Managing tight cash, navigating volatile commodity prices, renegotiating covenants with impatient lenders, fending off a hostile takeover. Easy-peasy.

The really tough job for a CFO? Finding somebody else who can handle his job.

Even in a year of crashing markets and congealing credit, Ishaat Hussain, finance director of Tata Sons, has said it’s actually tougher for the Tata Group to find strong senior financial talent than it is to find financing.

“We need a lot of well-trained, qualified people with a high degree of expertise. At present, money for good causes is available in plenty but good people are relatively scarce,” Hussain said recently.

Hussain is not alone in feeling hard-pressed for talent. With the Indian economy rising so quickly and the reputation of Indian financial executives climbing right alongside it, demand for financial talent continues to outstrip supply. That’s good news for senior finance people, many of whom have gotten used to double-digit salary rises every year. It’s not such good news for a company that needs more
financial leadership---and needs it right away.

Why the shortage?

In a way, the reason for the shortage is simple: India is getting richer and busier by the day. But why is the concern so extreme as to be the number one worry of Tata Sons’ finance chief? After all, financial expertise is hardly a rare commodity in India. These days, India is the world’s bookkeeper: more than 100,000 new chartered accountants join the workforce every year and thousands of financially focused MBAs march out of businesses schools alongside them. Why would it be so hard to find a few hundred ready to lead?

As unlikely as it may seem, experts offer a number of reasons why so few end up in line for the throne.

First, if you’re at the top of your class in business school, you’ll probably want to join an investment bank.

“The preference for a finance graduate is a banking sector or investment bank or something like that,” says Madhukar Shukla, a professor of organisational behaviour at Xavier Labor Relations Institute (XLRI) in Jamshedpur.
The banks are where the big money is, after all. Plus it’s challenging, exciting work, for a business where finance isn’t a support function ... and did we mention the money?

Or if those interviews didn’t go well, maybe you’ll end up in the business process outsourcing (BPO) industry, where the money is also fairly good. “It’s a huge gain for the BPO industry, but it’s a huge loss for corporates,” says Gangapriya Chakraverti, India business leader of Mercer’s Information Product Solution unit in New Delhi. Many of those who join the BPOs grow up to become process experts, not finance experts, she says. Not Indian finance experts, at any rate: if they ever do fill out a form, chances are it’s for a U.S. filing. They never develop expertise that can be used outside the BPO world.

Or maybe you decide to let somebody come whisk you off to Hong Kong. Foreign companies swoop in and snatch candidates, too, for the same reason as the BPOs: they know English, and they know Anglo-Saxon accounting. “The competition for Indian CFO talent also has the pressure of an export market, whereas you don’t with other countries like China,” says Rohit Ambekar, managing director of the Singapore office of J. Robert Scott, a global executive search firm. After a few years overseas, maybe you’ll come back. Then again, maybe you won’t.

If none of those choices pan out, you may decide to go with a domestic, non-financial company. And there you stay. Maybe after a few years in the finance office of a service company, you hear about a great opportunity at a manufacturing company. But you can’t take it. There is a broad split between financiers who know service businesses and financiers who understand manufacturing and that further limits supply, according to Ambekar.

This too exacerbates the shortage. In China, where manufacturing is the core of the economy, CFOs for manufacturing are harder to find than CFOs for services, according to Ambekar. However, in India, the situation is reversed: CFOs for manufacturing are easier to find because service businesses are the larger, faster-growing part of the economy.

Finally, to be brutally honest, you may not be promoted because the boss doesn’t think a whole lot of you. Most of the current generation of business leaders came of age under the License Raj, when running a business was more of a struggle. As a result, some say, whippersnappers who haven’t had to deal with the same level of frustration may seem to lack a certain level of resourcefulness and drive to executives of the old school. They’re also a bit sloppier.

This may not be entirely your fault. Automation may have made it more difficult for you to get the chance to make an independent decision. Jonathan Trevor, University Lecturer in Human Resources and Organisations, Judge Business School, University of Cambridge, speculates that automation gives finance heads more data at their fingertips, reducing the need to rely on juniors to make decisions. Eventually, he believes, less delegation may translate into less opportunity to develop the leadership skills needed to take charge. But whether it’s your fault or not, it can still be held against you.

No room for wallflowers

Finally, after years of hard work, you get an unusual email. The boss wants to chat! Waiting in his reception room, your heart pounds. Is this your big break? Are your 15 years of blood, sweat, and silent tears for Universal Widget about to pay off?

No, probably not.

The reason is that the skills that got you hired and promoted are not the skills you need to get further up the ladder. After all that fuss about needing you to be more careful and paying precise attention, it turns out that that’s not actually what they want.

At this point, having a broader outlook, and being slightly more extroverted and outgoing, “starts to matter a lot”, says Sandeep Surana, a partner at executive search firm Heidrick & Struggles in Mumbai.

Praisad Kaipa, executive director of the Centre for Leadership Innovation and Change at the Indian School of Business, puts it more poetically as a need to advance beyond the first three (of the seven) Chakras (energy vortices). But the bottom line is that they just don’t think you have the right stuff.

Once, the CFO was not much more than a glorified bookkeeper, but today, many CFOs are more akin to a vice-CEO or a chief operating officer. Senior financial executives need the same set of social and diplomatic skills as any C-level executive--maybe even more, since finance touches every function of any business, observers say.

And even if by some miracle you’re a bon vivant who’s cleverly disguised himself as a sober number-cruncher all these years, you may still not be right. At the moment, companies are especially keen on people who over the past two years have developed “a deep understanding of risk and business contingencies”, says Surana.

So beyond being a happy-go-lucky worry wart, companies also need advanced, specialised financial expertise. Cash management and capital formation are crucial for fast-growing companies--and failures in either area can be fatal. Expertise on mergers and acquisitions is also in demand right now.
Not that the boss has many other good choices. Although more Western finance people today say they are open to an assignment in India, headhunters say that not many offers are actually made. “People talk about it, but how much it happens, I have my own doubts,” says Surana.

Despite regulatory liberalisation and maybe a spiffy modern office, the task of an Indian CFO is inherently more complex than an equivalent post in a more developed country--and a challenge that few foreigners, ultimately, may be prepared to take on. “The complexities they are dealing with are something that no one clearly understands until you are in India,” says Mercer’s Chakraverti.

Poaching talent from another Indian firm is also easier said than done. Although job tenure is reportedly declining, loyalty remains relatively high--especially after the recent economic scare. “People are slightly more circumspect,” says Surana. “Earlier people used to buy the stories more quickly.”

This is especially true for start-ups. “Most countries in Asia suffer the same affliction, the loss of face if you join a business that doesn’t do well,” explains Ambekar. Today, headhunters must make a substantial offer to get someone to make the jump, particularly as society as a whole still does not take kindly to failure. It is one reason hi-tech startups tend to attract more Indians returning from Silicon Valley and other places abroad.

And the situation is getting worse--or better, if you’re a finance executive looking to get ahead. While the weak economy of earlier this year softened demand for executives for a little while, today business seems to be picking up once more. Headhunters say orders for senior finance executives are picking up, in India and all over Asia.

Finding the talent

Companies are responding to the challenge of finding and attracting talent in a variety of ways.

The simplest solution, of course, is a little more of the universal solvent. Pay hikes are a clear opportunity at many companies, as there are tremendous variations in executive pay. At the CFO level, for example, CFO pay ranges anywhere from Rs 40 lakhs to 4 crore per year, depending on the industry and the size of the company, according to a recent survey of 100+ companies by Omam Consultants of New Delhi.

Most companies are painfully aware of the need to keep up with the rest of the market. For CFOs, median salary increases over the past five years have climbed anywhere from 11 to 15% every year--and for top performers, anywhere from 18 to 30%. And even CFOs in the stingiest companies took home more than 10%-11% raises in four of the past five years, according to Omam’s latest data. Of this, 70% of the amount is base pay on average and 30% is variable.

In some respects, these raises are working. Between pay packages now approaching Western standards and the prospect of foreign postings at more and more Indian companies--long a coveted perk with a foreign company--fewer are going out of their way to look overseas for a boss, headhunters say.
Not surprisingly, pay raises are apportioned unevenly, with the riskier bets raising their offers more than blue chips. Increases vary, too, by size. Medium-sized companies are sweetening CFO salaries faster than other cap sizes now, according to Omam, and the youngest financial service companies seem particularly generous.

But pay is not the only thing. Group recognition is also important. As Napoleon noted, “a soldier will fight long and hard for a bit of colored ribbon”. Wipro, for instance, provides a lot of recognition to internally promoted executives, a hint to the new recruit that it is possible to rise in the organisation.
Another measure that some companies are trying now is to offer more leadership training to prepare more people to take charge.

The good news is that there may be hope for the wallflowers yet. Prasad Kaipa, a professor at the Indian School of Business who has coached both Indians and American business people on leadership, says that he finds Indian business people on the whole are actually better able to adopt a longer-term, big-picture view than their American counterparts. “I do find that in western countries, especially the United States, there is a little more short–term orientation and a little more quarterly focus than in India,” Kaipa says.

The reason, he believes, is that Indians tend to identify less with their job. At the same time, he argues that Indian philosophy encourages a bigger picture view of society that extends far beyond one’s own job function.

Other aspects of learning to be an executive can be more problematic. One of the biggest challenges: learning to see gray. Typically, says Kaipa, finance executives need to learn how to handle ambiguity. Coming from a job where the answers tend to be relatively clear, an environment where there can be a number of answers, all equally valid, can be an enormous challenge, Kaipa says.

He finds, however, that role-playing simulations can go a long way toward helping the financial executive see the kind of decision-making that’s needed at the next level.

Others are more skeptical that the pool of top talent can be expanded very much, even with more pay and more training. “Yes, there is a shortage of CFO-level people in India ... but I don’t think that’s exclusive to just India,” says Ambedkar, the recruiter. “I think the talent pool world wide at the C-level ... is a very finite pool of people.”

Weighing the risks

But does all this special treatment of one group create new risks for the company--and the executives--particularly if workers begin to feel vulnerable?

In Grenoble, France, for instance, workers at a Caterpillar plant held four top executives hostage for 24 hours earlier this year to try to stop a plant shutdown---but only after President Sarkozy offered to protect the factory. In China, in July, angry workers even beat their general manager to death, to stop a plant takeover.

But others argue that income disparity shouldn’t be much of a worry to an Indian company. Trevor at Cambridge argues that Indian society doesn’t have the same kind of egalitarian tradition that say France does. The presence of huge variations in pay by itself seems unlikely to him to have much impact on the company’s culture. Even foreigners brought in at foreign wages reportedly don’t seem to excite much envy.

On the other hand, just because the plant isn’t going to riot doesn’t mean that it’s good for the company. “The evidence that incentives do actually promote long-term value creation is shaky,” warns Trevor.
Misplaced incentives can turn off employees, turn off executives, and produce all kinds of terrible, unintended consequences, Trevor says. Some pundits have even blamed the crash on misguided incentive systems that led traders and executives to miss-assess the risk--a heads I win, tales you lose system that was very good at generating wealth for the people running the company, but not so good at generating wealth for the shareholders.

For his part, Suresh Senapaty, CFO of Wipro, says Wipro tries to pay well, in the third quartile, but avoids making pay the deciding factor in recruitment. “Salary is important but never a sufficient reason. This is typically the last discussion,” he explains.

The 60% solution

That’s the big picture. In the meantime, even without going back to school or reading Dale Carnegie, your boss just may ask you in with another chat.
As with any market, the market for talent is all about the alternative. As goofy as you looked to him last month, this month you may be looking better. The news from the headhunter may well not have been good--it keeps getting harder to find external candidates. “Of late, there has been a surge in demand and going forward we do see that this demand will continue,” says James Agrawal, consulting director and head of BTI Consultants India.

In the end, your boss may have decided that you’re not so bad after all: look at Wipro, where Senapaty says the company will promote internal candidates even when that person is only 60% prepared.

Or maybe your boss just got a great offer himself ....

View the full digital version of this article here

Return to Newsletter