Accountancy has often been perceived as a rather routine and unexciting profession, conjuring up images of someone who spends the whole day with spreadsheets and only cares about number-crunching.
Rightly or wrongly, this picture has been embedded in people’s minds for many years. However, in the past decade or so, this has begun to change, partly due to globalisation and the all-encompassing nature of business today.
Besides needing a head for numbers and an understanding of financial statements, CFOs are now being put in charge of a wide range of disciplines including administration, human resources, information technology, corporate governance, and business decision-making.
On top of this, CFOs must also provide financial information to board members and shareholders, participate in negotiations, and be in the thick of corporate moves such as mergers and acquisitions. Simply put, CFOs and finance directors today need far more than just financial skills.
According to Azman Sulaiman, client partner for government-linked companies at Korn/Ferry International, CFOs are traditionally risk-averse but this trend is beginning to change. CFOs in the past often killed off new ideas before they even saw the light of day, says the executive search consultant.
‘Nowadays, the expectation placed on CFOs is that they must be able to look ahead and understand that there are intangible parameters that need to be taken into account,’ he explains. ‘Yes, they need to look at the bottom line but more than that, they need to think more strategically over and above what they have been taught in their finance degrees.’
Tian-Pouw Pun, client partner at Korn/Ferry concurs, adding that the CFO’s main function today is way beyond just looking at profit and loss accounts.
‘More than anyone today, a CFO has to be the brain, the eyes and the hands of an organisation. He has to look at cost reduction, top line as well as bottom line.
‘At the same time, he has to guide board members on how to run the business and shoulder some responsibility in a company’s decision-making. And he needs to be a good communicator too,’ says Tian-Pouw.
Woon Tai Hai, executive director for KPMG Business Advisory, notes that the traditional role of the CFO has been to simply monitor and control an organisation’s expenditure.
But CFOs today are expected to be much more holistic, forward-looking and are required to be much more competent and outspoken in their communication abilities, as well as being a well-rounded business leader, he explains.
‘They need to possess a strong set of core management skills, preferably with deep experience learned from somewhere outside the finance function. This way, they can be well-rounded strategic managers with excellent business acumen and great financial foundations, that will help them competently advise the CEO and board members.’
Foong Yein Teng, executive director and finance head of office equipment manufacturer Euro Holdings, adds that CFOs also need to keep up with changing accounting standards, tax legislation (including foreign laws), governance, transparency and sustainability as well as IT knowledge.
‘CFOs need to keep up to date with the changes or face being left behind,’ says Foong. ‘For example, all CFOs must grasp and gain a basic understanding of foreign business laws and accounting standards and the use of IT to expedite workflow, so that the accuracy of information and the quality of work and reports can be improved.’
Keeping up with technology
Acknowledging that technology plays a big role in today’s businesses, Woon says CFOs have no choice but to keep abreast with technology trends in the market. Failure to do so may mean losing the edge in innovation, especially if competitors are already reaping the results of early and successful adoption, he points out.
Woon says that while CFOs do not need to understand deep technological details, they must be aware of and appreciate cost-effective technology solutions, while being able to make bold decisions to deploy them appropriately in their organisations (see the article 'Heading for the Clouds').
‘In essence, a CFO must not fear new technology but instead embrace and understand IT by collaborating closely with the chief information officer and/or chief technology officer in their organisation,’ he says.
To keep up with modern trends, CFOs today also have the option to cultivate a lifelong learning mindset, which includes studying for postgraduate degrees, says Chong Aik Lee, lecturer and head of accounting and finance at UCSI University.
He believes that students need to be exposed to case studies, assignments and projects that have been embedded in the course structure.
‘In my personal opinion, CFOs should be equipped with an entrepreneurial mindset to lead the business, strategic thinking to assist CEOs, and communication skills to articulate complex financial information, besides having core knowledge in accounting and finance,’ Chong adds.
KPMG’s Woon concurs, adding that the analytical and numerical skills learned in formal education are invaluable today, and will remain so in the majority of major organisations around the world.
Aside from relying on formal qualifications, Euro Holdings’ Foong stresses that CFOs need to be sensitive to the business environment and be able to identify the changes taking place in the market.
‘CFOs have to learn to embrace changes and react or be able to adapt quickly to them. They must broaden their knowledge in other areas, including learning about the entire operation process, market trends and business environments in which the company operates, in order to contribute positively to the organisation.’
To attain these skills, Foong suggests that CFOs should not be desk-bound. ‘CFOs are required to build their network, not only with peers in the financial industry but also to communicate with the clients, suppliers and all other stakeholders of the organisation,’ she points out.
Advice for future CFOs
Korn/Ferry’s Azman notes that while many industries today are looking for CFOs with broad-based skill sets, specialisation in certain areas can be an advantage.
‘For instance, in telecommunications, I would be hesitant to recommend someone who had not worked in this fast-moving environment before,’ he says. ‘My advice to young finance professionals is to be a specialist rather than a generalist, gaining as much expertise as possible in niche areas.’
Other important traits would-be CFOs need are a flexible attitude and people-management skills, Pun adds.
Woon advises young finance professionals to start training by getting involved and talking to different departments in their current organisation and listening and understanding their needs.
‘Communication can only be improved through practice and the budding CFO could take part in social events and clubs such as Toastmasters, where activities such as public speaking are required, [and which provide] a great platform to develop leadership skills outside of the office.’
UCSI’s Chong says that on top of acquiring all the necessary knowledge and skills, future CFOs should be grounded with professional ethics to ensure all business transactions and decisions are ethical and lawful.
‘Past corporate failures should be lessons for them to learn and future CFOs should be mindful of the corporate and human governance issues,’ he says.
Ultimately however, the hallmark of a modern and successful CFO is the ability to adapt to change quickly, have a lifelong learning attitude and always be a step ahead, thinking strategically about the future of the company.
Desirable skill sets
According to a KPMG survey, Future Perfect: The CFO of Tomorrow, the most highly desired traits in CFOs are as follows:
- Leadership and team-building skills.
- Ability to communicate at all levels.
- Accounting or finance qualification.
- Management experience outside finance.
- High-level negotiation skills.
- Experience of running a business.
The results of the survey suggest that there is still not one quick path to becoming a CFO, even if he or she is armed with a top-notch MBA or similar qualification.
The most respected and sought-after candidates for the CFO position are those who have demonstrated outstanding overall leadership in an organisation, have excellent communication skills (learnt or natural), backed up by a traditional finance or accounting qualification.
How are these skills acquired? Apart from on-the-job learning (60%), respondents thought that company-sponsored professional development and training activities (50%) were very important.
Very few (14%) respondents thought that further formal education would be important in gaining new skills.
Source: Future Perfect: The CFO of Tomorrow was carried out by KPMG and CFO Asia Research Services in July 2008.
Edwin Yapp, journalist