In nearly two decades as an executive search consultant, Caroline Raggett of executive search firm Russell Reynolds has seen expectations around CFOs change in Asia.
“For the last 15 years, there’s been a lot of investment by mostly multinational companies to grow domestic talent,” she observes. “I would say for the last five to eight years, that talent has really started to be a strong part of the CFO regional talent pool.”
The latest change stems from the economic slowdown in China, which has made companies look beyond the mainland to other markets in the region. Raggett’s clients now tend to ask for more than just China experience, although they continue to look for attributes such as curiosity, being comfortable with ambiguity and being a talent magnet.
Raggett spoke to CFO Innovation’s Cesar Bacani about what multinational and large Asian companies are looking for in top-tier CFOs, advice on how finance professionals can best prepare themselves for the top job, and other issues. Below are edited excerpts:
What are the trends you are seeing with regard to top-level CFO recruitment?
For the last 15 years, there’s been a lot of investment by mostly multinational companies to grow domestic talent. I would say for the last five to eight years, that talent has really started to be a strong part of the CFO regional talent pool. More recently, privately owned enterprises [mostly in China] have been poaching that talent and making it their own.
As businesses have gravitated towards Shanghai as a regional headquarters at least in North Asia, a lot of time and effort has been sucked up by taking advantage of the huge opportunities in China.
So you start seeing two distinct types of CFO that’s regional and Asian: the type that is based in China and always has been, and the type that has been based elsewhere, probably Singapore or Hong Kong.
What’s the difference between regional CFOs in China and those based in Singapore and Hong Kong?
Those in China tend to be much more execution-focused, with a very heavy focus on growth. They are likely to be much closer to supply chain, production, distribution, exports, and of course, to a big consumption market.
If you’re sitting in China, and everything around you is grow, grow, grow, harvesting that opportunity in terms of delivering business results becomes a huge priority. It’s difficult, and potentially less interesting or impactful, to investigate beyond that to what other, potentially smaller opportunities or problems elsewhere in the region might be.
The difficulty now is obviously China growth is slowing down, which is normal and to be expected as the economy matures, even if it would have been nicer if it had happened in a gentler way. It means that now is the time to seek out and act on those opportunities elsewhere in the region.
So we are increasingly asked for somebody who has ‘more than just China’ experience.
It’s not just technical skills. It’s attributes like curiosity, being an independent thinker, being comfortable with ambiguity, able to handle complexity in several different dimensions, a forward thinker, somebody who is very strong in developing others - a talent magnet, if you want to call it that.
So this is a change?
Asia is becoming much more complex as a business environment because shareholders will continue to seek high growth returns that have been traditionally buoyed by China alone. In turn, this means multinationals will hunt out those opportunities beyond China, while continuing to maintain a competitive position in China.
So these buzz words are coming out a lot. And, of course, influencing skills, business partnership, all the usual ones we heard over the last 10 years as well.
The expectation is that the CFO will be able to look across the Asia region, particularly for multinational corporations, and say: Here is my investment pot of $100, how much am I going to put into China, how much do I put into Indonesia, how much do I put into India, Philippines, Vietnam?
What are the risks I’m incurring in making those decisions? How do I balance changing labor costs, currency fluctuations, geopolitical risks? Should we be changing our overall physical manufacturing or distribution footprint in the region?
So rather than putting $80 into China, because I know it’s going to generate the bulk of my returns without question, now there are multiple decision points. It becomes much more complex.
Are you finding enough of this type of finance talent?
We do know these candidates, and we discover new people every day who fit this brief.
The good news is that these people tend to develop others like themselves. So for every CFO that gets it right, there could be three or four in their team who have the potential. This pool of people should grow as a part of the total pool.
But today they are not the majority of people, I would say. Maybe the top 10% of people, and that’s a very intuitive number. I’m not sure it’s the right number, but it feels about right.
And then there’s maybe a further 50% or 60% of people who are great executors, who have worked in high growth businesses and have done a really good job of what was required under those circumstances.
The 50%-60% do a great job. They are very comfortable to sit around the table with the supply chain, the HR director, the sales director, and have a meaningful discussion at a commercial level.
The top 10% are able to foresee and create a plan to deal with disruption or discontinuity, take more strategic decisions. They are able to go that one level up in terms of overall decision-making and business leadership.
As an executive recruiter, how do you know that the CFO that you’re talking to is in the top 10%?
We look at previous experience as point of entry into a discussion. So if I have a client for a certain scale and certain industry with a certain strategic issue, I’m going to look for people who have had experience of that type of environment or who have experience that is fungible to that client.
I expect to see facts and figures in a CV written by a finance leader. Over 80% of the CFOs we have placed recently have experience outside finance, so that is also a good indicator of a broad thinker.
However, this is only a point of entry. The interview, as well as referencing, will determine the top 10%, in our experience. We pay a lot of attention to competencies, the ‘how’ in executives doing things, what their innate and learned skills are.
What can the CFO expect during the interview?
My best advice would be to expect a discussion that goes beyond the bare facts of a career. A good interviewer will be digging deeply into the competencies that her client requires in an individual to be successful, but will also be exploring an individual’s potential and agility to be deployed or promoted into other roles at that client company in the future.
Take, for example, something like ambiguity. I’d be asking a series of questions: Tell me about the time when you had to make a decision but you didn’t necessarily have all the information. How did you feel about that? How did the decision turn out? Who did you have to influence to support your plan? With the benefit of hindsight, what would you have done to improve the outcome?
I like to hear about their influencing skills and their ability to bring people around their point of view. I can see also how comfortable or uncomfortable they are with a certain amount of ambiguity, whether they’d be happy to get themselves back into a similar situation again.
A lot of the interviewing is about experiences and what you learned from it and what the business outcome has been. It’s not just about the facts and figures of a CV.
You’d be looking for people who are articulate? Finance people are seen as comfortable with numbers, but perhaps not as good as telling the story of those numbers.
I like to think that’s a cliché of the past, but there’s definitely room within the CFO’s team for people who are incredibly close to the numbers at a technical level, and who may be less extrovert and more introvert.
But if you think about the modern CFO, their role often includes IT, often includes other functions like legal, procurement or facilities. They will be out and about with the CEO or President, talking to business leaders. They can’t be a purely numbers person.
The last 15 or 20 years has seen the rise of the CFO who’s articulate, engaging, socially charming. It is about the numbers and having logic, a rationale that’s evidence-based, but you have to sell that vision as well, particularly when you’re talking with the business leaders and other key functions such as marketing and HR.
As you look at the top-level CFOs that you have placed in the past five years or so, would you say that the majority or all of them are people who speak English and with overseas experience, not just home-grown experience?
If you are to look either into listed businesses or regional CFO roles here in Asia, most are fluent in English as their second language, if not their first language, especially if they have worked for a multinational corporation.
There’s an emerging number of mainland Chinese companies that are looking to expand overseas and may even in some way, shape or form, want to understand how multinational corporations operate. So having some English is very advantageous, if not required.
What about Mandarin?
We see it quite often, in terms of what our clients are asking for, even if it is a multinational company. They’re looking to build a cadre of local leadership, so pretty much across Asia, it will be English plus one other language, and most commonly, that is Mandarin.
In Hong Kong, Cantonese may be a more of a requirement for certain companies. In Singapore, there’s often more open-mindedness as to what that second language is because of their proximity to Malaysia and Indonesia. Occasionally you will be asked for fluency in Bahasa.
When you talk about second language, is it just spoken?
Spoken, reading and writing are obviously best. But at least proficient spoken language is important. If the reading and the writing piece is not there, it may often mean looking at the capability of the rest of the finance team to see what support they can offer for legal documents or signing off on reports and accounts.
Is having an MBA a requirement?
Not having an MBA is in no way, shape or form a barrier. But if you have an MBA from a really good school, then that might lend a positive advantage.
So if you have been to INSEAD, for example, Harvard, or have an EMBA from HKUST Kellogg . . . If it was a really good school, that might confer a positive image of your intellect, your curiosity, your ability to multi-task, doing an MBA while holding down a full-time job, that would be positive.
But in my 17 years of doing this, I’ve never seen a client decide between two candidates based on an MBA.
Being a CPA or being a management accountant, that’s not a requirement now?
There will be some regulated institutions where you have to have a qualified accountant as your CFO, a stock exchange, for example. But in most organizations today, because of this focus on broad business knowledge and strategic capabilities, it’s less of a requirement.
But a university degree in business presumably would be a bedrock foundation?
A university-level education is generally where CFOs start. There may be exceptions, but generally speaking, most will have a university degree.
From a subject matter point of view, although I have not studied this in any great depth, most people come from a degree subject such as finance, accounting, business, economics. But it’s not set in stone.
But track record is key.
That’s absolutely true. I need to know on behalf of my client what you have done. I also need to separate out what you have done and what you have influenced others to do and what you have led your team to achieve.
That’s one bucket, what you have done for the people around you. The other bucket is, what have you done to help shape the company’s opportunities.
Maybe you’re somebody who’s actually shaped the opportunity, gone to the board and said: “From a growth perspective, we need to raise funds for M&A. Here are our three targets.” And that’s been transformational for the region.
I’m also looking for how you did it. You could be really smart with your numbers and see the way forward, but the really good leaders know how to bring other people with them on that journey, and get to the same point of decision and be excited about doing it.
Would you hire a 28-year old as a CFO?
I wouldn’t say no, but at that age they generally lack the maturity to influence senior business leaders. There’s a level of maturity that goes with inspiring others and inspiring a team, particularly in tough times. Some people have it really early; for some people it comes later.
We have spoken about the idea about being a talent magnet. There’s only about 10% [of CFOs in Asia] who possess this more advanced skillset we’re looking for. So if you’re going to bring somebody in who is like that, you had better make sure that they’re able, and are interested in spending the time, to invest in others and build up that strength of talent in your organization.
Are you looking for experience with analytics, social media, technology?
It hasn’t really got that far here in Asia. It’s not uncommon for clients to ask for somebody who’s done IT before, particularly if there’s a big ERP or SAP project coming up.
Big Data, data analytics, cyber security, digital e-commerce – this is so complex and so fast evolving that it’s really a function of its own.
What is important for the CFO is having an appreciation for the dynamics of technology, and how quickly it can affect the finance agenda, particularly from a risk perspective. So the agility to embrace new things, change, dynamism in your area of competence, yes, that’s important.
At a concrete level, the CFO may be asking herself, how will this affect our margins, distribution, supply chain? Understanding the implications of technology, more than being the person driving the technological innovation itself, is key.
In your experience, whenever clients have to choose between a man and a woman, equally qualified, do men tend to get the job?
That’s an interestingly worded question! There are companies that have a very positive diversity agenda and may be more likely to select the woman. There are, sadly, also companies that do not have any diversity policy whatsoever, and there it is more difficult to assess the selection criteria vis-a-vis diversity.
I think one of the things that we [at Russell Reynolds] can do is help develop a pool of candidates that is not picked from just the male population coming through, but also has a heavy focus on developing women. At the end of the day, increasing the number of viable female candidates means clients would effectively have more candidates to choose from without compromising one iota on quality or potential.
My personal view is that the diversity discussion should move on from just gender, from just nationality or having local or international experience. The diversity of approach, training and philosophy should be just as important.
Are you finding that the CFO that you are speaking to have greater expectations of salaries and so than what is actually on offer?
It’s difficult to answer with an absolute yes or no, but consider the laws of supply and demand. If you want that super female Asian, high potential, global, but local profile, then that is a much, much more a smaller pool. And you may have to dig deeper to find this strategic, influential, creative and commercial profile we have been talking about.
Taking into account items such as housing allowance, schooling for children, relative income tax, it can become very, very expensive very quickly. So generally the package for a really good finance leader is at the top end of the market because you’ve got a shortage of supply versus the demand.
Do I see a point in which supply and demand even out? Possibly. I’m thinking about the small cadre of 10% today who train other people in their likeness. Maybe it will take ten years and then we’ll have 30% of the pool that looks like that.
But in ten years’ time, who knows what the markets and economic situation will be. Maybe these skills and competencies will be replaced with other requirements – knowledge of Africa perhaps.