The debate over whether chief executives require their finance directors to be beancounters or business partners is surprisingly persistent. Many FDs would like to be seen in a partnership role ­ and have positioned themselves and developed their functions accordingly. But is this what CEOs really want?

Our four recruitment experts suggest that CEOs want it all ­ they like their FDs to fulfil both the compliance and the partnering role.

Mark Freebairn, head of the financial management practice, Odgers Ray & Berndtson
‘If I ask chief executives what they want from their FD, the first phrase they use is a “business partner”,’ Freebairn says. However, they also want ‘someone who gives them complete confidence that the numbers are right and that they will be on time’.
The specific requirements will reflect the nature of the company, whether public, private or private equity-backed. A public company FD, for example, needs to inspire City trust.

‘In a public company FD, the CEO wants the combination of business partner, sound technical finance experience, external communications and the ability to play a sober numbers-orientated head as the yin to the yang of the outgoing, punchy, optimistic chief executive,’ Freebairn says.

This sounds like chief executives want it all. Do they? ‘Yes, absolutely,’ says Freebairn. Is that realistic? ‘Yes, as long as the FD is able to recruit a complementary team that allows the FDs to do what they want to do.’

Though Freebairn accepts that the image of FD as beancounter will take a long time to disappear, it still annoys him. He says: ‘The collective term for FDs now should be “sounding board” rather than beancounter. Ask most chief executives who their right-hand person is, who they would not cope without, and the first role they come up with is the FD.’

Suzzane Wood, head of the financial officers practice, Heidrick & Struggles
Wood suggests that what CEOs say they want and what they actually need isn’t always the same thing. They may say they want a business partner, but they also need someone with a grip on compliance and governance as well.

‘Chief execs definitely want to own the strategy,’ Wood says. ‘They can get a bit concerned if the FD wants to have corporate strategy, planning and development under their belt. Superhero FDs who have ended up with risk, investor relations, corporate strategy and business development under their remit are starting to encroach on the CEO’s territory.

‘There’s a potential conflict there. They are almost overstepping the mark. Some CEOs, when replacing them, recognise they need to prune the business. They prune the bush to make it stronger, but also as a signal.’

They may want a structure that recognises the board sets the strategy, with finance supporting it and possibly a separate individual responsible for corporate development.

The requirements of the FD have shifted more in the past year, Wood says. Until recently the priority had been to find a safe pair of hands to drive the growth agenda ­ adding value in recognition of the threat from private equity. This moved the emphasis away from regulation and governance to growth. However, there have been a reasonable number of boardroom changes, with new CEOs coming in. ‘This creates the opportunity for CEOs to reshape how they lead the business,’ says Wood.

Sarah Hunt, MD and founder of Equity FD and Equity FC
Hunt has particular expertise in recruiting FDs for private equity-backed businesses. She has found that what CEOs want will often depend on their own experience in a private equity-backed environment.

Those who are first-time CEOs, perhaps following the buy-out of a business division, may ‘refer back to what they have seen before’, she says. ‘They may have been in a larger business with finance providing technical support.’ They may, therefore, be more focused on hiring a beancounter, rather than a strategic partner. However, Hunt will seek candidates who can tick both boxes. ‘We want someone who will be responsible for the figures, but they also have to be able to show that the numbers mean something, and are able to be a partner with the chief executive,’ she says.

CEOs who have been FDs themselves tend to have a clearer idea of what they want in their own FD. ‘They will instinctively know whether someone is a good finance person, so they tend to focus on that person’s ability to partner them,’ says Hunt. It shouldn’t be about whether the CEO feels they will enjoy going down the pub with their FD, Hunt stresses. ‘It’s more, can we have a good row and then be friends again in the morning?’ The CEO needs to be able to tell the FD their ideas and expect an opinion based on business understanding, not just on cost control.

Ben Jones, head of the CFO practice, Whitehead Mann
‘The overriding feeling now is that the FD is required not only to be strong in the numbers, compliance and corporate governance, but to play a role in the strategic direction of the business as well,’ says Jones. He has, however, seen a subtle shift in the relative emphasis placed on those requirements.

Over the past four years, CEOs have been asking for FDs who can fill the role of business partner, someone who will ‘drive the performance of the business’, he says.
‘Now we are seeing a slight correction in terms of chief executives and chairmen wanting the CFO to have a very strong handle on the numbers. We have come off the back of a four-year bull market, but now we are going into a fairly uncertain 2008, which is redressing the balance between the requirement for a business partner and someone with really strong accounting skills and a genuine handle on corporate governance.’

In essence, CEOs, chairmen and company investors are looking for CFOs who are genuine all-rounders. Jones calls such an FD ‘the demigod’. ‘This is someone who is not only strong technically, and who has a good handle on corporate governance, but who can also help drive business performance.’

Has Jones any advice for FDs being asked to meet the requirements of a demigod? ‘It starts with the CFO creating a relationship with the rest of the business and creating a finance function that is seen as a peer rather than a functional tool within the business,’ he says.

This is an abridged version of an article that originally appeared in Financial Director magazine