How the FD became every company’s Number Two, and what makes a great one

Exploring the dramatic shift in the role of the finance director – and who suits the job

Let’s be honest – if you’re a Londoner who’s had a relative amount of success in your career, you probably have at least a vein of competitiveness running through you. Which means you like to know where you rank.

The CEO is obviously the most important person in any company – at least, you’d hope so, if things are going to plan.

Now, we’re not normally into picking favourites and encouraging hierarchies, but it’s become apparent that there is a new, indisputable number two in town: the finance director.

The FD – or CFO, depending on how any given company labels the role – has become the CEO’s most trusted ally in recent years.

FDs have come to straddle all functions of the business, shaping strategy and driving business development. This has been not through some unified Machiavellian power-grab, secretly codified in accountancy annuals across the land, but simply because the nature of business itself has changed in recent years.

Commercial pressures on companies are weighty, while business analytics has become capable of measuring the financial impact of most business decisions precisely. Companies are more finance-focused than ever. It’s no coincidence that more than half of FTSE100 CEOs have a finance background.

The FD is now “one of the two most senior roles in a company”, says Aidan Connolly, CFO of WorldPay, which turned over £3.09bn in 2011. Connolly says that the move to digital – from the bygone days of document sent by post, manual accounting and paper accounts – has reshaped the role.

He explains: “The speed of money in a business is generally such that the FD has to have multiple skills, to be a really full-playing member of the team. He [or she] typically needs to be available to advise across the whole of business activities, not just focusing on whether the books balance at the end of the day.”

Karen Young, director at Hays Senior Finance, the leading recruiting experts, agrees: “FDs are now wholly relied on as trusted advisor to the managing director or CEO and the main board.”

Young headed up Hays’ DNA of a FD report, which surveyed more than 800 FDs to dig deep into their make-up, and into the role itself. “FDs are used as a sounding board for commercial sense-checking for all strategy, not just financial strategy,” she says. “That’s how they’ve risen up the chain of command in the board room.”

Stephen Ibbotson, head of financial management at the Institute of Chartered Accountants in England and Wales (ICAEW), says the role of the FD has evolved from being “focused on internal controls and internal and external reporting, to a broader and more complex role”.

That means new demands are being placed upon FDs.

Ibbotson says there is much more internal and external communication in the role, now FDs “have to explain what their companies are doing more than they ever used to” to bankers and analysts. “Internally, they have to articulate not just performance, but also expectations and the outlook for the company.”

He also thinks the role has become much more about leadership. “They have to be able to drive the strategic messages and help the CEO move the organisation forward.”

So what experience and qualifications does this new generation of powerhouse FDs need? And what do companies need to look for in FDs to ensure they’re getting the best talent possible?

The new breed of FD: qualifications & skills

Traditional qualifications are still the backbone of financial knowledge. Hays’ DNA of an FD report found that ACA is the most popular qualification for FDs (39%), followed by CIMA (29%) and ACCA (20%).

Two in three of the FDs surveyed had a degree, and half studied for a masters, MBA or doctorate.

Hays’ Young believes that “in 10 or 15 years’ time that will change, and 90-95% will have followed the degree route, as that’s becoming seen as minimum level of qualification”.

WorldPay’s Connolly says that the “speed of money these days really forces you back to doing the good old things really well”. He adds: “Not only do you have to be strategic, visionary and very commercial, trying to drive business forward, you have also got to be really on top of processes and internal control, because transactions flow so quickly.”

It is this combination of hard traditional accountancy and more strategic thinking that requires today’s FDs to have a much broader skillset than in previous years.

When it comes to skill-sets, the Hays report found that 36% of its FD respondents said commercial awareness was the most important attribute for a FD to have.

The need to communicate and think strategically are also key. ICAEW’s Ibbotson says that some FDs and CFOs now get business operational experience as part of their training and development.

He explains that “finance has transformed over recent years”. Where one FD used to be responsible for “everything – treasury tax, all accounting, all business performance management, and so on”, many of those functions are now processed through shared service centres and centres of excellence, freeing up FDs to work on strategy, leadership and business development.

He thinks that the broader skill-set this demands can’t just come from “exams”, though. These skills have got to be driven by experience.

Magic ingredients: getting the most relevant experience

There aren’t any shortcuts to becoming an FD. Young says that of more than 800 FDs surveyed for the Hays report, none were younger than 30. The research found that 45% of FDs have more than 20 years’ post-qualification experience, and 64% of respondents were aged between 41 and 55.

She explains: “You’ve got to be tried and tested and to have worked through business scenarios. You’ve got to have learnt from decisions and survived, and be able to prove on your CV you’ve helped companies to prosper.”

Although three in four FDs have always worked in finance, according to the Hays report, Connolly says he would “always advocate” that FDs should have broader experience than that, on top of good qualifications from a good accountancy body. “I have spent my career in different industries and doing non-finance. I’ve been a general manager many times. For a modern finance director it’s important to have that broader view.”

FDs must also be tech-savvy in today’s world, bearing in mind that the very manner in which transactions happen is evolving rapidly – particularly among the younger and nimbler of the business community. Research from WorldPay, for example, shows that 50% of start-ups are trading using online and mobile wallets, while two thirds of SMEs under three years old offer e-commerce as a sales channel.

“During my working life I’ve seen technology play an increasing part in the role of any finance function, indeed in any modern director role,” says Connolly. He says the new role of the FD as “a partner of the CEO and business driver” necessitates “a much wider appreciation of how technology can impact the development of the business”.

He adds: “The difficulty [occurs] if people are ensconced in their role with their head down, not looking at tomorrow. What you’re really planning is the shape of business between five and 10 years away, and planning how you get there. If you’re not aware of rapid changes then you’re not doing the job properly. […]

“You may not be able to get shiniest, glitziest technology instantly, but you have to think about how you will move it into the business at the right time”.

The personality traits of a great FD – and how to spot them

Three in four FDs in the Hays survey said they think that being hard-working has aided their career success. Youn
g also lists “good organisational skills, good people skills, communication skills, but also fortitude” as important attributes.

Young says that FDs’ increasing influence within organisations has led to the need for FDs to be “people who can articulate a vision and inspire people”.

Connolly looks for “curiosity” when recruiting for senior financial positions. “I want to see them ask good questions about the business, and be able to think on their feet. I’m looking for a spark – someone who will contribute when they bring themselves to the role, not a cardboard cut-out.”

This is important, Connolly says, because “although I’m hiring today for X job, I’m looking at how I can develop you, and what I can get out of you in the next role, and the role after.” He says this approach comes hand in hand with the fact people change roles far more regularly in today’s world.

Young advises that those recruiting for financial positions build teams of people with different experience, and avoid recruiting in “your mirror image”. “Because how on earth will you have the sort of diversity and experience to bring something new, and how you will get assumptions challenged? Challenge is the job of a FD.”

Challenge may be the job of a FD, but the job of a FD in today’s world sounds immensely challenging.

Yet for those who have what it takes, it is also a highly rewarding career.

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