From FC to FD

What management thinkers have learned since the sixties is that it often pays to reward people for doing their job brilliantly by not promoting them - unless they clearly show signs that they're capable of stepping up to the next level. That's good news: no-one benefits from an executive being over-promoted, and if you're a great financial controller, why shouldn't you get a hefty pay rise for showing excellence in the role even if you're not getting a directorship?

But many, perhaps even most, FCs do see the role as a stepping stone to the board. And given how much you learn in the controller position - about the finance function, about the company, about business in general and about managing teams - you'd be crazy not to see an FD posting or promotion as a natural next step.

So how can you formalise that process? We think there are five areas to focus on - get them all right, and you're ready to be a finance director, providing the kind of partnership to the CEO and the board that you currently offer to the FD.

1. Get out into the business

There might once have been a time when excellence in financial management could earn you a place at the boardroom table. But those days are long gone. As FD, you have the broadest and most detailed view of the business, so it's no surprise that you'll be expected to understand exactly how it all fits together.

That means you need to get more a feel for how things work on the ground. Why are marketing people so flighty? What are the real obstacles to efficiency on the shop floor? How do salespeople really operate in the field? Getting out of the finance function and using your position as FC to support and guide all these groups 'on location' will certainly help you understand the detail in the numbers that you're already seeing - and many if not most FCs already have that kind of operational exposure.

If you look at most of the job ads for FCs in larger organisations (which can equate to FD roles in smaller companies), this is already expected. And it means when you come to pitch for that FD role, you'll more easily earn the respect of your boardroom peers.

If you can afford the diversion - and many FCs in growing or equity-backed businesses can't - consider a move outside the finance function as a stepping stone to the board. Gaining front-line experience in an operating role proves you can handle people, that you're versatile and that you're not just a numbers person. Typically, this might be a divisional general manager role, but many FDs have done stints as departmental heads - in areas that report into the FD such as HR, for example, or IT. But some even look to flex their muscles in more left-field roles. FTSE Group FD Tim Ward, for example, spent a period as head of marketing at the London Stock Exchange.

2. Develop a strategic mindset

The essentials for any FC are accuracy, efficiency, control and clarity. You keep the finance function running well and the numbers are timely and accurate and you're sure of a pat on the back. But today's FD needs to be able to translate those disciplines into forward-looking analysis. The question is: can you take your exposure to those decision-making processes as FC and make them your own?

Developing and supporting strategic developments is where the FD really earns their kudos.

'I worked at a technology company where the finance function seemed to be focused on coming up with reasons why not to do things,' says Huw O'Connor, FC turned FD and now MD of fast-growing hotel chain City Inn.

'Then I moved to another company in a related sector that was much more entrepreneurial - and the finance guys, like everyone else, had a real 'can-do' attitude. There, when an idea came up for discussion, we asked how we could make it work.'

Better yet, because the FD understands how the business is really performing, they ought to be able to guide the management team and investors on how they can reach their goals. In the case of an exit, for example, the critical considerations are forecast numbers, cashflow and strategic opportunities. Articulating and shaping that strategy for maximum potential income makes the FD perhaps the key member of the team.

3. Hone communication skills

Being comfortable with how the business works and working on its strategic development are natural developments of the FC role. You're taking the skills you apply to what's happened and applying that what's happening and will happen.

But both that granular understanding of operations and that strategic outlook need to be supported by an ability to communicate, not least because as the right-hand to the CEO, you're closer to the big decisions.

'The secret to our FD/CEO relationship is regular communication, complete trust - as well as identifying clearly between us where our skills are best focused,' says Martin Leuw, chief executive of £20m-turnover software MBO Iris.

'Often the CEO and FD will have very different personalities, but must work very closely as a team. So an understanding of each other's strengths and weaknesses is vital, and communication skills are essential as the role of FD often covers considerably more than just the finance area, encompassing HR, legal, property and admin.'

And while as FC you have to direct a team and communicate detailed information, understanding how to pitch the bigger picture - and often to people who simply aren't comfortable with numbers - requires something a bit extra.

4. Get mentored

Whether or not there's already an FD on board - and many growing and equity-backed businesses won't have an experienced finance director - making a conscious decision to develop your career and acquire management skills by learning from other people on the top team is a no-brainer.

Plenty of FDs enter formal or informal coaching or mentoring arrangements - so developing that kind of sounding board before your hit the boardroom can only be a smart move. (Depending on who you talk to, a mentor is someone who'll 'take you under their wing' and offer a broad-based relationship aimed at professional development. A coach helps personal behavioural change on an issue - which is part of the mentor's remit, too.)

Don't assume that your own FD or CEO is the best mentor.

'Directors can be good mentors, but one of the biggest problems they face is that they are so used to telling people what to do that they first have to learn to shut up,' says Professor David Clutterbuck of Clutterbuck Associates.

'It's often helpful for individuals to work out their own issues. Equally there are times when giving advice is the right thing to do. It's about getting the balance right.'

And remember: your step up from FC to FD might mean moving company, so having an external coach or mentor will ensure you don't get into conflicts of interest.

5. Expand your remit

The titles 'financial controller' and 'finance director' mean different things in different situations.

'I always ask people whether their FD is keeping score or scoring goals,' says Fred Edwards, who runs myFD, a company that supplies financial management services to SMEs.

'In smaller organisations, the person who's called 'FD' is often what would be, in a bigger company, a financial controller. So they may not be so comfortable providing advice and strategic analysis at board level.'

The corollary is that FCs in bigger organisations are expected to expand their role to handle aspects of the finance function's remit that fall outside the FD's focus, which may be on strategy, IR, corporate finance or M&A. That makes them quickly suited to FD roles in smaller organisations.

But in growing businesses where the finance function is smaller and the work more varied, the FC can offer the FD the chance to shed some of the burdens that come with the territory. Running project teams, handling business forecasting or stepping up as de facto HR director will not only make the job more interesting and let you experience top-level decision making in non-financial areas - it'll also expose you more directly to other members of the board team.