Executive Search & Career Forecast
Inside the Chief Financial Officer Role
The AESC paper, "Executive Search & Career Forecast: Inside the Chief Financial Officer Role," includes a one-on-one interview with Russell Reynolds Associates' Caroline Raggett about emerging trends in the CFO function. The following is an excerpt of the article.
This paper presents one-on-one interviews and commentary from leading executive search consultants, all members of the Association of Executive Search and Leadership Consultants (AESC), who specialize in placing chief financial officers (CFOs).
Caroline Raggett, Russell Reynolds Associates, Hong Kong
Managing Director, Corporate Officers in Asia
What are some emerging trends you are witnessing in the CFO function? Where are you seeing the most growth and the least growth?
We are seeing an increasing demand for CFOs with big-picture thinking, strategic mind-set and general management experience. According to our recent study of CFOs from companies listed on the Hang Seng Index, the CFOs who were appointed in the last five years are 2.5 times more likely to have general management experience, and nearly five times more likely to have strategy and business development experience, than those who were appointed more than five years ago.
A need for globalized talent is also on the rise, as more and more companies seek expatriate executives or local CFOs who have worked, or at least studied, abroad. Based on our Hong Kong CFO study, the percentage of Hang Seng Index CFOs with international experience has grown from 33 percent to 71 percent over the last five years; similarly, the expat ratio at Hong Kong-headquartered multinational corporations has also increased from 50 percent to 70 percent.
The mandate for the CFO role has transformed from being a bookkeeper to serving as a strategic and highly commercial business partner to the CEO. Today’s CFO needs to work closely and efficiently with the rest of the C-suite, and be able to develop, motivate and inspire his or her team. Good people skills, such as communication, influencing, and relationship building, are becoming more and more critical to the success of the CFO.
We are seeing diminishing importance of relevant industry experience, as companies seek top, crosssector talent who possess a transferable skillset, good commercial acumen and a high degree of adaptability and agility. Our study shows that Hang Seng Index companies and Hong Kong multi-national corporations (MNCs) are 18 percent and 72 percent more likely to hire their next CFOs from a different sector, respectively.
How would you describe the outlook for the CFO function in Hong Kong and the Asian market?
The recent high turnover of CFOs in the Asia region and the increasing volume of CFO search work we undertake in Hong Kong and China suggest a robust outlook for the CFO market; and correspondingly tougher competition for companies looking to hire CFOs. While both foreign businesses and local organizations see a generally positive economic environment and continued opportunities for growth in the region, both in key markets and through a proliferation of investment opportunities beyond the major markets, they also see a more complex environment in terms of political and economic volatility. This situation is exacerbated by well-funded privately-owned enterprises and PE-backed companies who are competing very effectively both financially and culturally for best-in-class talent, often ahead of an IPO.
Therefore, companies need to hire or develop high-caliber CFOs, who not only can drive the growth agenda and generate shareholders’ return quickly, but also bring strong governance, regulatory awareness and a high degree of comfort in dealing with ambiguity. Unfortunately, the supply of CFOs who possess these qualities will remain limited in the short to medium term. We are currently seeing a “switching premium” in excess of 26 percent of cash compensation to attract the best finance talent in the region. Employers will need to defend their best finance talent rigorously and compete for CFOs on the issues that matter to CFOs the most. Our research shows that when choosing a new employer the three key factors besides compensation that an executive considers in Asia are: a culture based on respect, the quality of the leadership team and empowerment to act.
What trends are you witnessing in the CFO function as it relates to executive search? In which markets and industries are most searches being conducted?
Today’s CFOs are becoming more strategic and showing stronger management, leadership and communication skills. In the past two years, over 90 percent of our successful candidates have had leadership experience outside the finance function. 85 percent of them stood out from their peers due to their commercial acumen, communication relationship-building skills and strategic mind-set. Moreover, multi-sector experience, digital knowledge and entrepreneurship or innovation have become significantly more desirable compared to five years ago.
To read the full article, click here.