This article was first published in the May 2015 China edition of Accounting and Business magazine.

Business partnership between the CEO and CFO is an issue that has been raised time and again, but as recent research shows, there hasn’t been much improvement in this area. 

A KPMG survey of Asia-Pacific CEOs found that although more than 70 per cent see a powerful future for their CFOs, one-third still feel their CFOs are not helping enough with the challenges CEOs face in running their organisations. According to the survey, CFOs need to focus more on understanding their stakeholders – they need to move out of their finance bubble. ‘CEOs want their CFOs to focus on growth but the current typical CFO is too mired in costs and compliance issues, wading through the numbers.’ 

It is a similar scenario in Malaysia, where CEOs expect their CFOs to do a much better job of leveraging the increasing wealth of financial information so as to be able to play a more strategic role in assessing new markets, improving performance and re-shaping the enterprise. 

‘They see a future – much sooner than later – in which data analytic capabilities are generating more powerful financial intelligence that is then applied to strategic business needs, issues and opportunities – above and beyond running the finance function. They are looking to their CFOs to realise that potential,’ says Datuk Johan Idris, managing partner of KPMG in Malaysia. 

The issue is compounded, he adds, by the ASEAN (Association of Southeast Asian Nations) Economic Community (AEC), which is set to transform the regional landscape in 2015. ‘CFOs are expected to embrace change positively so that the organisations remain relevant and competitive in a challenging landscape… CFOs need to broaden their game, add big-picture thinking and take a more strategic approach. In short, [they need to] be more of a business leader and less of a finance executive,’ he adds.

While on the one hand, CEOs say their CFOs are not helping enough, a KPMG survey of CFOs conducted in 2013 found that 60 per cent of CFOs are happy with the overall performance of their finance function, and on average less than 10 per cent of CFOs rated any of their finance processes as a weakness. 

‘Clear disconnect’

Martyn van Wensveen, global leader of financial management at KPMG in Singapore, who contributed to both survey reports, says there is a ‘clear disconnect between the actual performance of the CFOs and the expectations of their bosses’.

‘This could be for a variety of reasons – the CFOs don’t realise that they need to take a more strategic approach, or they do realise it but don’t know how to go about transforming their role to that of a business partner,’ he says. 

The lack of urgency on the part of CFOs to take on the role of a business partner could also be because they are bogged down by cost and compliance issues. ‘Ensuring compliance, meeting new regulatory requirements and ensuring controls are in place is something that a lot of finance functions struggle with,’ he adds.

Johan concurs, adding: ‘Most CFOs would like to think more on the strategic side, but they are buried under regulations. They cannot get past the tactical and operational aspects of their jobs.’

Unsurprised by the recent survey findings, Lee Lai Keong FCCA, former CFO of Hong Leong Assurance, says the issue has been raised many times in the past. ‘It’s almost a broken record,’ he says, attributing the gap to a lack of follow-through by both CEOs and CFOs. 

Lee, who has been coaching CEOs since 2010, says although many CEOs (including his clients) lament the quality of their finance people, narrowing the gap is the responsibility of both parties. ‘It takes two hands to clap. 

‘On the one hand you need a finance person who embraces the concept of business partnership, and on the other hand you need a CEO who understands this concept and knows how to engage the finance person in order to transform him from a traditional finance person to a business partner,’ he adds.

Moving forward

In transforming the traditional finance manager to a business partner, the onus is on CEOs to move the process forward. ‘More often than not, there is no follow-through because CEOs have not sat down with their CFOs to set the agenda, identify areas to improve and prioritise, or set key performance indicators,’ Lee says. 

Among public listed companies and private limited companies – where the lack of business partnering is most prevalent – the problem is exacerbated by the fact that the CEOs themselves lack the skills of professional managers. ‘CEOs themselves may not understand the concept of business partnership with their finance people,’ Lee says.

But more importantly, he stresses, the CFO has to want that change. ‘The CFO has to start the conversation,’ he says.

Chin Chew Lo, group CFO at WWRC Holding Pte Ltd, agrees. ‘The CFO must have the right mindset. If at the outset the CFO does not agree that his role needs to be transformed then there’s no point continuing with the discussion,’ he says. Unsurprised by the survey findings, Chin believes that CFOs must up their game and get more involved in setting the strategic direction of an organisation. 

‘Some CFOs are really good in matters relating to compliance, financial reporting and internal controls but if we were to talk about something extra then you’ll find that many cannot assist the company towards future growth. The CFO really is the right-hand man of the CFO. It’s important for the CFO to be familiar with all aspects of the company’s operations, including sales, for example. What’s wrong in meeting with key customers or suppliers? That’s how you can get to know the business and assist the CEO in bringing the company to another level,’ says Chin, adding that this is a role that can make an impact on an organisation.

Chin, who was previously the regional financial controller at Alstom Asia Pacific, practises what he preaches. When he was first hired to his current role at WWRC more than a year ago, the CFO role was purely focused on the finance function. 

‘But during discussions I told them of my capabilities and experience. I suggested that the role also cover human resources and IT, and that the responsibilities should include ensuring that these three functions are aligned to the group strategy and meet the business requirements and challenges in the next three to five years. 

‘I felt that it was important for the CFO to coordinate the back-office support as well as look at areas such as investor relationships; after all, I would have the same expectations of my CFO if I were the CEO,’ he says, adding that he makes a point of meeting with key customers as well as bankers to gain insights into the economy and challenges businesses face. 

Fortunately for Chin, the CEO was receptive of his proposal, particularly because at the time the company – which is involved in the trading and distribution of chemicals – was undergoing a restructuring and rebranding exercise to better reflect its regional exposure. (WWRC, which has an annual turnover of US$150m, has a presence in Malaysia, Singapore, Indonesia, Taiwan, Korea and Thailand.)

‘They shared their plans and vision for the company, and I shared with them my experience, and that’s how we came together,’ he says.

Johan believes that being a leader involves more than managing the team. ‘CFOs need to work more closely with colleagues in the C-suite and to understand what they are trying to achieve,’ he adds.