Find the Right Balance
16 November 2010 Rob Marcus
As the role of the CFO continues to evolve from bookkeeper to influential business partner, the range of skills necessary for the job is widening. Rob Marcus, group finance director of Progressive Digital Media Group, talks to Elly Earls about the value of placing equal importance on number crunching and business competence to successfully transform a company.
Much has been written about the shift from bean counter to business partner as the role of finance director continues to develop. But with financial reporting becoming increasingly complex, it is perhaps more important than ever for CFOs to be well versed in the technical side of accountancy.
For Rob Marcus, group finance director of acquisitive media company, Progressive Digital Media Group (PDM), it is essential to match business competencies with technical ability, a view that was cemented by his five-year stint as financial controller at Telecom Corporation New Zealand (TCNZ).
A large corporate, equivalent to a FTSE 100 company in the UK, TCNZ's finance department is divided between a lean head office and structured business units. The head office looked after investor relations, financing, external reporting and internal reporting.
"There's a divorce between the head office and all the business units where the investment takes place," Marcus remarks. "And they achieve a healthy balance between management accounting and financial reporting."
As well as demonstrating his flexibility and adaptability, the time Marcus spent in New Zealand taught him lessons that have proved invaluable for his role in the UK. "I guess one of the first things I learnt about was influencing," he recalls.
"I'd come from PricewaterhouseCoopers, where I'd learnt that, as an auditor, influencing is pretty important. But when you're in the head office and you need to get people who don't directly report to you to do things, you have to learn to work with them if you want to get things done. It sounds obvious, but it took a while to build up those relationships."
TCNZ is also focused on investing in people, and put Marcus on a leadership development programme during his time with the company. "It was basically a mini-MBA that emphasised managing yourself and others, leading the business and understanding what transformational leadership really is," he explains. "A lot of it is common sense, but it's good to understand the theory behind it so you can make sure you're applying it when doing the job."
The move from financial controller at TCNZ to finance director at PDM has been quite a change for Marcus, but one he has embraced from day one. The UK-based media group is a much smaller company, with just one central finance department, for which Marcus is responsible. "I wanted a role that offered breadth, so I could develop and be responsible for areas that I hadn't managed before," he remarks. "In terms of the company, we're young, dynamic and growing quickly."
PDM is also an acquisitive organisation, which attracted Marcus to the role. "I wanted to be able to work with a company that was buying other companies," he says. "At TCNZ, everything was structured and formalised. From a finance point of view, we were subject to Sarbanes-Oxley, so everything was documented - things were done in a certain way and everyone knew what it was.
"At PDM, we've come about through a number of acquisitions. So it's all about integrating, reinventing and improving the company's processes to make sure we've got robust financial reporting and are managing our risks appropriately. I've come from a focused, controlling, risk-managing role, to something that is far more dynamic and almost a blank canvas to create."
Cash flow visibility
Since becoming PDM's finance director, Marcus's biggest headache has been cash flow visibility. With a number of different business units, all of which have different working capital cycles, there are many challenges to meet.
"Modelling the working capital cycles, tracking them, and understanding their movements and seasonal fluctuations is very difficult," he explains. "So we've had to delve into the detail, understand what's driving the business and make sure we can report on that. We've still got some challenges there."
As a 21st century finance director, it is crucial to understand exactly what drives a company's different business units, which at PDM include magazines, websites (www.the-financedirector.comamong them)and events. "We're doing financial reporting and partnering with the business," notes Marcus. "So when you meet with business managers, you need to understand what they're talking about."
With no experience of digital publishing, Marcus admits he was not afraid to ask questions. "If you don't understand it, you can't understand the risks or what's driving the business and what the strategy of the business should be," he says. "And, in time, when we go out and start selling the company to institutions and other shareholders, I need to be able to sell them the finances of the business; I can't do that without understanding what drives it."
Indeed, the role of the CFO is steadily evolving, with finance directors becoming more involved in strategy planning and business development. But, for Marcus, there needs to be a balance between being a bookkeeper and a business partner.
"If you look at events in the UK over the past couple of months, there have been a few instances where CFOs have got themselves into trouble and companies have hit difficulties with their financial reporting," he says. "I think that the swing towards being a business partner and owning the strategy needs to be balanced with remembering you've got to be the financial guardians of the company."
With Marcus's background, he is in an ideal position to meet both agendas for PDM. "TCNZ was Sarbanes-Oxley-compliant and this drove good financial discipline into the business," he explains. "That's something I'd like to replicate here, albeit without a lot of the detail that you're forced to do under regulations. It's good to remember that you still need robust financial control in place as well as owning the strategy and partnering with the business."
As financial reporting becomes increasingly complex, financial directors must have a basic accountancy skill set, even if they do have a technical specialist reporting to them. "You need to ensure you can speak the same language," Marcus summarises, adding that the majority of FTSE 100 financial directors still have CA qualifications, despite the move towards business partnering.
"This, again, is all about ensuring you've got that control and risk-management balanced with strategy and business partnering," he emphasises. "But having said that, there is a flip side. When you look at investor relations, managing shareholders, planning strategy and working with the business, these all require skills that were not traditionally associated with finance. What we're seeing is that the accountants who will succeed are those who have business competences and interpersonal skills alongside technical ability."
With the shift away from the financial director as a number cruncher, there's an inevitable compromise in the form of a loss of objectivity traditionally associated with the finance department. "When you look at recent events, a lot of it has come about because of judgmental errors in accounting, where accountants working with the business are motivated to make sure that what they're doing looks good, that what they're reporting is growth," Marcus acknowledges. "That has to co-exist with objectivity and integrity, but with the move to business partnering, it's possible to lose a bit of objectivity."
Yet business partnering offers enough advantages that Marcus is convinced it is a positive development, and laments the fact increasing numbers of technical specialists are being employed in finance roles.
"There's been a bit of a cultural shift and more technical people are going into finance now," he believes. "The big four used to recruit graduates who studied Classics at Oxford and Cambridge because that showed they were well-rounded and capable, but, increasingly, people are coming through who only have the technical skills, because they studied business studies and finance.
"I'm occasionally disappointed by the weakness of accountants' communications skills; if you're working with the business, you need to have softer skills. While it is important to have technical ability, it is also important to have leadership qualities to be able to transform a business. If you have people coming in who lack those skills, it will have an impact on the industry."
As the finance function evolves and becomes more involved with strategy, balance is key. While leadership skills are essential for the transformation of a company, technical ability must not be overlooked as the role progresses to take a more influential position in companies' structures.