ON A TEAR
Finance salaries are still rising across Asia, according to our latest compensation survey. How long will it last?
By Cesar Bacani

Kamal Aryf Baharuddin is an outlier among his finance peers in Malaysia. The 38-year-old chartered management accountant has worked for leading health-care services company PMCare for seven years. “This is the longest job I’ve had,” says Kamal Aryf, who has held finance posts in four companies since obtaining his bachelor’s degree in accounting from the University of Central England. “Normally, finance professionals in Malaysia move on every two to three years.”

He has stayed put partly because of the financial rewards—Kamal Aryf has been promoted three times since joining PMCare as corporate finance manager in 2000. Named general manager, corporate and finance, just last month, he capped a remarkable ascent to the top with a 20 percent raise. “I can’t complain too much,” he says of the latest raise. Even so, he rates job satisfaction at PMCare as becoming “so-so.” Says Kamal Aryf: “I want more challenges. You don’t want to get to a point where you do things by rote and by remote control.”

That finance chiefs like Kamal Aryf are highly sought after in Asia is not news. The region long ago shook off the economic and business troubles of the 1997 financial crisis. GDP growth last year was stellar, with China’s economy up 11.4 percent, India’s 7.8 percent and even the Philippines surging 6.9 percent, its best performance in more than 30 years. As a result, finance departments everywhere are frantically driving business activity (including a spate of IPOs and M&As), analyzing performance, and reporting results.

But success cuts both ways. While finance chiefs reap substantial monetary rewards, the job is also getting tougher—CFOs are taking on more responsibilities even as they are hard-pressed to recruit and retain ever-costlier staff. “We’ve been trying to find a controller for our factory in Suzhou, but it’s been three months and we haven’t found anyone,” gripes Suzhou-based Chen Zhanxin, who is CFO for Asia Pacific at Fairchild Semiconductor in China. “Those who are qualified expect too much in salary.”

The CFO Asia 2008 Compensation Survey, conducted in February and March this year, tells the story. The average annual base pay of financial controllers, treasurers, and other second-tier finance executives in China is US$25,770 (see “Are You Paid Enough?” this page). Salaries are 18 percent higher in Shanghai, which is near Suzhou, and a whopping 40 percent more in Beijing, the country’s capital. In India, the average second-tier annual salary comes to US$39,888. Hong Kong pays the highest average salary at US$101,106, which is 23 percent larger in U.S. dollar terms than what controllers and other second-tier finance executives get in Singapore.

The talent crunch is unlikely to ease despite the threat of a U.S. recession. Many economists believe that this will cause an economic slowdown in Asia rather than an outright contraction. “The projections we have across markets indicate that salaries will still go up—although marginally—in 2008,” says Nischae Suri, head of talent and organization consulting analytics, Asia Pacific, at Hewitt Associates. In its annual survey of salaries across the region, entitled “Managing Compensation in Asia,” the consultancy reports that finance, sales, and marketing are the three “hot functions” in China, Hong Kong, Japan, Malaysia, Singapore, Taiwan, and Vietnam.

Ample Rewards

Our survey reveals just how hot the financial talent job market has become. Nearly all of the 405 respondents from China, Hong Kong, India, Indonesia, Malaysia, and Singapore saw their pay rise in fiscal 2007 (see “Up, Up, and Away,” page 32). The weighted average salary increases: 16 percent for CFOs, bringing the Asia-wide average annual salary to US$59,846, and 15 percent for controllers, treasurers, and other second-tier finance executives, yielding an average annual salary of US$35,157.

CFOs and controllers in India topped everyone: their average pay soared an average of 26 percent, followed by Malaysia at 15 percent, China and Indonesia both at 13 percent, Singapore at 11 percent, and Hong Kong at 8 percent. Very few saw their total 2007 pay fall or stagnate. These outliers were based in Indonesia (17 percent of CFOs there said their pay did not change), Hong Kong (14 percent) and Singapore (12 percent).

Tellingly, two out of ten CFOs in Hong Kong, India, and Malaysia switched jobs last year, while 15 percent of CFOs did so in China. (Only 6 percent of CFOs in Singapore changed jobs.) Job switching was also pronounced among the second-tier finance executives in China, Hong Kong, India, and Malaysia (see “Rising and Leaving”).

The job-hopping does not surprise David Hui, leader of Asia Pacific financial services at executive search firm Korn/Ferry International. “It’s about opportunity, and good people always want opportunities,” he says. “And companies are now willing to look further afield because the nature of their business has become regional or global.” Finance executives are changing jobs not only within the local economy but to foreign markets as well since finance skills are transferrable across borders, unlike sales and marketing, for example, which require intimate knowledge of local cultures, language, and tastes.

“Many finance people in Singapore have moved to Dubai because of the better compensation packages there,” says PMCare’s Kamal Aryf. “They recruit people here to move to Singapore. At the same time, people in Malaysia are also moving to mainland China and also to Australia.” He says he is himself considering going abroad: “Not to China or Hong Kong, because I can’t communicate in Mandarin or Cantonese, but as far as Singapore, why not?” Indeed, headhunters have approached him several times, most recently for a job as head of finance for a commercial bank.

Employees Wanted

The market’s supply side is starting to respond to the surging demand. In most places local universities are producing a steady stream of accounting graduates. But the spurt of economic growth across the region has been so strong that demand is still outstripping supply. “Growth in this country is happening across industry sectors, and that means that there is higher demand for professionals across industries and across functions, not just finance,” says Avdesh Mittal, principal in India for executive search company Heidrick & Struggles.

In India, wage inflation is pushed higher by the business service companies, which are desperate to hire the best young talent. “A lot of BPO and knowledge process outsourcing firms that have set up in India are paying substantially higher value than local firms,” says Delhi-based Mayank Kalla, head of finance and shared services for Asia Pacific operations at U.S. multinational Ariba, which specializes in spend management. “They’ve just completely gone and skewed the market from the compensation standpoint. People automatically measure compensation against theirs, especially young folks.”

Complicating the picture is the finance function’s steady evolution to higher-value work, which often means that mere accounting graduates no longer fit the bill. “In the past, functions like finance and HR were not considered as critical as they are now,” says Mittal. “Owner-driven companies would have a very loyal accountant who’d take care of their day-to-day transactions. But now companies have realized that they have to scale up and become globally competitive. That’s why you find suddenly that there is a shortage of the right kind of people, because the demand for them had not been as strong as it is now.”

In Malaysia, any holder of a diploma or bachelor’s degree in accounting from one of ten universities with three years’ working experience is eligible for membership in the Malaysian Institute of Accountants. “But I prefer to hire someone with a professional qualification because you need to have initiative and be hard-working to get qualified, and these are good attitudes to bring to your job,” says Kamal Aryf. The problem is a shortage of qualified accountants, “even though it is now possible to gain a CPA or CIMA qualification here in Malaysia.”

Experienced qualified accountants are also at the top of the list in companies that have hired non-accountants to head finance. Enterprises planning an IPO may recruit an investment banker, for example. “There’s no reason why you have to be a qualified accountant if you have a strong accounting team beneath you,” says Korn/Ferry’s Hui.

Increasingly, however, the finance department needs more than qualified accountants, says Mittal, because finance is being called upon to play non-traditional roles. “An accountant may take care of statutory compliance and the traditional finance functions, but these days you’re also talking of finance contributing to strategy,” he says. One of Mittal’s clients is looking for a tax specialist for its finance team, because in India 30 to 35 percent of operating profits go to tax. Whatever the finance function can sieve out of that, says Mittal, will go directly to the company’s bottom line.

Talent Management

The competition for second-tier finance executives presents challenges to CFOs in recruiting and retaining staff. “This is something that’s preying on my mind a lot of times—how to keep staff happy,” says Kalla. The 30-year-old qualified accountant, who has been with Ariba for nearly eight years, draws on his own experiences to motivate his 15-member staff, ten in India and five in Singapore. He had been promoted three or four times since signing on with the company as a finance and accounting associate, shortly after completing his articleship (or apprenticeship) with Deloitte.

“The way I look at it, I have to make sure that they get enough of next-level challenges and can move up the ladder here in the company, because otherwise they’ll start looking outside— and that’s a nightmare for any CFO,” says Kalla. “There’s certainly a lack of good talent to fill a new position or to replace an existing one in the last 12 months.” Kalla has just been promoted to head of finance—his predecessor accepted an offer to become the commercial head of a local retail business. Now there is room to promote people lower down the chain.

Over at Malaysia’s PMCare, Kamal Aryf also has the flexibility to promote subordinates, although he has the option to take his time. The new position he has been named to was vacant for a while, and he had effectively been discharging the duties of CFO even while holding the title of deputy general manager. His second in command still has the title of senior manager, but knows a promotion is possible in due time.

Dandan Zhang, managing director for Greater China at executive search firm J. Robert Scott, has more advice. “Make them feel at home, give them support, pay them well, and link their pay to the performance of the company,” she says. In China, she adds, granting stock options is becoming a common way of keeping people. According to our survey, 25 percent of CFOs and 13 percent of second-tier finance executives have been granted options and restricted stock in China.

“There’s no substitute for paying good money for the right activities, behaviors, outcomes, and potential,” says Suri of Hewitt Associates. “You definitely need to match the market.” He also stresses the importance of relationships and a shared vision. “There’s a saying that people leave managers, not organizations,” he observes. In a global survey of best-performing companies, Hewitt found that one common trait is management’s ability to focus employees on the long term and create ownership of the company’s vision. “This orients employees towards thinking about the future, not quarter-by-quarter performance,” says Suri.

Communication is also key. Hewitt’s 2008 compensation survey found “a huge gap between what employees want to know and what organizations are telling them,” a state of affairs that the study traces in large part to lack of clarity over who communicates with employees about compensation issues. “When it comes to taking ownership of the compensation process and accountabilities, and driving the changes and the results, managers and HR keep on passing the buck,” the report concludes. Suri urges CFOs to take the lead: they should regularly discuss career paths, development opportunities, and compensation issues with each member of their team.

The New CFO

The demands of talent management could be unsettling to many finance chiefs. Many Asian CFOs now report spending between 25 and 30 percent of their time on employee issues. And this is happening when CFOs are increasingly being called upon to take a seat at the strategy table, extend decision support, talk to the markets and regulators, oversee risk management, and monitor planning and performance management, in addition to their usual tasks. Of course, such broader responsibilities are precisely why CFOs are being offered handsome compensation packages.

“People want CFOs who have strong leadership skills, rather than just reporting and reviewing skills,” says Hui of Korn/Ferry. “The skill sets required of the CFO now span strategy, business decision-making, recruitment, and team-building.” Greater China headhunter Zhang says a multinational looking for this new-breed CFO for its mainland Chinese operation can pay as high as US$300,000 a year in base pay, excluding stock options and other benefits. That’s nearly six times the average CFO salary in China in the CFO Asia Compensation Survey.

How much higher can finance-function salaries go? Zhang thinks the hot streak still has some way to run. “It still takes years of experience and achievements in order to make a good CFO,” she notes. She is also seeing large Chinese companies—not just multinationals—express willingness to pay top dollar for a finance executive fluent in Chinese and English and who possesses the skills companies are increasingly seeking in a CFO. “They are beginning to require people who have a global outlook because they need to answer a lot of inquiries from global investors and they are going abroad themselves,” she says.

Then again, things could turn out differently. Some highly paid CFOs in Hong Kong lost their jobs in the 1997 Asian financial crisis and the SARS epidemic in 2002, when companies decided they could make do with finance managers since there was little need for capital-raising, M&A, and other high-level finance activities. Barring such a turn of events, however, demand for talent will go nowhere but up.

Cesar Bacani is a contributing editor for CFO Asia.