What's in a Name? The Role of the Finance Director

Towns far and wide are structured many different ways, but the core operations are all based on a tried and true history that dates back to the founding of the Commonwealth.  There is one position that we find time after time to be difficult and sometimes controversial to define, and that is the role of the Finance Director.

The Finance Director in many Town's is defined as the Chief Financial Office (CFO) and is responsible for the general oversight of the financial departments such Accounting, Treasurer, Collector, Assessing, and sometimes also HR or Payroll.  The position is generally held by either the Town Accountant, or the Treasurer/Collector, and in some places, is a free standing management position, a step just below the Town Manager/Administrator.  The position is generally responsible for the creation of the annual budget, as well as ensuring the outcome of that budget throughout the year.

So what's the problem with creating the Finance Director position, or hiring someone new into the position?  I think it really boils down to a few factors including the obvious such as skill set, and experience, but also a few less obvious traits such as personality and management ability.  In the municipal finance market in Massachusetts, there is already a very apparent lack of qualified candidates to perform the more basic roles that are necessary for the operation of the Town - accounting, treasurer, assessments, etc.  Add in the fact that you need to recruit and hire someone who can do these primary functions, on whatever software or platform your Town has, and you have limited your hiring pool generally by 60% or more.  To then expect that you will take the remaining candidates, and find someone who possesses the skills and personality traits that make for a successful Finance Director, is a tall order.

In Fiscal 2014-2015, based solely on a review of Selectmen meeting minutes and articles in the local papers around the Commonwealth, there were 31 Finance Directors hired as either part of the Town Accountant or Treasurer/Collector position.  Of those 31 hirings, 18 of them lasted a year or less, citing reasons for the resignation or dismissal as being for either personality conflicts with management or the staff, or for technical and experience reasons that caused the Town financial difficulty, unrest, or complex budgetary situations that could not be addressed.  A 58% washout rate is not a good start given the time, money, and transition time necessary to onboard any municipal finance professional.

Of the 13 or so remaining hirings from the previous example, 6 Finance Directors managed to convince their communities that the reason the financial functions were not producing at capacity was because the financial system or platform that was installed was poor, lacking functionality, or was setup incorrectly.  In this day and age, regardless of the vendor you are switching from, or switching to, the average cost of a full systems conversion package will run you between $70,000 to $120,000.  As if the money that you are spending to hire a "qualified" Finance Director isn't enough, if you are approached for a system conversion warrant article, that should be a red flag that there is potentially a problem in the technical skill set.  Any Finance Director who is worth their value will take reports and data anyway they can get it, and turn it around into a functioning financial analysis and budget document.  There are software platforms in the market that make the process easier, but what is your cost versus return on "easier", especially when you factor in the problems and disruption that are inevitable with a software conversion.

The remaining 6 people, or a mere 22% of the recruitments, took the job, hit the ground running, and were able to succeed through either a combination of experience and personality, or good old fashion hard work, without massive overhauls to the Town's departmental structure, workflows, or software platform.  There are so many variables that define the turnaround time, and the successfulness and timeliness of the outcomes, that sometimes a washout in one community is a perfect fit for a neighboring community, due purely to a slight change in those variables.  In an employment market that is largely dominated by recycling the same personnel around the Commonwealth, Town administration needs to be aware of what attributes make a great Finance Director, not just an above average accountant or treasurer.

One last thought on the matter - do you need an in house Finance Director?  My opinion is no, you do not.  If you have done a great job hiring at the department head level, and the financial departments are strong, and independent, then the Finance Director position in its most pure form becomes about management, coordination, and evaluation of the financial function of the Town, and about data analysis, collaboration, and production of the budget on an annual basis.  These fundamental responsibilities, especially when executed by a person who knows the intimate details of the daily departmental processing, can ensure that the Town's core financial function is well managed, productive, and stable in order to act as the foundation for all other Town operations. 

Baystate Municipal Accounting Group, as well as several other firms in the market, have successfully fulfilled the Finance Director role in various forms over the past several years. If for nothing other than simplifying the hiring process, we would love to discuss various delivery options for this service with you.