Why the CFO is Critical to Driving the Organisation’s Engaged Talent Agenda
People often constitute 60% or more of any organisations’ operating expenses. The way this is viewed at the top table is critical to how decisions are made around expenditure on people. More importantly decisions on talent: The 20% of an organisations’ workforce that make the 80% difference through their contribution.
Often the language used can define how the topic of people is discussed, is it a cost or is it an asset? If one is to really begin to shift the thinking to a more strategic view of people and talent, the conversation has to move from income statement to balance sheet. This in essence directs the dialogue from short term considerations to long term benefits and consequences.
The research on engagement levels highlights the potential benefits to an organisations performance of investing in and driving the people and talent agenda. An example based on research by the Gallup Organisation (2014) highlights that there is a strong correlation between single and double digit growth organisations. Double digit growth organisations show engagement levels of 63% or more, whereas single digit organisations are lower. Experience in our own client base highlights that the difference in EBIT earnings for front line sales managers leading team’s averages at 20% greater for the managers defined as strong and engaged.
The CFO either supports this investment in people and recognises the value in continued long term investment, or focuses on cost. It starts with the CFO who often sits on a remuneration committee that agrees the salary for an HR Director. Failure to benchmark and pay for a strategic role, often perpetuates the perception of HR being a secondary or operational function vs. a strategic function.
When the CFO has procurement as a sub-function they shape critical decisions around the “blanket rates” organisations pay recruitment agencies. The agenda to save money, can have a radical impact on an organisations ability to attract and acquire crucial top skills. This failure to differentiate between broad readily available skills and scarce differentiating talent, can have dire long term consequences for a business’s talent agenda.
Closer to home it is vital as the CFO builds a strategic finance function that they invest in building the right people and leadership skills into their team. This has the first direct benefit of assisting them to retain and attract key financial skills, but also equips their team to move into the business partnering role with their “stakeholders”.
CFO’s can often find themselves in the thankless position between people decisions and business decisions. This is not easy, but this also puts them in a critical position to shape the dialogue to ensure it enables the long term sustainability of the business. They have a unique opportunity to direct thinking to making the right investment decisions related to the primary lead indicator of any business’s performance: PEOPLE.
Critical Questions for the CFO:
- How do you discuss people “costs” in the executive, your team and in the business?
- How are you investing or not investing in critical skills and engagement levels. Do you know the long term consequences?
- How have you invested in your HR function? What return are you getting or not getting?
- How engaged is your team? How engaged are they with the business? How does the business view them as a function?
Written by: John Brodie
Group Managing Director at Mindcor