The ideal finance director makes it easy for investors, builds relationships and isn’t too possessive, according to Paul Lee from Hermes Private Equity.
Lee was speaking at the latest Quoted Companies Alliance regional forum entitled The Role of the FD – To Infinity and Beyond.
Lee joked that, as a young father, the movie Toy Story came to mind upon hearing the subject of the seminar. “To infinity and beyond” is, of course, the catch-cry of Buzz Lightyear, one of the lead characters in the film.
Keeping with the Toy Story theme, Lee said he considered whether three of the characters would make good FDs.
He ruled out Buzz, saying he's “too full of himself” and didn’t have enough substance. Mr Potato Head, Lee continued, is “slightly more reliable but too stodgy”. Lee concluded that Woody, the protagonist, is the ideal FD. “He’s straight, mostly reliable and pretty good at communicating.”
Lee said for an FD to be considered 'top flight', they must make it easy for the investor, work on their relationship with them and not be possessive about the company.
"[Investors] need you to help them out, to tell them the story of the business so they can work out whether it's a good story,” he said.
“They need to understand not the technical nature of the business but how it works as a business.”
He recommended explaining the business in the context of strategic analysis, given many fund managers’ tendency to be closest strategists.
When it comes to building relationships with investors, Lee emphasised that fund managers invest in people not assets. “They want to know who you are and why they should trust you,” he said, noting that there are also three key elements to building trust: openness, availability and consistency.
Lee also warned FDs not to be too possessive, saying they must let fund mangers meet staff and visit sites unchaperoned. If you don’t, it “looks like you don’t trust local management”. Lee added: “The same goes for non-executive directors.”
Hermes is one of the few groups to ask for access to non-execs.
The payoff if you get all of that right, Lee finished, is that “you’ll look more like a Woody than a Buzz or Mr Potato Head”. His message resonated with many finance directors in the audience as well as the other speakers. Paul Clarke, who today retired from brewer Fuller, Smith & Turner after 16 years as FD, told the group he agreed with everything Lee said.
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