Accountancy: Watchdogs join the team: Finance directors can also be entrepreneurs, writes Roger Trapp

COUNTLESS books, articles and speeches - not to mention the evidence of our own eyes - have conditioned us to accept that the world of business will remain in a state of upheaval for some time.

But it is not just the business environment that is changing. The corporate organisation is also being transformed. Concepts such as team-building, flatter hierarchies and increased focus on the customer are having a profound effect.

Even senior executives are seeing their roles alter. Of particular importance are the perceived changes in the job description of the finance director. Until recently the position was associated almost exclusively with number-crunching and controls.

However, a recent report co-written by Sir Geoffrey Owen, former editor of the Financial Times, suggests that there has been a trend towards 'becoming part of a management team, concerned to add value and to stimulate change'.

The working title for the study carried out for the Board for Chartered Accountants in Business by the Interdisciplinary Institute of management at the London School of Economics was Dinosaur or Dynamo? But according to Sir Geoffrey, who wrote the report with Peter Abell and with the assistance of Mike Cranna, a more appropriate title might have been Watchdog or Entrepreneur? In fact, the work appears under the typically non-committal heading The Changing Role of the Finance Director, though the findings are not as dull as that suggests.

Although a number of trends emerge, the results of the survey of more than 1,000 finance directors carried out during the summer also reveal many shades of opinion. As Sir Geoffrey told a debate on the paper at Chartered Accountants Hall last month, there were 'a few comments that the road to Carey Street is littered with entrepreneurial finance directors'. But there was a recognition that they needed to become more entrepreneurial and think more commercially.

Besides the main finding that the finance director was becoming more 'pro-active', the study also stressed the central importance of the finance director in the company - often second only to the chief executive - and the part played in decision-making.

The job is, it is believed, becoming more complex and demanding, partly as a result of the need for fast change created by increased competition. But it is also the result of other developments, such as the corporate governance requirements brought about by the Cadbury Report and accounting regulation, making the traditional watchdog role more onerous.

In the debate with Sir Geoffrey, Peter MacFarlane, finance director of Allied-Lyons, added his voice to the widespread concern among accountants about the growth of regulation. He said he spent a lot of time on investor relations, strategy and planning as well as keeping an eye on controls, thus lending some support to another finding, that the various pressures are creating conflicts and tensions.

To judge from questions from the floor, they will pose problems for accountancy bodies. For, while some employers have recently swung back to the chartered accountant qualification in preference to the MBA, there is evidence that the training is not regarded as sufficient preparation for this enhanced role. Even Phil Armitage, head of training at the Institute of Chartered Accountants in England and Wales, acknowledged that the changes recently announced by the ICAEW and the Chartered Institute of Management Accountants would not alone deal with this.

Both the report and the debate gave significant support to the view that the best qualification for the new finance director role was an accountancy qualification for the necessary financial background followed by an MBA for wider business sense.

In the meantime, those already in the job have to be constantly aware of fresh developments in any number of areas that could have an impact on them.

The LSE report draws attention to the growing recognition of the need to combine financial performance measures with other indicators, such as manufacturing efficiency, customer satisfaction and product innovation. To the layman, though, the impetus for this is perhaps coming from an odd direction. Most leading accountancy firms are developing their own methods of dealing with this approach to assessing corporate success.

But perhaps the best known is the 'balanced scorecard' produced by Harvard Business School's Robert Kaplan and David Norton, who suggest that financial targets should be just part of a broader set of objectives. 'While traditional financial measures report on what happened last period without indicating how managers can improve in the next, the scorecard functions as the cornerstone of a company's current and future success,' the pair claimed recently in the Harvard Business Review.

With the Institute of Chartered Accountants of Scotland, for instance, seeking to build on the accountancy firms' efforts in this area, it is not beyond the bounds of possibility that auditors and others with financial training will accept wider measures of corporate prosperity. So the traditionally trained finance director stands to assume even greater importance.

Then again, this concept could just be a passing fashion. What is more certain is that the notion of the finance department as an 'aloof, authoritarian' part of the company charged with checking and reporting on other people's activities, is being consigned to the past in favour of something more participatory and open.

(Photograph omitted)