a mini-networking exercise withpeople sitting near to them. The result

was a positive surge of animation. Shealso took straw polls before and at theend of the event to see how manyattendees were, or aspired to be, FDs.

Encouragingly, the ‘wannabe’ factionhad swelled significantly by theevening’s close. But that was only to beexpected from an event packed withserious, generally-applicable goodadvice, but also a number of personalanecdotes giving the lie to the ‘bean-counting’ perception of the job.

PennyBickerstaff

Helen Jesson

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Skills sets and personaleffectiveness

John Tranter, previ-ously with EatonWilliams and nowfinance director ofthe Mencap charity’shousing and supportservices, focused onthe different skillssets necessary to dothe job of FD, and how to combinethem for personal effectiveness.

Tranter looked first at the differentfacets of the job and hence the vari-ety of roles the individual FD isrequired to play. The book-keeperrole, he suggested, is the most funda-mental of these – making sure thatthere is a good set of books and thatyou understand them.

In controller mode, though, adequateskills at budgeting, planning andforecasting will “prevent the mid-night sweats when you wonder ifthere’s enough to pay the salaries atthe end of the month”. Thirdly thereis the function of commercial manag-er, in which you work alongside thecommercial and sales teams, ensuring

quality and service delivery. Finally,comes strategic partnership. This partof the FD’s job he described as, “thesexy bit, where you get your BMW”.

Nevertheless, he pointed out, thismost exciting part of an FD’s dutiesalso loops right back to the more pro-saic book-keeping, as the FD has tounderstand how changes in regula-tions such as financial reporting stan-dard 17, international financialreporting standards, Sarbanes-Oxley,for example, will impact the business,and the outside world’s perception ofthe company.

Tranter next looked at “your team”,which he defined as all stakeholderswho help the FD and companyachieve their aims. Hence this catego-ry includes not only the people whoreport to you, but also the marketingdirector and heads of other divisions.As he stressed, once this wider circletrusts and relies on you, and you areuseful to it, you are on the way tobecoming successful.

Also – to embarrassed audience self-recognition – he pointed out that it isoften politic (and genuinely useful)to forego the relative pleasures of a

good session with a spreadsheetbehind closed (office) doors, and togo out and engage with people in theorganisation.

This interaction with people, he con-tinued, should also involve attaining adegree of self-knowledge and of howyou are perceived. Elements of yourthinking are going to be ‘unknown’ toothers unless you make the effort toreveal them. And it is this ‘unknown’factor that can lead to unnecessarymisunderstanding.

Moving on to organisational ‘politics’,already touched on by earlier speakers,he reiterated their importance, and thesheer folly of believing that giving thejob 110% of your effort is any guaran-tee of reward. He said that there arevarious mixes of integrity and politicalability with which you can operate.However, he advised, no-one can real-ly afford to operate in a high integrity,yet politically naïve way.

Lastly, he ventured that, while anyFD’s skills would grow during thecourse of a career, within that growththe expansion would almost certainlybe greater in the personal, than thetechnical, skills.

Kelly Smith – lat-terly chief financialofficer continentalEurope and Africa,Research Inter-national – describedhow a career inindustry can devel-op, and how bestto negotiate it.

Having been promised the worldwould be her oyster as an accoun-tant, her own post-qualificationexpectation of “a steady progressionupwards”, has not entirely beenborne out by experience, Smithadmitted. The reality had been lessof a climb up a solid ladder, more ofa roller-coaster ride.

As she went on to explain, manythings in an organisational careerwill be beyond your control.Reorganisations can mean jobs dis-appear through no fault of theincumbents. Flatter organisations

may mean that while you are doinga good job, there is nowhere higherup to go. Also, politics are ever-pre-sent, and there is always the possi-bility that your face does not fit.Indeed, while not denying the use-fulness of developing good relation-ships, Smith stressed that there is lit-tle point in trying to fit in where theculture is completely alien to you.

But if that sounds problematic,Smith also pointed out that all expe-rience is useful, and indeed difficultexperiences are twice as useful aseasy ones, giving you – long term – asense of perspective, making youadaptable and better at the job.

As well as developing through diffi-culties of your own, it is equallyessential to retain awareness of theother people with whom you work,trying to understand their motivesand objectives. Good people skillsare just as important as technicalability.

Returning to the subject of flatterorganisations, Smith pointed outthat straightforward career ‘staircas-es’ rarely exist now, and that it maybe necessary to see sideways move-ments – ‘landings’ – as a way ofbroadening your experience inreadiness for the next step.

She also recommended not beingafraid of moving – always providedit isn’t too often. And of being eagerto expand your existing job by tak-ing on new responsibilities.

In summary, she said, be preparedfor a career that is not a steady riseto the top, but one that will havesetbacks and cannot necessarily berigidly planned. In retrospect, itmay look like a smooth progres-sion, but that is unlikely to havebeen the case. However, when anysetbacks come the best policy is toview them as opportunities. And,most of all, your career is there tobe enjoyed.

Solid ladder or roller-coaster – the ups and downs…

Kelly Smith

John Tranter

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THE FINANCE FUNCTIONFINANCE & MANAGEMENT June 2005

The many shapes and sizesof the FD role

The final speaker,Mark Garratt,addressed the differ-ent milieus in whichan FD can operate.And, as quicklybecame apparent,he has the hands-onexperience for this.Previously UK managing director andgroup finance director of CaterBarnard PLC (quoted on theAlternative Investment Market),Garratt went on to be FD of ReedHealth Group PLC. But since firstbeing made an FD in 1985, he hasworked in all of the following:

● a subsidiary of a listed company;● a private company;● a management buy-out (MBO)

team;● an exit team prior to an initial

public offering (IPO)/trade sale;

● a turnaround situation; and● a listed PLC.

He therefore brought personal expe-rience to his description of the spe-cial skills an FD in each situationrequires.

Subsidiary of listed companyFD to a listed company’s subsidiary,or even a start-up, is often one’s firstjob as FD. The business may not becore to the group, and the FD’s mainresponsibilities will be to supportany subsidiary board decision mak-ing, present accurate managementaccounts, also report to group –probably in a different format andto a different timescale.

The FD’s autonomy will be restrict-ed, although his responsibilities willextend to most local commercialdecisions, including – in Garratt’sown case – human resources. At thesame time, the FD will be subject togroup controls, having to suffer

both internal and external audits(frustrating or amusing, accordingto outlook, for those used to beingon the other side of theauditor/audited divide).

Growing private companyIn this case the FD will have moreresponsibility, reporting directly tothe board, having more input intoinvestment decisions about newstart-ups and new divisions, andperhaps developing corporatefinance skills in terms of carryingout due diligence on target acquisi-tions as well as overseeing post-acquisition integration.

Budgets and forecasts will now have“landed in his or her lap”, and theremay also be international sub-sidiaries’ figures and reporting todeal with.

Management buy-out teamAs part of an MBO team, the FD willpossibly be working 16-18 hour

Matthew Robertsdescribed a day inthe life of an FD. Forthis he was able todraw on substantialpersonal experience– having risenthrough the BurtonGroup organisation,including an early period involved insubstantial group restructuring, andlater organising the flotation of theDebenhams stores business, and itssubsequent private sale. He is nowgroup finance director of the bingoand casino group Gala.

In Roberts’ view, an FD is chieflyresponsible for three key issues – cus-todianship of the company’sfinances, managing external rela-tionships, and strategic direction.And to do so he needs to have andemploy six different skills:

● accounting knowledge;● presentation skills;● strategic vision;● networking;● influence; and● management.

Of these skills, he said, accountingknowledge is the ‘first base’ of thejob. You have to be right on top ofthe basics, be sure there are no sur-prises, have the right controls andthe right people in place, and be ableto ask the right questions.

After that foundation is in place, get-ting your message across is also veryimportant in your external relation-ships. Analysts, he revealed, basemuch of their assessment not on theactual figures your business pro-duces, but on how you get the mes-sage across, and how much trust youengender. Similarly, it is importantto be able to communicate withyour bank/lenders on how day-to-day activity is keeping in line withstrategy.

The skill of strategic vision, for anFD, encompasses having the rightfinancial structure and controls inplace, engaging with and influenc-ing other board members, an under-standing of the right level of risk forthe business, and an ability toensure the business makes moreright decisions than wrong.

Of the remaining requisite skills, hepointed out that “an FD is only asgood as his or her networking skills,being reliant on a good flow of infor-mation”, and also that since financeis most definitely an overhead, itmust make sure its influence is feltand its function adds value.

Of the final element – managementskills – Roberts said that these bringtheir own rewards. In his view, “oneof the most rewarding parts of the jobis managing a team, leading heartsand minds, dealing with people whoare fully motivated and engaged. Itmakes the whole day-to-day experi-ence more rewarding.”

Finally, he reminded his audiencethat the successful FD must also beconstantly mindful of his annualachievements – is he managing theteam well; are the financial process-es and key performance indicatorsmoving towards the holisticapproach of the balanced scorecard;and is the business being moved for-ward to its optimum form, whetherthrough initial public offering, saleor financial reengineering?

A day in the life of an FD

MatthewRoberts

Mark Garratt

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THE FINANCE FUNCTION June 2005 FINANCE & MANAGEMENT

days, on complex transactions,struggling for funding, trying to‘sell’ the company’s story andpotential for success, dealing withmany different sets of advisers, legalagreements and terminology. Thistime, Garratt observed, “the duediligence boot will definitely be onthe other foot”; now the FD mustsuffer his own business being exam-ined with the proverbial tooth-comb.

Exit team (eg prior to an IPO or tradesale)In this role, trying to float the com-pany or sell it privately, the FD willbe responsible for presenting a cleanset of books which accentuate thepositive. They will again be on thereceiving end of due diligence, theirfocus will be distinctly profit andmargin-centred, with cash manage-ment a priority (probably includingrelease of those provisions madeearlier in anticipation of a rainyday).

Contracts will be being negotiatedto be as long-term as possible. Therewill also be much reading ofprospectuses not only to present agood face but also to excise unsub-stantiated over-optimism by otherdirectors, and simply spot errors.Then there are the necessary presen-tations. Indeed, Garratt noted, itwill be “presentations, presenta-tions, presentations”.

TurnaroundBy contrast, in a turnaround the FDwill not have had any close involve-ment with the business’s history.Here the job is simply about makingtough decisions fast. They will becost and profit-focused, dealingwith ambivalence about the busi-ness’s future, negotiating with stake-holders, possibly responsible for thedivestment or closure of businessunits. It is a multi-faceted rolewhich can include IT, humanresources and administration.

Listed PLCAn FD of a listed company facesmany more regulatory and report-ing requirements. Although, as yet,only half-yearly reporting isrequired, the FD of a quoted compa-ny will probably need to know thequarterly trading position. Thewhole corporate governance area

will have to be addressed and moni-tored. Human resources issues, andeven approval of non-executivedirectors may be part of the brief.

These, along with developing andmaintaining investor relationships –with both founders and institution-al investors – will be a drain on theFD’s time. Again acquisition integra-tion will be part of the job, as willsale of some businesses into theirappropriate markets. And, finally,involvement with the choice andrunning of appropriate financial ITsystems will be inevitable.

The common threadsIn conclusion, Garratt summarisedwhat he considered to be the com-mon threads in all these differentfinancial directorships. These wereas follows:

● you are an overhead, and have toshow added value;

● you will be managing staff;● you will have to form good rela-

tionships with banks and externalstakeholders;

● you must be firm with debtors –cash is king;

● you are responsible for the effi-ciency and cost of systems andprocesses;

● you will have direct or indirectresponsibility for IT; and, mostexcitingly

● you will be helping to define theshape of the business.

As he put it, “it certainly isn’t bor-ing.”

Finally – a chance to askthose burning questions

The second half of the evening’sallotted time was devoted to audi-ence questions (of which there weremany).

Recurring issues raised includedhow to find the right balancebetween book-keeping and thedesire to be a strategy-setting busi-ness partner, the related problem of– as one questioner put it – “how tosleep at night knowing that you areresponsible for complying with allthe various financial rules and regu-lations”, and – most important of allfor many there – how to make the

transition from financial controllerwhen all the posts available seem tobe looking for an established FD.

The panel provided practical solu-tions. According to Smith – withoutdemur from the other speakers – inthe event of conflicting priorities,getting the figures right shouldalways be made the first task. As sheexplained, you have to get the fun-damentals of the business right first,to support and inform any strategydecisions to be made.

As Garratt added, the process isslightly linear – once you demon-strate that you understand the num-bers, colleagues will trust you tounderstand strategy-setting.However, it is not completely linear,he cautioned, since “an FD’s job isabout multi-tasking, so you have tobe able to simultaneously think ofoverall figures and answer detailedquestions on specific issues. To thatend, it is important to be able to del-egate, and learn to make time forthe priorities, making sure theurgent does not, overall, take prece-dence over the important.”

As to the transition from financialcontroller to FD, there was generallyagreed advice to the effect that itmay be advisable to consider anapparently backwards move, such asbecoming FD of a subsidiary of theholding company in which you arefinancial controller. Or else, a periodmoving sideways in the same organ-isation – becoming FC in anotherdivision or company – may providethe breadth which enables you nextto secure an FD post.

But as Tranter pointed out, whenyou apply for such a job, rememberthat it is not your technical qualifi-cations that interest the interview-ers – they are taken as a given. Youneed to be able to show how youhave added value in your existingjob. For example, by how muchhave you managed to increase yourcash flow?

You also need to consider what thecompany seeking an FD is itself try-ing to achieve. Then, if you canmatch your skills and curriculumvitae to that desired outcome, youare well on your way to getting thejob. F&M