Managing finance in a global organization has never been easy. Time zones, distance, and technology all make it hard for a CFO in Houston to keep tabs on happenings in far-off Hyderabad. Often, overseas finance departments have to fend for themselves.
That may be changing. A new study by the Economist Intelligence Unit (EIU) finds that Western multinationals keep their finance staff in Asia on a shorter leash than they do most other departments.
The report, which polled 210 Western firms about what autonomy different functions enjoy in Asia, shows that sales, marketing, and human resources have much more freedom in how they operate compared with finance, IT, and R&D.
Tan Aik Na, head of the global treasury center in Singapore for DuPont, a US$27 billion chemical giant, says the change is appropriate. “To get data consolidated in a way that makes sense for the investment community usually takes a tremendous amount of discipline, and requires robust common systems to be in place,” she notes. “Unless standardization can be driven across geographies, it is difficult to achieve some of the objectives of the finance function.”
Zafer Evren, Hong Kong-based Asia Pacific finance chief of Avon, a US$8 billion American cosmetics firm, makes a distinction between front-office finance and back-office operations. “Areas like tax, shared services, accounting, and treasury are all back office and it’s best if they are centralized and standardized as much as possible,” he explains. “But in front-office areas, where finance can really partner with the business and add value, then having more independence is useful.” In particular, Zafer highlights the wide autonomy that his finance team has in working on business planning, return-on-investment analysis, sizing up acquisition opportunities, and advising business managers on strategy.
For a local finance manager, tighter controls are a mixed blessing. “It can be frustrating because the compliance burden can be complex and onerous,” says Tan. “But it’s also satisfying because standardization brings huge productivity improvements.”
Avon’s Evren agrees. “Centralizing the back office makes huge sense,” he says. “As long as finance has sufficient freedom in other areas to contribute value to the business, then we’re all happy.”
With Asia’s economies contributing an ever greater proportion of global sales at many Western firms, could regional finance teams in Asia become more autonomous in years to come? It’s unlikely. Just four of the 210 Western multinationals surveyed by the EIU said that their global CFO was based in Asia. By way of comparison, eight companies said their global head of sales was based in Asia, and seven had moved their head of marketing to the region.