To be effective, you need to know your financial models

It's more important to be able to lead than to be the best in every area, says Paul Breckell of RNID

Finance professionals should be proud of their technical skills. They must lead with expertise to be credible, but they don't need to be an expert in every area. As the management writer Tom Peters says: "Leaders are rarely the best performers. A symphony conductor is usually a good musician, but seldom a world-class performer ... the ability to lead, to engage others and to turn them on rarely coincides with being tip-top of the individual performance heap."

Charity finance directors may harness the expertise of others in relation to information systems, taxation, technical accountancy and property management (to name a few), but to perform effectively they need a clear understanding of their organisation.

For example, I am involved at a small international charity as a trustee. We have no paid staff, fundraise £100,000 a year and make grants to support a number of projects in Kenya. The things that make the organisation tick financially are therefore simple: developing our voluntary income, persuading donors to use more committed types of giving and ensuring an effective grant-making programme that is sensitive to local needs. The financial model is to raise as much voluntary income as possible, make sure new income is long-term and sustainable, and spend what we receive effectively to have maximum impact and hold minimal reserves.

For the RNID, the picture is inevitably more complex. It operates social care enterprises for deaf and hard-of-hearing people, with statutory funding that covers the different programmes' costs to varying extents; it has technology businesses researching, developing, sourcing and selling products to support deaf and hard-of-hearing people; it is an effective campaigning organisation; and it has a medical research programme supported by voluntary income and membership fees.

The financial dependencies are complex, the risk profiles vary for different parts of the organisation and the way that financial strategy and performance interact with overall impact is therefore much harder to map, understand and influence.

Although these two examples are radically different in operation, scale and complexity, the need to get a full understanding of the financial model is common to both. The finance director needs to be in a position to evaluate, explain and control the financial risk profile of the charity.

Tom Peters sums up the importance of financial expertise and credibility in a fast-changing and challenging world: "Leaders need to be the rock of Gibraltar on rollerblades."

- More Finance & IT at: third

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