In recent dealings with a number of businesses, I have been surprised at the high level of finance people actually running the company concerned. I know there is meant to be a good working relationship between the Managing Director and the Finance Director (or CEO and CFO if the ego needs to be massaged) but the roles are completely different and neither has the ability to effectively do the others job.
I understand this situation comes about from the founder/MD leaving the business and the remaining shareholders look for a ‘safe’ pair of hands to carry on running the business. From a purely financial perspective then, it looks like a good idea to offer the role to the Finance Director. The problem is that running a company requires the ability to deal with many unknowns, grey areas and people – all of which are not predictable or have one way of being dealt with. Exactly the opposite to running a finance department which essentially comes down to the rule of maths, which is black and white, and even some clever dealing with HMRC or investors have its limits.
The problem is that the decisions necessary to take a business forward don’t always make sense or can be rationalised. Ultimately some of the best advances are down to new ideas, gut instincts and risk. When a business looses this momentum it starts to stand still and no longer breaks new ground. Granted costs can be cut and margins grown but ultimately no business can be run on financial measures alone.
Much better in my mind to look elsewhere in the business, or even outside, to find someone to support the FD, who still knows the business, but is willing to question procedures and take some risks.
Piers, I think you’re right in that Finance Directors are promoted more frequently than those from other functions – though I have no data to support it. I also think that your points, though correct, apply to people coming from any part of the business…particularly if they come from that part exclusively. MDs need to be incredibly flexible, as I’m sure you know better than me. They need to balance the needs of shareholders with those of customers, employees, society. They have to have vision…but also the capacity to understand implementation and how to communicate and effect change.
Saying that accountants can’t run successful companies is as true as saying that a strategist can’t run successful companies. Neither can a brilliant logistician or marketeer. You need someone with an intriguing blend of skills and, maybe most importantly, the ability to build a strong team that supports them where they’re weak. And some of those wonderfully adaptable people, mind, may well have trained as accountants.
Good points – I think I hit a nerve with this post, had quite a few people complain! Definitely don’t feel I necessarily have the skills but you are right any person going into that role would find it a challenge.