'Charity chief executives must become more financially literate'

19 Oct 2016 News

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Charity chief executives have “a lot of work to do” to become more financially literate, according to the chief executive of the poverty relief charity Turn2Us, Simon Hopkins.

Speaking at Civil Society Media’s Charity Finance Summit yesterday, Hopkins said there was a need for current and future charity chief executives to operate with an “almost intuitive understanding” of sustainability at “the truly structural level” to ensure the charity’s survival through volatile times.

In response to a live poll at the event which revealed that 55 per cent of audience members thought that their own chief executive does not have sufficient knowledge of strategic finance issues, Hopkins said “there is a lot of work to do, but you are pushing at an open door”.

“The door is more open than it has ever been and that is incredibly good news,” he said.

Hopkins said it is “unarguable that the person running the business of the charity must be highly, highly financially literate at a very strategic level”.

“Financial leadership can’t just start with the finance person - it has to start with the person at the very top of the organisation and that means the chief executive,” he said.

'Digital is shaping the finance function'

Hopkins said the digital age was shaping the role of the finance function and forcing charities to provide real-time figures – and increasing the need for a chief executive who is able to understand and make those fast financial decisions without the need to check first with those with a better financial knowledge.

“We live in a digital age and that means that today’s finance people are almost certainly the generation that will oversee the transformation of annual budgeting to real-time financial filing. Because the digital age is speeding everything up.

“But we have to be able to get into significant real-time decision-making. That means that sometimes you can’t wait to have a trustee meeting to go through the annual spreadsheets. So you have to have someone who is sufficiently empowered to say, 'we are going to do this and we can commit to doing this'. The only person who is in that position is the chief executive. But if they don’t have that deeper understanding of the organisation’s business model and underlying resilience, they can’t make that decision.”

Hopkins said that although finance professionals are still underrepresented in chief executive positions, he has seen significant changes since entering the sector in 2010.

“My initial assessment of the voluntary sector, having spent most of my time in the commercial world, was that we were probably at least 25 years behind the commercial world in terms of liberating and utilising the finance talent within the sector. But over the last five or six years, that has changed significantly,” Hopkins said.

Despite the finance function developing from being a “back office thing” towards a role of “strategic business partner”, Hopkins said there was still a long way to go for the finance function to be seen as a key part of the leadership team.

“Have we as a profession won that battle? The answer has to be no,” he said. “Financial leadership can’t just start with the finance person. It has to start with the person at the very top of the organisation. And that means the chief executive.

“I am not suggesting that all charity chief executives should be from a finance background, but I happen to think that we are underrepresented as a profession. A few more people breaking the glass ceiling would be a really, really healthy thing. And more and more finance people are now getting into chief executive jobs roles,” he said.

Sustainability in volatile times

Hopkins said a key part of strategic finance was ensuring the charity’s sustainability though volatile times.

“It’s very easy to provide a cosmetic levels of financial sustainability but true structural or systematic sustainability is about your almost intuitive understanding of whether your organisation can withstand lateral and linear shocks to the system. So strategic finance is about much more than managing budgets and being good at forecasting.”

Hopkins said finance professionals were “in a great position” to step up to the leadership plate.

“In terms of timing and what is happening in terms of attitude within our sector, your time is now,” he said.

The cover theme for the next issue of Charity Finance magazine is financial leadership. Click here to find out about subscriptions

 

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