Chief Finance Officers (CFOs) are considered the performance accelerator in many businesses. The role sits at the intersection of productivity, expenditure, investment, and innovation. The recession forced the CFO to step up – to help businesses restructure their organisations, manage risk vs. cost, curb unnecessary expenditure, balance the books and ensure healthy cash flow. In the growth economy since, the CFO role has done anything but retracted. In fact, it is now is driving strategic business decisions.
HR and finance: a combined effort
The key tenants of the CFO’s proposition when it comes to talent management and acquisition are their strong financial modelling and analytical skills. These skills lend themselves to a holistic organisational perspective made through an assessment of data, positioning CFOs as an ideal candidate to help the organisation drive a more effective HR strategy.
A recent EY CFO report found that 80 per cent of finance and HR professionals surveyed said their relationship is becoming more collaborative. It goes on to suggest that more engagement from the CFO in HR matters leads to increased corporate and HR performance, higher growth and improvements in employee engagement and productivity.
According to the report, CFOs and Chief Human Resources Officers (CHROs) at high-performing companies dedicate over 50 per cent more time to collaboration than those at companies with lower performance. However, securing and retaining the right talent is as a key priority too. According to Deloitte’s CFO Signals surveys, CFOs often prioritise this above driving change, cost control, operational execution and risk.
Driving organisational change
With Brexit on the horizon, harnessing the CFO skill set to help set and drive HR strategy is becoming important. Almost half of CFOs surveyed in the CFO Survey: 2017 Q2 predict hiring will decrease over the next 12 months. Sound, informed decisions on budget priorities and allocation for maximum L&D ROI will be crucial.
In addition to political uncertainty, changing workforce trends are also driving organisations to redesign themselves. The gap in digital and highly skilled sectors (70% of organisations cite ‘capability gaps’ as one of their top five challenges according to a SumTotal whitepaper), flatter work hierarchies and the management of Millennials mean businesses are moving from traditional, functional structures to focus more on interconnected, flexible teams built around specific projects. Millennials are taking on more responsibility in the workplace and organisations need to address their expectations. his includes providing the accelerated development opportunities that more than two-thirds of Millennials say an employer will need to have in place in order for them to stay – all the while ensuring that funds directed to them are well placed.
More activity in HR
More than two thirds of CFOs now take an active role in recruitment and talent management. For example, some finance departments are now closely monitoring the acquisition of key hires, their performance after three months and the return on investment that hire has contributed to the business. Finance is also working closely with HR to better understand where cost can be saved through reducing employee churn. Often, promoting talent from within to replace strategic, high level jobs when positions become available is more cost-effective than hiring someone new. As well as saving on external recruitment fees, this can also inspire existing employees to remain with the company and grow into another position.
Continuing to move along the strategic path, the finance department will take a more active role in balancing, assessing and making the case for L&D investment. With budgets under pressure, understanding exactly how much the company is spending on training per employee – and measuring the impact of this training investment – is an imperative.
Quantification – a job for the CFO
According to the CIPD, poor quality people management costs UK businesses £84 billion a year in workforce disengagement, performance and productivity. Calculating the true cost of talent management is not as straightforward as simply monitoring L&D spend against budget. As finance’s role in HR evolves, it will need to take into consideration the hidden expenditure related to training. The cost of learning expenditure per-head can at least double – if not quadruple – once all associated indirect costs are factored in. These indirect, variable, costs include loss of productivity when employees undertake training and wasted training investments – for example, when employees fail to attend a scheduled training event on the day due to illness or workplace demands.
The key to effective L&D is for finance to work closely with training partners and HR to develop appropriate metrics to monitor and measure the efficacy of learning and development programmes. Specific measurements need to be developed to quantify returns on each programme, assessing the behavioural change and business impact of training interventions. Learner feedback and workplace engagement need to be assessed, and insight from analytics used to continuously refine the talent management programme.