Becoming a CFO: How to Try Your Luck in China
If regional CFOs harbor expectations that recruiting and retaining finance talent in China are going to be easier because of the economic slowdown there, Simon Lance has sobering news.
“It’s still a very tight market and pretty competitive,” reports the Regional Director, China, at Hays, one of the world’s leading specialist recruitment groups. He describes as “a fairly small pool” those finance professionals in China who possess the desired combination of technical, soft, cultural and people management skills, as well as language and alignment with the company’s values.
Shanghai-based Lance spoke to CFO Innovation’s Cesar Bacani about demand in China for local and foreign talent, particularly those from Hong Kong and Singapore, and other people issues. Excerpts:
Is it a bit easier now to recruit and retain finance talent in China because economic growth is slowing?
I would have thought so myself, but unfortunately not at the moment. We’ve seen a few changes in the recruitment market in general, but at the senior end, looking at senior management or senior technical candidates – CFOs, controllers, treasurers, FP&A, finance managers, cost managers – it’s still a pretty acute skills shortage. It’s still a very tight market and pretty competitive.
Demand for some of the mergers and acquisitions roles and in investment banking, which are driven a lot by business confidence, is starting to pick up again now, as a bit of confidence comes back to the market. But we find the skill set that companies are looking for at that level is still pretty hard to find.
It’s usually a combination of the technical skills and also the soft cultural skills, as well as language and quite often the people management skills or the alignment with the company’s cultural values. That’s still a fairly small pool in China.
We’re essentially talking about first-tier cities here, correct?
Our perspective on the industry is really strongest in the areas where we have offices established, so Beijing and across northern China now, we have quite a strong presence, Shanghai and Suzhou, and Guangzhou and Shenzhen.
We are hearing a lot of talk about the Tier-2 and Tier-3 cities like Chongqing and Chengdu, but we’re not physically active in those markets as yet. We don’t have an office in the western part of the country either. I think there’s merit in setting up there, but it’s also a pretty dynamic market and I would like to understand it a little bit more.
There’s a lot of multinational companies relocating [to the west]. The roles that we tend to hear about tend to be mid-level positions. The CFO would be more likely to be based in Shanghai or Beijing or Hong Kong.
What about Hong Kong, Singapore and other cities in Asia? Are candidates coming over from there to Beijing or Shanghai?
There’s quite strong movement between Hong Kong and Shenzhen and Guangzhou. We do see some Singaporean or Hong Kong nationals working in Shanghai and Beijing.
But by and large we have more interest from our clients in identifying Chinese nationals. Where that is not possible, we expand to search to Hong Kong and Singapore, and even expats [in the West], but there is a strong preference to find Chinese local candidates.
But as I said, the talent pool is small, so it’s not always possible [to cater to that preference].
Why is that pool shallow? This is, after all, a nation of 1.3 billion people.
I think in those business-critical roles, the interest from employers is not just on technical skills and the understanding of the local tax or financial market. They’re also looking for quite strong people skills and a bit of a cultural connection.
A lot of [mainland] Chinese candidates haven’t yet come to the level in foreign companies. There’s still a bit of a transition happening in bridging the two worlds of Western management and Chinese local culture.
I’ve been hearing this for many years. I would have thought by this time there would be a pipeline of experienced finance talent in China. Is it because demand is just so strong that supply cannot keep up?
I believe it is only a matter of time. There’s a really good wave of finance professionals in junior to mid-level ranks. I think over the next five to ten years, they will develop into the senior roles.
I’m not sure of the reasons, but there is definitely a shortage of the very senior end. Personally, I believe industries themselves have a role to play in some of their management development programs. I would advise international postings for their Chinese staff.
I would send a financial controller to Australia or the US or the UK for one or two year secondment; that would bridge the cultural gap quite well. I think there’s always a role for industry to play. They need to invest in their staff rather than look for someone that already has that background.
Are companies also interested in expat Chinese – people who left to study abroad or settle there, and now want to come back home?
It’s not so much about nationality or cultural concerns; it’s about the long-term commitment to China. If we’re talking about people being put in senior roles in finance or technical disciplines, companies see that they can build a lot more around that person if they have him for five or ten years.
With Chinese expats, at some point, they’ve had some very strong connections with China. But for Western expats, they might be thinking about staying two or three years; for Hong Kong or Singapore perhaps a bit longer. The ideal is for someone to commit long term to China and be based here for life.
Is there a trend of companies developing their own internal candidates rather than going outside to hire for top positions?
China is a fairly impatient recruitment market, so domestic firm or multinational, the preference and the need is to find someone that already has the [required] skill set. People are looking for the perfect short-term solution. Personally I think in the next five years the companies that have good development programs will do better.
Where is demand for talent coming from? Is it more from multinationals or from local companies?
There is increasing demand from the domestically owned companies. We don’t really do a great deal with state-owned enterprises ourselves, but we’re starting to get a lot of requests from middle and large sized domestic-owned companies.
I think it’s a sign that as the domestic companies have gone through their rapid set-up and establishment phase and they move into consolidating their business and then expanding, they need to introduce systems and structures. You do start to see a stronger financial team and a stronger financial management structure. If they want to keep growing and consolidate, they really need to bring in some structure in their financial management.
Globally most multinationals are under increasing cost pressure, so the financial management of their businesses in China is becoming a real global priority. There’s still very strong demand [for finance talent] among multinationals.
I think that’s driven by needing to run a very lean, efficient and profitable business. Perhaps global economics also play into that, if the MNCs are exposed to the European or US markets. They really need China to become a highly efficient, profitable revenue stream.
So the flow of foreign investment into China is still strong despite the economic slowdown? You’re not seeing MNCs leaving or cutting back in China?
I have sensed some multinational individuals leaving and heading back to the UK and Europe, but it tends to be a seasonal trend around this time of year. When the school year and the financial year end, there is a bit of turnover. But generally speaking, no, I haven’t seen a mass exodus of companies or individuals. I think China is still seen as a pretty good place to invest in.
Certainly we’re seeing Japanese and Korean companies operating here. There’s still very strong links with Singapore and Hong Kong. I haven’t seen too many Southeast Asian companies.
It’s probably in the other direction in manufacturing like textiles and some of the raw chemical industries. [Chinese companies and MNCs in China] seem to be heading in the other direction to Thailand or Vietnam, just for the low cost of labor for low-end production industries.
Do the people you have placed tend to move on after a year or so?
We follow our retention rates closely and they’re generally quite good. It’s very rare that, at the senior level, any of our candidates would be leaving in less than two years. You do see higher turnover in the more junior ranks, of course.
Generally speaking at the senior level, unless there’s a catastrophic mismatch, they usually stay for a good tenure. For most of our placements, if they progress through their probation period, we would be pretty confident they’ll stay for three four years.
At the junior end, you’re probably looking more at 18 months to two years. That’s about the norm in the industry for graduates.
Someone who really stays a short time in a company, whether a CFO or a junior, will that person become not as employable as others? Or because of the shallowness of the pool, everybody just gets snapped up?
It is something that we would question very closely. If they had valid reasons and they have conducted themselves in an ethical way in accepting the role and then leaving, no, it wouldn’t necessarily be a barrier.
But if you see [departures] in someone’s resume five or six times in a row, you would probably be a bit cautious.
If you go back a few years in China, maybe looking at the five years leading up to 2011, there’s definitely more candidates that will have fairly short tenures. I think that was because the market was really booming in China and people were making short-term career decisions.
But not anymore. I think candidates are aware that they need to establish themselves and demonstrate a longer term commitment, particularly at the senior level, if they’re going to progress. We quite often would give advice to people that have moved two or three times very quickly and are looking to do that again – we would advise them to try to spend a decent amount of time in their current company.
If you’re aspiring to be a CFO, you’re a much more marketable candidate if you can demonstrate that you have managed a business through a rapid expansion, through a downturn, through high turnover, low turnover. If you can really demonstrate that your practical experience is well-rounded, then you’re more marketable than someone at the same level who has spent only two years with a company as it was going through good times.
A lot of the senior guys I’ve talked through that have stayed with the same company through the tough times will say they’ve learned more in the difficult times than in the good times.
What advice would you have for foreign finance professionals, including those in Asia, who may be interested to work in Chinese businesses?
It should be a long-term commitment. They must realize that employers in China are no longer looking for a one- or two-year secondment for an individual. They are looking for people that see their careers in China.
Hong Kong and Singapore have a fantastic advantage over other expats because their language and cultural attributes are much closer to China’s. But they still need to be committing to the longer term.
Is not speaking Mandarin a deal-breaker?
I don’t think it’s a deal-breaker yet at the senior level, but it will become increasingly more important. The talent pool that can speak Mandarin over the next five years will start to increase pretty rapidly in the middle levels. I think [speaking Mandarin] it will become a bigger advantage over the next couple of years.
Chinese in the business community speak very good English generally, but it’s almost a sign of commitment for expats to get interested in the language and the culture in China. It also helps you in understanding Chinese staff or in trying to localize yourself into a Chinese business.
What about advice for local Chinese, including Chinese expats?
They have two distinct career paths they can pursue. If they’re interested in working for a multinational company, gaining some international experience is a very good plan, whether that is through secondment with their current employer or perhaps going abroad for a period of time with a new employer.
If their preference is to pursue a career with a domestically owned local Chinese business, international experience may perhaps be not so critical. But China is increasingly doing business on an international platform. I think, at the senior level, international experience is quite valuable.
Speaking English is an advantage. Within certain sectors, such as manufacturing industries, speaking German or French can be an advantage if you’re dealing with European clients or suppliers.
Do you need post-graduate professional qualifications?
Not necessarily, but I think as the market matures, professional qualifications will become increasingly more important. Probably at the moment there is more tolerance for the actual experience rather than additional qualifications, but I think it will become increasingly important.
But you need to be a university graduate, at least.
Absolutely. In China now if you don’t have a tertiary degree, then you have fairly limited options in the professional world. With the current rate of graduates coming out – I think it was nearly 7 million last year – non-graduates will really struggle to compete for the foreseeable future.
Would having a foreign qualification such as ACCA, CIMA and CPA Australia be an advantage, as opposed to a local accounting qualification?
For some companies, yes. It may signify possession of soft skills [because foreign curriculums focus on both hard and soft skills]. The exams are probably done in English, so passing them indicate language skills. And you would have a better understanding of some of the international regulations, of international culture and international business.
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