Effective Financial Stewardship

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Effective Financial Stewardship Traits for Executives

Financial Stewardship More Important Than Ever

Since the Enron debacle, the financial stewardship responsibilities of C-level executives have taken center stage in the U.S. business community. From large metropolitan, money center dailies to local or rural newspapers, headlines consistently trumpet developments—usually negative—at companies large and small.

Unfortunately, most of this attention surrounds scandal, failures, waste, ecological damage, financial mismanagement, or even fraud. Levels of public trust in the wisdom, commitment, and abilities of C-level executives are at all-time lows.

The fact that most members of senior management are hard-working, educated, experienced, dedicated, motivated, and sincere individuals has often been lost on the viewing and reading public. Watching any local news broadcast or reading almost any front page of your local newspaper offers the answer: news negativity sells advertising and attracts attention.

This unfortunate trend and the often disastrous effects of the recent deep recession have focused an even brighter spotlight on the financial stewardship efforts of senior management. Critically important to publicly traded companies, closely held organization senior executives are also under the microscope of public, government, and legal scrutiny.

The Primary Components of Financial Stewardship

There are a variety of theories and opinions about the critical mass structure of financial stewardship. Most are valid and offer value to the reader. Author and utilities consultant, Scott Lucal, has a simple and useful proposal for senior executives to consider. He contends that there are two primary components of financial stewardship, and that failures typically occur because senior executives neglect to address one of the two responsibilities:

1.     Create and adhere to written decision-making and implementation plans.

2.     Create and follow a written risk-management plan that minimizes potential money losses.

This combination of strategies and behaviors may reduce, if not eliminate, most issues ranging from operating and financial situations to media perception and disclosure of results. Spending some quality thought time on these two straightforward suggestions may part the current “curtain” of mistrust and/or confusion and offer a workable plan for improving financial stewardship.

In addition to adopting these or similar components of a working plan, senior executives should consider the professional traits that solid financial stewards exhibit in most settings.

Common, Effective Financial Stewardship Executive Traits

• Knowledgeable decision-making: Senior executives should be neither emotional nor impatient during the decision-making process. Consistently good decision-making typically depends on exhibiting the remaining traits listed below as senior management faces multi-barbed challenges on a daily basis. Although dependent on the wisdom, experience, and use of the additional traits, decision-making ranks number one on the importance scale.
• Efficient and effective planning: The adjectives “careful”, “solid”, “strategic”, and other descriptive terms are frequent companions of the word, “planning," but "efficient" and "effective" are often more valuable precepts. Although some experts and executives believe a bad plan is better than no plan at all, others vehemently disagree. They often contend that a bad plan must be recognized and immediately corrected or modified. Doing nothing allows a bad plan to possibly infect an entire organization. Although always subject to changing conditions and necessary modification, an efficient, effective plan is common to good financial stewards.
• Careful evaluating: Objective evaluation of all financial aspects of operations, marketing, advertising, revenues, and expenses consistently appears in the resumes of superior financial stewards. Evaluation does not mean recording, proofing, comparing, or verifying financial data. It does require the senior executive to interpret financial information on multiple levels. For example, asking, “How does an expense or investment impact prior or future decisions?” Or, “How do cash flows for the past six months affect potential future investments or marketing plans?” This trait (talent) is not innate. Superior financial stewards develop evaluation expertise as their experience and professional wisdom increases.
• Diligent execution: Executing is more definitive than implementation. Effective execution involves creating, scheduling, and executing project plans to conclusion. While C-level executives typically must depend on others to develop detailed parts of the project or plan, they will not be mere spectators to action plans. Good financial stewardship requires execution involvement from beginning to end. This trait is associated with all good financial stewards.
• Consistent assessing of conditions: Careful assessment follows diligent execution as a natural action for superior financial stewards. Creating, overseeing, and executing a plan delivers knowledge, information, and critical data. Assessing the plan and its execution is equally important to effective financial stewardship. Careful assessment identifies both the wonderful and less effective components of both the plan and its execution.

Senior executives must re-establish public confidence in their financial stewardship abilities. While few “lost” or forgot their high performing stewardship ability, the unfortunate publicity of the disastrous and illegal actions of a few peers cast a pall over the many talented professionals currently functioning well.

Newer members of the financial stewardship “club” should consider the noted components and adopting the traits of superior performers. Experienced senior executives can also use this information as a “refresher checklist." Avoiding mistakes by practicing diligent financial stewardship will re-energize the image and stature of the senior executive community.