Because profit is the measure of how effective a business is, it's unsurprising to find the finance director at the centre of decisions within the business. This frees the chief executive to concentrate on business strategy - to speculate to accumulate - and to focus on external relationships. This approach is essentially forward-looking and risk-accepting.
In a charity, the providers of finance do not receive a profit. Instead, they receive a proxy return: the benefit to beneficiaries. Beneficiaries are the 'last-chance saloon' for a charity: it should not fail them. Because of this, the charity finance director has traditionally been required to deliver absolutely reliable financial stewardship, to ensure that funds entrusted to a charity are used for the purposes stated and to see that the risks to the beneficiaries are minimal. This approach is essentially risk-reducing and potentially backwards-looking.
What has changed for charities in recent years is the external context. Fundraising markets are saturated, government finances are straitened and the causes that charities address have become so acute that profit can be made from alleviating them. Many charities were struggling with effectiveness and impact before Sorp 2005, but this is no longer optional, if it ever was. They must be able to understand the commercial perspective.
In addition to handling a double stakeholder set of donors and beneficiaries, the charity chief executive must now think about protecting the charity's commercial space so that intellectual property developed for its mission earns a return for the beneficiaries rather than a removed set of shareholders. The charity finance director has to be able to advise the chief executive and trustees where marginal pounds and pence are best spent.
The charity finance director, unsurprisingly, now has the central role of working with his colleagues and the chief executive to devise a path through a more competitive world. We recognised these changes and are developing new systems of practice evaluation, seeking economic models showing our impact and developing new business models based on profit.
Finance directors are coming out of the stewardship shadows and into the business development light, and their relationships within their organisations need to reflect that.
- Charles Nall is corporate services director of the Children's Society.