Businesses across all industries are transitioning from a "growth at any cost" philosophy to one of profitability and operational efficiency. In this new environment, today's C-suite must recognise that cash flow is as important as people in a company's financial management.
Workforce, a growing strategic business priority
According to Gartner's "CFO Perspective on the 2022 CEO Survey," the workforce was rated third among CEOs' top ten strategic business priority areas for 2022-2023, an increase of 32% from the previous year. Furthermore, although talent has not traditionally been a main emphasis for CFOs, it is becoming more important. According to the CFO Insights poll, 77% of CFOs agree or strongly agree that the CFO plays a significant role in supporting personnel strategy development throughout the company.
Even as more CFOs focus on human capital, not all CFOs are ready to guarantee that their business and personnel management strategies work in tandem. Contemporary finance directors need a new paradigm for determining how to effectively balance the budget while maintaining a culture that provides top people with more than just a job, but a fantastic place to work.
CFOs should begin by asking five essential questions regarding their talent strategy.
#1 Do you understand the business case?
For example, a Gallup study conducted in 2021 discovered that disengaged workers cost U.S. corporations up to $500 billion each year. On the other hand, highly engaged teams are 14% to 18% more productive than disengaged teams. In 2022, Gallup discovered that "company units with engaged employees earn a 23% greater profit than workers in business units with unhappy workers." Nevertheless, it is not always evident how to convert these statistics into results in our own enterprises. The first step is to hold the whole C-suite responsible for this goal and to actively participate in developing a firm where financial and human success are synonymous.
#2 Do you look at the past, the present, or the future?
Company health depends on financial performance monitoring and reporting. Financial reporting records the company's past actions and results. In terms of talent planning, CFOs must balance this perspective. Talent planning should focus 20% on the future — where we want the organisation to be — and 80% on the present—implementing the best strategy to get there. Seeing simply through the standard financial reporting paradigm might result in wasteful starts and ends in terms of talent. Poor internal communication, creativity, performance, job satisfaction, and burnout result from a detached, dysfunctional organisational culture. From a past, present, and future viewpoint, organisational culture investments will become more than a cost category and a key lever for achieving the firm's financial goals.
#3 Do you have a people strategy or a headcount plan?
A one-dimensional headcount plan divides expenditures among departments. That may keep the firm on track financially, but will it foster development and innovation? A personnel strategy, on the other hand, is a company's comprehensive plan to recruit, engage, train, and retain its workers. It establishes the strategy for a company's interaction with its workers from recruiting through offboarding. It's critical to go deep to ensure you have a real people strategy. Do you know what structure is best for achieving this year's company objectives? Do you know whether your staff are in the greatest possible position to execute their best work? Do you know how committed your workers are to their jobs and your company's mission?
#4 What modifications will be required to implement your people strategy?
After you've determined that you have a people strategy in place, it's important to ensure that you have the proper components in place to effectively execute it. Consider if you and your colleagues are merely monitoring headcount objectives or searching for opportunities to optimise and expand. Assess how successfully you integrate people, purpose, and performance to accomplish the results your firm requires. Do your workers come to work for a salary or do they have a sense of purpose in what they do every day?
#5 How will you monitor and measure the progress?
The performance of your personnel management must be assessed in the same way that all other company objectives are. Choosing the correct measurements might help you determine if you're making long-term growth. Although there is no "magic" statistic, there is enchantment in seeing how a set of financial and people metrics interact. What happens to revenue per employee, cost per employee, employer net promoter ratings, confidence in the leadership team, and so on as we get closer to our sales and profit targets? Employees in a real performance culture will win for the firm while also winning for themselves, and this will be reflected in the metrics. Yet the narrative and feedback that the data are conveying are much more essential than the numbers themselves.
A transformational role of CFOs
With the emphasis on responsible growth this year and years ahead, finance executives may play a transformational role in integrating a company's financial and people objectives. Addressing these five questions is a fantastic place to start when developing a culture that values people, performance, and profitability.