Following on from Hintel’s recent summary on the government’s mini-budget – and the fallout from the budget itself – upon reflection, it is on balance, marginally easier to be a finance director for a business than the Chancellor of the Exchequer for the country.
The mayhem that followed the mini-budget reinforced a number of fundamental operating principles for me. Firstly, surprises given or received by financial personnel will never be well received, secondly, as Finance Director (or Chancellor in this case!), gathering consensus from others which are underpinned by data and facts to ensure strategy alignment is critical, before delivering any major announcements.
This leads to my next point, the chaos caused by the mini-budget announcement seems to have generated an unforeseen consequence of mixed messaging and rushed decision-making. The generally accepted good news around employer costs, energy assistance and real estate incentives were completely lost by including an unpopular change of a higher rate tax cut. Like everybody, having watched the chaos unfold in the short term it reinforced for me the rule book that I have tried to operate with for many years…
- Operate proactively within the senior leadership team and obtain consensus and backing on major decisions to present a united front to the business. A business leader, or in this case the Chancellor, has limited authority and influence if they simply become a messenger without an independent voice.
- Decisions need to be data led and preferably benchmarked against independent data. The days of leadership by making a decision that will not be challenged by the business are a distant memory, but nobody usually argues with data and facts when it comes to initiatives. This also applies to the Chancellor of the Exchequer with the swift U-turn.
- If available, look at precedents and how history judged similar decisions. There are very few original decisions to be made that have not already been successfully or unsuccessfully made previously. In the case of the budget, there is a strong precedent with Ted Heath’s dash for growth in the 1970s – it did not end well!
- Try hard not to operate in a bubble of spreadsheets, forecasts and budgets and stay in touch with business leaders at all levels.
- Ensure that decisions are supported by forecasts that can assess the impact of investment and change. This enables decisions to be explained to the business and stakeholders and take opinions in advance of the launch of a major initiative.
- It is impossible to predict all unintended consequences of a decision but taking opinions from a variety of different sources will reduce the risk of a poorly executed plan.
We will now be dealing with the fallout from the mini-budget for many years and sometimes the moment calls for a bold statement of intent. My advice, for what it is worth, would be to leave the headline statements to the MD, CEO or in the case of the budget, to the Prime Minister!
The role of the FD or senior finance person in any organisation is to provide as a minimum, consistency, and trust that we are stewarding the assets of the company and stakeholders.