In Hong Kong these days, it is not unusual to have an applicant accept a job offer – only for the company to hear back a few weeks later that he or she had decided to take another post. Especially for finance, there is an abundance of job openings in economically vibrant Asia, where the unemployment rate is trending below 4% in many places (versus 9% in the US).
Sam Wong is seeing the problem first hand as he works to transform the finance function of his clients. “Companies are scrambling or having a hard time,” says the Partner, Advisory Services, at Ernst & Young in Singapore. The growing trend of finance expanding from transactional activities and statutory reporting into business partnering roles and value-added services is not helping.
Wong spoke to CFO Innovation’s Cesar Bacani about what companies can do to acquire and keep finance talent, how they can manage the transformation of their finance function and other issues. Excerpts:
I am told that hiring finance professionals for compliance and reporting is increasingly difficult in many places in Asia.
It is a problem because compliance standards change quite rapidly. In the banking sector, compliance is such an important function and a very high cost element as well. Central banks have policies that evolve, I would say, every quarter, easily, so the compliance people have got to keep up.
Regulators are requiring more compliance work, more things to check. You used to be just required [to work on] a smaller sample to do your compliance testing. Now you probably need a larger sample. Then you have the development of Basel 2 into Basel 3, for example. New standards come out. Then demand [for compliance people] will go up . . . But I don’t see supply moving up fast enough.
There are many accounting schools in Asia and the professional institutes such as ACCA and CPA Australia, not to say HKICPA and ICPAS, are quite active here.
If you talk about fresh, raw graduates, to me, this is all just fundamental requirements; the rest is aptitude and attitude . . . and continuous education.
They will only give you a very basic level of understanding, then you have to comply with your company internal compliance policy, you have to comply with statutory requirements, you have to comply with regulatory requirements, which is industry-specific. You have to comply with reporting requirements, which are professional-specific.
And not all the students that come out of these professional bodies are interested in doing compliance work.
So that’s why companies are scrambling to hire finance people.
Yes, scrambling or having a hard time. You talk to some of the industry players. These compliance people move around quite fast because they are in high demand. And not everyone wants and likes to be a compliance guy.
Yes, I’ve heard about how accountants are being asked to also do analytics, provide business insights, devise forecasts and get involved in other business partnering roles. Do they really want to do these or are they in fact happier doing transactional work?
They want to, yes. But wanting, that’s one thing; whether they have the time and space to do it, that is the point. The reason why clients engage us to enhance the finance function is not to save money. It’s to free up resources so [finance] can add value to the business line.
The investment my clients make, the money doesn’t come from the CFO budget. The money comes from the business line budget. The business line wants to pay us to free up the finance, so that the finance can help the business line.
So in a typical finance function, if I have ten accountants in there, would you say that half of them would be open to business partnering?
In the Singapore context, if I were to make a guess, it will be only two that will be interested in transaction processing; eight will want to do value add. Singapore is a knowledge economy, so we want to be value add.
You look at Nanyang Technological University, which is the world’s biggest engineering university. We generate students who are business-minded. The next one is SMU, Singapore Management University, which is known for the very unique teaching style for students to be very vocal and very participative in business. So rather than coming out with accounting accountants, we come out with business accountants.
Both sides of the finance function, transactions and business partnering, they have problems with talent recruitment and retention?
That's right. It’s always a challenge.
What can a company do?
One strategy is what I call the ‘tour of duty.’ If the company is big enough, especially MNCs, [finance staff] can switch from a particular sector to another sector [in finance work], so cross sector rotation. The second one is geography rotation. The third is rotating from the finance function to the business line and then rotating back.
Even compliance, you can shift sectors as well. So for example in an energy company, you can move from lubricants to retail petrol, two different sectors where compliance and transaction processing is done by two different teams.
Is there a case to be made to outsource transaction processing so your finance function is purely or mostly business partnering?
Yes, I wouldn’t say 100% outsource. I would say a significant portion can be outsourced. There are different tiers to this. One is outsourcing, the second one is shared services, which is in-sourcing, and the third is retaining [compliance and transaction processing] at the local level.
You are likely to retain FPA [financial planning and analysis] and a portion of your local compliance [if you outsource or in-source]. I have seen compliance functions being progressively consolidated, not outsourced, but consolidated in an in-sourcing model.
And in that model, resources being consolidated in a shared services centre, are finance staff more likely to stay?
I’m helping an organisation right now to do retention of the staff in their shared services. A lot of times, especially finance shared services, the shared services centre is seen as a separate organisation from the finance function. Shared services should be part of the finance community. Then it becomes a question of how to rotate people in and out of shared services [to other parts of finance] to create a wider career path for them.
For example, your shared services centre in the Manila office supports 14 countries. There may be opportunities where the shared services accounts payable supervisor is rotated to, say, the Singapore office procurement function. Accounts payable, procurement – they’re part of the supply chain. You can come in to work as part of the finance community in the procurement function for a year and then rotate back.
Essentially, though, if you are in shared services, you always come back there, so that is your career path. You’re not likely to become the CFO.
I wouldn’t say that. I have seen shared-services heads moving up to headquarters to become CFO.
Remember, there’s a group of people who want to do transaction processing. They like to do transaction processing. You group them together so they can be productive in a shared service environment. The rest of the finance people can then focus on business partnering. It comes back to the idea of putting the right person in the right job.
How do you motivate shared-services staff anyway?
Even internally within shared services, there’s rotation from accounts payable to accounts receivable or to general ledger . . . and then there are also work improvement projects that they can do to come out with innovative ideas. Don’t forget, a shared service centre is a service centre. Shared service centre is customers. The customers are the finance functions [of the company units].
So the usual things about motivation, being complimented for a job well done, getting awards, more travel, more education, more skills training . . .
Oh yes. We cannot assume that shared service centres are just transaction processing and they don’t need any motivation aspects.
And these retention initiatives apply to the business partnering side as well. Are FPA and other business partnering finance staff paid more than those in transactions and compliance?
I would expect so, because the level of qualification in terms of work experience qualification would be different.
Do FPA staff need to be CPAs?
Actually, not really. Business graduates or even economists – I have many banker friends who are engineers by training. What you need is really the structured thinking, the structured analysis of a business problem and fragmenting it into smaller bite sizes for you to analyse. Then you can go and find data and information to support that.
Accounting is very different from financial analysis. Accounting is recording of transactions. And in financial planning analysis, normally we take cash basis, rather than accrual basis.
Is there any special advantage if my FPA person also knows about compliance and reporting and transactions? Does that enrich the kind of advice that he or she can give me as a business person?
Oh, definitely. Why should I be talking to four different persons from finance, one for analysis, one for compliance, and so on? If there is a single contact I can go to, I would go to this contact. If it is something more complicated about the topic, the finance guy should be able to find out internally within the finance function what the correct procedure is for me to keep me out of trouble.
This [FPA] person should have some knowledge of [compliance and transactions], some appreciation for the tax implications [of a deal], for example. Once you get to the point of specific tax regulations, that’s when you try to find a tax adviser who is a specialist in VAT or customs duties. But I will expect the FPA to have a general appreciation for this sort of topics.
There’s no need [for the FPA] to be an expert in accounting either, FRS 2 or FRS 39. They just need an appreciation [of accounting practices]: ‘Generally you do straight line depreciation for this type of asset for seven years . . .’