Conflicts Between Treasurers and Finance Directors
Posted On January 7, 2019 By mhauk
Avoiding Conflicts and Making the Relationship Count
The Importance of Avoiding Conflict
The relationship between the key board member responsible for finance (Honorary Treasurer, Chair of Finance or Audit Committee) and the Chief Financial Officer (CFO) or equivalent (Finance Director, Resources Director or Head of Finance) is crucial for the success of a charity. Existing guidance tends to focus on technical and accounting matters, rather than governance roles and “soft” issues. Yet it is the latter that most often creates difficulties.
Conflict in this relationship can be very harmful for charities. Whether it is individuals that do not interact well, either with each other or with others in the organisation, or where the relationship is ineffective or even disruptive.
There are no legal or regulatory provisions that determine how this relationship should work, and virtually no guidance on how it can be done well. Without proper planning and a structured approach, these relationships can be dysfunctional, or at worst disastrous for charitable success.
Making the Relationship Count
Clearly, roles and relationships vary according to the size and complexity of the organisation, and it is not unusual for the treasurer to have a more hands-on executive role in smaller charities. This article considers the position where there is a professionally qualified or experienced CFO and a non-executive Treasurer, which enables a clear differentiation between management and governance roles.
To avoid conflict and enable these relationships to make a positive contribution, set out below are six key practical characteristics which will be useful to consider.
1. A Successful Personal Working Relationship
The starting point in any effective working relationship between Treasurer/FD is the personal relationship between the two individuals. There are some practical steps that will help.
The relationship is more likely to succeed if there is good chemistry between the individuals: an ability to communicate well; willingness for both parties to be completely open and honest in an environment of mutual trust; and alignment of views on key issues concerning financial strategy, management, and governance.
Avoid the relationship becoming too cosy, as both parties must be able to be objective and challenge each other – not always, but when necessary.
On occasions it is helpful for the Treasurer to be a confidante for CFO, as they can easily feel isolated or just in need of a friendly sounding board.
There must be a process for refreshment of relationships as with all trustee positions, probably through regular replacement of the Treasurer. Otherwise there are threats to objectivity, or at the very least a possibility of unrecognised complacency. So fixed term appointments for Treasurers are recommended.
2. Avoiding Finance Operating in Isolation
Even if the Treasurer/ FD relationship is working well, the finance function needs to interact well with the whole organisation, as conflicts may still arise with other parties.
Where a strong relationship has been established, care must be taken that it does not become too insular, to the extent where there is isolation from both the board and other senior managers. Where it works well, an effective Treasurer/CFO partnership can be transformative for internal communication on financial matters both at executive and trustee level. The view that finance should be a servant to, not a slave of, charity purposes may help position the relationship.
It is not unusual for the non-financially orientated members of the board and of the management team to abdicate responsibility on financial matters, delegating them to those seen as financially literate. This attitude was considered highly negative in the 2018 MHA/ Charity Finance Group survey of trustee skills, in which 92% of respondents considered it very important to have more than one person on the trustee board that is engaged with their charity’s finances. Together, the Treasurer and CFO can ensure there is strong engagement by the key decision-makers, avoiding decision making paralysis on financial issues, and establishing a shared financial vision for the charity. Communication, clarity and creativity all help.
3. Recruitment Considerations
Having the right individuals in post can transform relationships, so appropriate recruitment is essential.
Though the CFO will typically be line managed by the CEO, the Treasurer is often involved in the recruitment. This is appropriate to ensure both parties are comfortable they can work with each other. Furthermore, it is often the case that in considering the candidate CFO’s technical skills, the Treasurer may be the best placed to make the assessment.
Treasurers are generally appointed by the board, with the Chairman often in a sponsoring role. It is rare, but it is certainly worth considering allowing the CFO to be involved in the selection of the Treasurer, albeit on an advisory basis only.
The ability to establish good relationships is critically important, yet the role descriptors for Treasurers tend to focus on technical competency, rather than personal and management skills; referring to compliance and control aspects of the charity rather than oversight of the CFO and their team who have the direct responsibility for such processes.
4. Board Representation
The Treasurer and CFO are normally the key link with the board on financial matters, so their effective engagement is paramount.
The Treasurer role is generally viewed as being the representative for finance matters on the board. The Treasurer should not disempower the CFO from speaking to the board, especially as they will often have a better understanding of the detail of issues. However, it can be necessary for the Treasurer to be an advocate or spokesperson for the CFO. For example, where issues arising from the CFO’s line management or other management issues have created a potential communication barrier. This can arise, as typically, the CFO will have a reporting line to the CEO and thence to the board. To ensure the board is not prevented from having appropriate access to information for decision-making, it is appropriate to establish a ‘dotted’ reporting line to Treasurer. This must of course be handled sensitively by the Treasurer and probably in conjunction with the Chair.
Potential management or governance disputes on financial matters can arise – in such circumstances it is very helpful if the Treasurer and CFO present an aligned and consistent position; instil appropriate firmness and rigour on financial decisions; and provide explanation, clarification, reassurance or balm as necessary.
5. Staying in Touch
Insufficient or inappropriate communication in any relationship can often result in conflicts, so appropriate strategies are needed to get it right.
The regularity of contact between Treasurer and CFO needs to be mutually agreed. It is helpful to set formal contact dates in advance: for example, two weeks prior to committee meetings to agree the agenda and discuss draft papers.
Always maintain a clear balance between management and governance roles. It would be usual to expect there to be less contact between Treasurer/CFO than between Chairman/CEO. However, it really helps if parameters for working together are agreed – these should include an annual programme of recurring actions; prior preparation before meetings; and the process by which you intend to agree mutual goals in advance of key decisions.
6. Balance of Skills
Conflicts can arise where the skills and experience of Treasurers and CFOs differ.
Whilst it is quite likely that both parties have similarities in terms of their competencies, the requisite skills of a Treasurer are different to those of a CFO. It is essential for the CFO to have a good grasp of technical compliance – hence they are likely to be a finance professional and a qualified accountant. The Treasurer, however, should adopt a mostly strategic role regarding finance – hence it is not necessary they should be a qualified accountant, but strong financial literacy and understanding will still be essential.
Often, the Treasurer will be a highly experienced and qualified accountant or financial professional – in these situations the Treasurer can play an additional helpful tutoring/mentoring role for the CFO if they are less experienced.
Trustee diversity is being encouraged by the Charity Commission, and whilst instinctively positive, this may lead to conflicting approaches and attitudes. Some friction and challenge is good in all relationships, as long as it is proportionate and appropriately directed.
Well run charities recognise the significant part that strong financial management and governance should play. An effective Treasurer/CFO relationship really can count towards charitable success. The six relationship characteristics set out in this article should contribute to that outcome if actively and formally developed.
This article is from our Using Conflict as a Catalyst for Change report, a guide to help you embrace, manage and mitigate conflict within your charity.