Making the most of your FD
How fast growth companies can get the best value from finance directors
David Bloom, managing director of fd unlimited, on how fast growth companies can get the best value from finance directors.
Spinvox, the telco play that enjoyed significant growth before its recent and very public fall from grace, would seem to have suffered both publicly and internally by the lack of a finance director.
The finance director’s (FD) primary role in fast growth environments is to support the CEO in delivering the strategic vision by ensuring the business is suitably funded with the right controls and process in place to safeguard its assets, which include its most precious – the right people.
Fundamentally, the CEO and the management team have to embrace the value brought by a finance director. If you polled managers of – and investors in – businesses going through some form of rapid change, few if any would argue against the need for a quality finance director with sector and transition experience. Where opinion gets divided is around the timing of the hire (they don’t come cheap), and the emphasis placed on the three c’s: compatibility, credibility, and competency.
The FD must be compatible to the situation. Tensions can mount if he or she is not able to manage the relationship effectively with the management team day-to-day. On the one hand, an overbearing personality and negative attitude to risk can sap the entrepreneurial spirit of an organisation. This normally comes to light early on in the first three to six months.
On the other, without the right level of assertiveness, the FD will be marginalised and end up fulfilling the role of financial controller – producing the numbers and keeping score is critical, but that’s what you pay the financial controller for. This can be the most damaging, as it often takes much longer to surface, especially if the management team has no prior experience of working with an outstanding FD.
Problems typically arise where a management team is run by a visionary entrepreneur with limited process skills, or by an autocratic leader who won’t listen to an opinion – both scenarios frequently occur in entrepreneurial firms, of course – or the role is imposed upon an entrepreneurial management team by an investor who needs a trusted pair of ‘eyes and ears’ in the business.
A good FD is like your GP. They know enough about most issues facing the organisation to either address it themselves (e.g. build the dynamic financial model), know when to delegate internally and who to delegate to (e.g. the product margin needs improving by at least 10%), and when outside expert advice is needed (e.g. tax consequences of hiring a sales guy in a new geography).
A finance director isn’t just there to keep score and publish the results. The value add from proactive support to the visionary entrepreneur provided from an experienced, grounded individual invariably results in one plus one adding up to way more than two.