Finance directors (FD) and CEOs work closely together, so much so that the FD-CEO relationship can be described as the fulcrum on which the business revolves.
This dynamic relationship is important for several reasons during the best of times, but it has become critical in recent months as leadership teams try to navigate the treacherous terrain of a global health crisis.
In our latest blog, we explore why this key relationship is particularly important during a crisis of this magnitude.
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The current Coronavirus pandemic has created a vacuum in which the leadership teams of early-stage and growing entrepreneurial businesses have had to steer the company through uncharted and shallow waters.
As a natural consequence, the relationship between the finance director and the CEO, an integral ‘double act’ within a business, will have been put under immense pressure.
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How can the FD support the CEO?
A successful FD-CEO relationship provides stability, direction, and clarity, and due to the nature of a finance director’s role, these effects tend to ripple across the business.
- The FD will have the commercial gravitas to engage teams across the business, leaving the CEO free to concentrate on the creative vision of the organisation.
- The FD will flex and adapt to complement the flair and vision of the CEO.
- They will be a sounding board for the CEO and inject support and reassurance into the situation; two heads, after all, are better than one!
- They will have the confidence and conviction to respectfully challenge the CEO when necessary and intensely scrutinise the numbers.
- The FD will implement financial rigour to the accounting and finance process, flag up any financial, regulatory and compliance issues and lead on fundraising.
However, the finance director can add considerable value to this important relationship during a crisis in ways that may not have been immediately evident to the CEO during calmer times.
An FD adds considerable value to the relationship during a crisis
Before the crisis reaches a crescendo, the finance director will be able to rely on the strong FD-CEO relationships they have nurtured over time and can convert these relationships to support the business during testing circumstances.
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- The finance director will identify the cost and commercial drivers in the business, determine how they can efficiently utilise the business’ existing resources and source new streams of finance. The CEO will then be free to concentrate on innovation and revenue-generating activities.
- A successful finance director will have the confidence to step onto the frontline and communicate effectively with stakeholders to convert strong bonds into meaningful mechanisms of support. They will be able to manage relationships with banks (to negotiate loan extensions and favourable repayment terms), lawyers (to review the legal aspects of any proposed agreements), suppliers (to determine Tier 1, 2 and 3 distributors) and investors (to investigate existing and new sources of finance).
- A finance director provides objective rationalisation and accurate management, funding, and forecasting information so the CEO has the justification and confidence to make or defer big calls at key moments.
- The finance director will be able to pre-empt any issues by analysing business strategy, communicating with stakeholders, creating a management pack, and implementing operational KPIs, new systems, initiatives, and identifying areas of optimisation.
What makes this dynamic so important during a crisis is that it permits the accurate and reliable flow of robust information and enables the CEO to focus on other areas of the business.
Similarly, if the business is operating in an industry that is particularly exposed to the crisis, this relationship becomes even more important.
The circumstances of the past few months have tested this relationship and imposed unprecedented challenges on all aspects of business.
However, due to their ability to rapidly assimilate, finance directors have been able to mitigate challenges arising from remote working, cash flow issues and a crisis of biblical proportions.
At iFD, our finance directors can be deployed at short notice on an interim or part-time basis, supported by a wider outsourced accounting and HR team, to provide strategic direction, clarity, and leadership during a crisis.
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