How to be a great finance director or CFO: three tips

How to be a great finance director or CFO: three tips

What makes a great finance director or CFO? There are three simple rules, says one of the UK's top CFOs and the chairman of the Hundred Group of FTSE CFOs.

Be Honest
Be Right
Be Lucky

It really is that simple. These work whether you’re dealing with investors, clients, internal customers within your organisation or your own colleagues and staff.

Be honest

First tip: your greatest asset is your personal credibility. That will travel with you, no matter who you’re working for. Lose it, and you render yourself valueless. The only real way to maintain that credibility is to tell it like it is. When dealing with investors, that means being brutally honest about risk as well as about return. Do that and people will listen, respect you and make their own judgment. Always safeguard your personal credibility as it's worth more than anything else to you.

Second tip: recognise that things go wrong in your organisation, and be prepared to talk about them when they do. Shareholders and stakeholders are not stupid. They work in complex organisations which are far from perfect and they know that all companies have issues. Denial is not a credible position; implying perfection merely attracts suspicion. Far better to explain where things are not going well, and what you’re attempting to do to put them right. That approach is so rare that investors will sit up and listen.

Third tip: under-promise and over-deliver. I suppose you could say “that’s not very honest”, but having some contingency against things going wrong, and still being able to meet the promise, is critical. Building a reputation for doing this is hard and takes time. It’s not unlike a budget negotiation, whereby those that argue hardest are the ones who invariably hit their numbers. Take the pain up front at the start of the year rather than throughout the year and you’ve a lot more time on your hands to sort issues out, rather than constantly justifying your position and reducing expectations.

Be right
To maximise your chances of being right, you only need three things: great data analytics; great judgment; and great foresight.

Great data: At the Financial Times, we reckon that 60 per cent of our online newspaper subscription growth is achieved through data analytics, which allow us to recognise which casual users of are most likely to subscribe and how best to get them to do so. This is the new customer value maximisation battle ground. In the finance arena, this is where the function can add real value, in a world where decisions are increasingly based on very detailed data analysis.

Great analysis won't do you much good, though, unless your prepared to act on it or persuade others to act on it.

Great judgment. The power of rational persuasion and its impact on company performance is often associated with great leaders such as Steve Jobs or Jeff Besos, but actually changing opinions and getting stuff done is something great finance people do regularly, too. To have that credibility, and be trusted by your colleagues, you need great judgment, not least in picking the critical areas that need to be improved and indeed can be improved. Pick your battle grounds carefully; Be selective. Don’t invade Russia during the winter.

Be bold. Be prepared to predict the future, good or bad. Stick your neck out and, when you know you’re right, have the courage of your convictions. If you’re sure something is worth doing and the return justifies the risk, predict success, plan for that success and back yourself. Then you’ll make a difference.

Be lucky
It was Gary Player, legendary US golfer, who said: “The more I practise, the luckier I get”. That works in business, too.

Be prepared. If you believe, as I do, that every major business decision has at least one unforeseen consequence, you can still minimise the unforeseen impacts by simply looking for them in advance. You can, therefore, improve your chances of being lucky in three ways:  By great preparation, by using the experience around you and by using your own instinct.

Use the experience around you to avoid making the same mistake repeatedly. Not much in business is genuinely new; people with grey hair got that way through making lots of mistakes. So try to avoid the ones that have already been made, and at least think of a few new ones to make. It’s also kind of useful, with this philosophy, to work in an organisation that tolerates failure. Truly creative companies, such as Penguin, understand that you sign 100 new authors a year to find the one future classic author who effectively pays for all the others.

Trust your own instinct. Back yourself. Were you unlucky or actually did you just override your own instinct. Some of the unluckiest (by which I mean worst) decisions of my life were where I talked myself out of my instinctive position; some of my best were when I followed my instincts. Author Malcolm Gladwell sums instinct up as “the gift of experience; If you have no experience, then your instincts aren’t good.”

Robin Freestone is CFO at Pearson Group and chairman of the Hundred Group of FTSE CFOs.

This article is an edited extract from his keynote address at the 2013 FDs' Excellence Awards, in association with ICAEW. The FDs' Excellence Awards were created by Real Business and the CBI to recognise individual and team excellence in financial management. The awards are supported by Ernst & Young, Lloyds Bank, Drax, Jaguar, MWB Business Exchange, Asset Match, the Institute of Credit Management, Jordans and the London Evening Standard.