WHAT YOUR CEO WANTS FROM YOU
According to a new survey, CEOs say finance managers in Asia don't measure up
By Angela Mackay

It's every CFO's nightmare. You come into the office early in the morning and find a Post-it on your desk. The boss wants to see you. No big deal. The boss wants to see you about a thousand times a day. So you walk down the long gray corridor, the one with "Our product through history" pictures on the wall. You reach the CEO's suite. You knock on the door and are told to enter.

Once inside, you can see right away that something is not right. The boss does not look all that glad to see you. You sit down, make some joke about yesterday's budget meeting. The boss doesn't laugh. You ask what's up. At that point, the company CEO begins a tongue-lashing the likes of which you haven't heard since grammar school. While you don't catch every little thing, the message is clear: the boss is apparently not happy with the job you've been doing. After 20 minutes of being royally raked over the coals, you stagger out of the room, dizzy, sweat trickling down the back of your neck. You walk back down the long corridor, the walls spinning out of control. Finally, it hits you. This is too horrible. It has to be a dream. That's it, it's a dream. Wake up. This is all a bad dream.

It's not a dream. A new - and rather unsettling - survey by executive search firm Morgan & Banks and CFO Asia reveals that a lot of CEOs in the region would apparently like to bring their CFOs into their office and chew them out. At the very least, the survey of some 600 CEOs in various industries in Hong Kong, China and Singapore shows that chief executives are less than thrilled with the performances of their finance directors. Actually, less than thrilled may be an understatement. While a number of responses in the survey were fairly positive, the awful truth is, more often than not, CEOs said they were sorely disappointed by their CFOs' efforts at the office.

Admittedly, employers are generally dissatisfied by employees, often in small and picayune ways. This is just human nature. What's more, CEOs tend to hold their CFOs to a higher standard than other senior managers. This is not surprising. Over the past few years, CEOs have come to depend mightily on their CFOs. As one CEO concedes: "My CFO's job is to make me look clever." That's a tall order, one that presumes that the boss is frank and lucid about what he or she wants from the company's top financial manager. As the saying goes: "Show me the perfect worker and I'll show you the perfect boss."

But, as CFO Asia found out, most CEOs in Asia think their CFOs are far from perfect. Morgan & Banks asked chief executives to rank the importance of 14 separate financial and management tasks, and then rate how their finance managers handle those tasks. The most important issues, said CEOs: timely and accurate management reporting which supports decision making; effective credit control and debt collection; proactivity; the ability to interpret data; and strong staff development skills. While 84 percent of CEOs in the survey indicated that at least four out of the 14 tasks were crucial, only 44 to 63 percent said they were satisfied with their finance team's performance in these areas.

The biggest disappointment was in management reporting skills that support decision making. Fully 95.7 percent of the CEOs said such help in making decisions was vital - but less than half said they were satisfied with their CFO's results. Brian Moore, a manager at Morgan & Banks in Hong Kong, says the study highlights a yawning gap between what CEOs need and what CFOs are delivering. "CFOs have to improve the finance function's performance and better develop their staff," he said. "A lot of CFOs want to be general managers and CEOs one day. But the results of the survey show they still have a long way to go."

Vision Thing

A long way indeed. CFO Asia's own research backs up Moore's view. In a number of wide-ranging interviews with CEOs who participated in the survey, CEOs confirmed that theirCFOs often perform under par. The biggest CEO complaint: CFOs simply don't see the big picture. Bernard Fung, CEO of AON Asia, a division of the US$6.5 billion-a-year US-based insurance brokerage, points out that finance directors tend to get bogged down in budgetary concerns. "They miss out on understanding the company's business strategies. As a result their own strategies may not support those of the company overall." Such a narrow focus, Fung says, keeps finance directors from contributing fully to a company's performance. "Many CFOs are just too isolated, when they should be an integral part of the management where they can add directly to shareholder value."

Indeed, the AON Asia CEO worked quickly to integrate his finance team when the economic downturn took hold two years ago. He realized that budgets would soon be rendered meaningless if credit control and debt collection didn't become the finance team's top priority. Fung was able to hammer home this point by linking some of the finance department's pay to specific working capital targets. As a result, says Fung, the CFO worked overtime to insure that team goals were well understood by all AON employees. "He has gained the confidence of both the operational and management teams who don't think he's some sort of bean-counter," says Fung. Performance-based compensation is still rare in Asia, however. As one truly dissatisfied CEO said: "I wish my CFO's salary was performance related. I'd save a lot of money that way."

And in fact, many Asian managers are still unable or unwilling to hold CFOs accountable for any job other than the finance function. Tony Cheung, general manager of Seagram China, a division of the Canadian-based drinks and entertainment giant, thinks this is a big mistake. Cheung says he works closely with his CFO, who has a wide array of responsibilities. The Seagram Asia's CFO, for example, recently helped reengineer the Hong Kong operation in consultation with Boston Consulting Group. "My CFO is my right hand man. He helps me make decisions and map out a strategy," Cheung says. "This is what I would expect."

Of course, Cheung could expect those skills in his CFO because he made sure he hired them in the first place. Cheung's finance director, a Malaysian Chinese, served as a senior finance executive with Pepsi-Cola in China before joining Seagram. Experience working at a multinational corporation can prove invaluable, Cheung says, noting that such experience often changes the way a finance manager views the role of CFO. "The ideal Asian CFO is probably one who has had international exposure and knows how this job is done in the West," Cheung explains. "They are less likely to be reticent about speaking their mind and have a combination of international experience and knowledge of the marketplace that makes them a good partner to a CEO."

In fact, the Seagram China GM says many of his peers tell him that they have serious problems with home-grown and trained CFOs. "Some people talk about a lack of assertiveness from their Asian CFOs," he says. "They may, of course, be very assertive privately, but this may not come out in their job." Companies that don't look for CFOs with broader experience deserve what they get, Cheung says. "If all you want is bookkeeping, then there's no point complaining about your CFO's lack of sophistication."

Ill-Suited

An unsophisticated CFO may not seem like a huge liability for a small- to medium-sized enterprise (SME). But as many CEOs at SMEs are fast learning, a conservative finance chief will likely run a conservative finance department - maybe too conservative. Some CEOs complain that overly cautious and unimaginative finance managers simply don't have the wherewithal to smoke out new sources of capital. Finding funds during boom times, they say, is simple. Scaring up capital during a credit-crunch ... well, that separates the good CFO from the bad.

Moreover, CEOs note that a cautious CFO may also shy away from developing a top-notch finance department, something that can damage the prospects at even the smallest of companies. Not surprisingly, nearly 70 percent of the CEOs interviewed for the Morgan & Banks survey said that staff development and effective use of accounting resources should be a top priority for their CFOs. When it comes to achieving these goals, however, a paltry 44 percent of the respondents said they were satisfied with their CFO's performance.

Mark Ingrouille knows the feeling. Ingrouille, until recently managing director (Hong Kong and China) for D'Arcy Masius Benton & Bowles, the international advertising agency, says he had serious concerns about the development of his accounting team in Hong Kong. "We had a traditional accounting department whose attitudes were very different from the rest of the agency." The employees in accounting, for example, wore suits while the rest of the staff dressed in less formal gear. While the different dress code was not a problem in itself, Ingrouille says it did illustrate a certain reluctance to embrace change. "Many finance people find it hard to cope with very fast moving conditions - they find it unsettling. But that's what we need in our business," he says. Compounding Ingrouille's problem: the employee turnover in accounting at the ad agency was every five years. Thus, he was restricted in the number of new employees he could bring into the finance team.

To help remedy these problems, Ingrouille started at the top. Last September, he brought in a new CFO. The new finance chief, Robin Chen, is an Australian-born Chinese with experience working in the advertising industry in Singapore and Australia. D'Arcy Masius Benton & Bowles recently changed its structure as well, going from a classic pyramid organization to a cluster management system. That restructuring has left the agency with two managing directors - one for northern China and another for southern China and Hong Kong. Chen, however, is CFO for both operations. This move means that the CFO is now involved in pitches for new business. That pleases Ingrouille, who is now the regional head for business development at the ad agency. "The finance department used to be way behind if the agency had to quickly throw their resources behind a new pitch," he explains. "But with Robin involved at the very first stage, that can't happen now." The rejiggered structure, "recognizes that the finance function is the backbone of a company like ours," he says. Ingrouille admits that there is a risk, however, to expanding the CFO's powers within the group. "If a CFO is a strong manager and leader as well as a great finance professional, then he'll want to move on to a CEO job," he says. "and who can blame them?"

Is IT It?

There are powerful reasons for CEOs to take this kind of risk. A strong CFO does more than keep a company's financial house in order - a good finance manager also helps a CEO make tough strategic decisions. Says a CEO of a pharmaceutical marketing and distribution company in Asia: "Where I really need help is on acquisitions. I need my CFO to let me know if something is good value for money or too much for us," he says. "We are not a huge company so a wrong move could really set us back."

Like many of the CEOs in our survey, the head of this pharmaceutical company was particularly unhappy with his finance team's reporting skills, saying they did not adequately support decision making at the company. To fix the problem, the CEO says he is spending big money on a shared services center that will link all the company's businesses in Southeast Asia.

Not all companies have the resources to set up a shared services center, or a data warehouse, or even a decent computer network. This, in fact, is a common complaint among CFOs - they don't have the technology to do their jobs properly. But the CEOs in the survey seemed downright suspicious about CFO requests to purchase IT products. Barely one in three said they were satisfied with their CFOs' ability to do a cost-benefit analysis on investments in accounting information systems.

Given that suspicion, its not surprising CEOs in the survey find CFOs lacking inareas that would likely benefit from better IT systems. Only 44 percent of the respondents said they were satisfied with their CFOs' benchmarking skills. What's more, only 43 percent said they were happy with their finance chief's inventory management. In addition, less than half were thrilled by their CFO's supply-chain management.

Still, not all CEOs buy into the notion that better machines would make for better CFOs. "This is no excuse," says a CEO of a global company with regional headquarters in Singapore. "It wouldn't work with me. My CFO should have made a good case for why we needed to upgrade. Then I'd have something to tell the board. He'd get his systems and the company would benefit."

Mind the Gap

That kind of clear thinking from a CEO is often rarer than a stock split these days. Says Morgan & Banks' Moore: "From the CEOs we talked to, there seems to be a lack of clarity in the setting of objectives for CFOs in this region." This, of course, raises an obvious question: are CFOs in Asia really doing such a lousy job, or are CEOs just lousy at defining the CFO's job? Certainly, if a chief executive fails to spell out what's expected of the CFO, then it's hard to blame that CFO for not delivering the goods.

A manager at another executive search firm points out that, in Asia, the CEO is the one with the foreign education and the international experience. Moreover, CFOs tend to come up through the corporate ranks, he says, and are, therefore, more accustomed to taking orders rather than setting tasks and goals. Just as some Asians tend to be less assertive in the workplace, some Asian CEOs tend to be more autocratic. This does not make the CFO's job any easier.

Not that CFOs necessarily want an easy job. Most know they have a tough assignment. Many CFOs would gladly settle for a slightly more detailed job description. Others would like to turn that job description on its head, moving into non-financial arenas like business partnering. "There's room for CFOs to play a bigger role," says Moore. But, he says, there's a catch. "First, they have to win their CEO's confidence and fill those gaps in the finance function." Judging by our survey, that could take some time.

Angela Mackay is AsiaCorrespondent for Sunday Business.