As we enter 2023, businesses across industries are shifting from a “growth at all costs” mentality to one of profitability and operational efficiency. And in this new climate, today’s C-suite must understand that a company’s financial management is as much about cash flow as it is about people.
According to Gartner’s “CFO Perspective on the 2022 CEO Survey,” the workforce ranked number three on the list of CEOs’ top 10 strategic business priority areas for 2022-2023, up 32% from the previous year. And while talent has not historically been the primary focus for CFOs, it is becoming increasingly so. CFO’s own CFO Insights survey reinforced this, with 77% of CFOs either agreeing or strongly agreeing that the CFO plays a substantial role in supporting talent strategy development across the enterprise.
But even as more CFOs turn their attention to human capital, not all CFOs are equipped to ensure that their business and talent management strategies operate in lockstep. Modern financial leaders need a new framework for evaluating how they can best balance the budget with a culture that offers top talent more than a job, but a great place to work.
CFOs should start by asking five key questions about their approach to talent:
We’ve seen the statistics. Back in 2021, a Gallup poll found disengaged employees cost U.S. businesses up to $500 billion each year. On the flip side, highly engaged teams are 14% to 18% more productive than teams with low engagement. And in 2022, Gallup found “business units with engaged workers have a 23% higher profit compared to workers with business units with miserable workers.” Not always clear, however, is how to translate these stats into outcomes in our own organizations. The very first step is ensuring the entire C-suite is accountable for this outcome and actively part of building a company where financial and people success is one and the same.
Tracking and reporting financial results is a critical part of a company’s health. But financial reporting, by definition, takes a historical view of the organization by documenting what happened, or the results of the company’s previous activity. CFOs who are actively engaged in talent strategy needs to balance this view. A good rule of thumb for talent strategy is to focus 20% on the future — where we want the organization to be — and 80% on the present — executing the best plan to get there.
Looking only through the traditional financial reporting paradigm can create unnecessary starts and stops from a talent perspective. The resulting disjointed (and often dysfunctional) company culture will ultimately hamper results through poor internal communication, creativity, performance, job satisfaction, and ultimately, burnout. Through a blended view of past, present, and future, investments in company culture will become more than an expense category, but a critical lever for achieving the company’s financial goals.
A headcount plan is one-dimensional and allocates costs across departments. It might keep the company on budget, but will it support growth and innovation? By contrast, a people strategy is a company’s overall plan to attract, engage, train, and retain its workforce. It sets the approach for a company’s relationship with its employees across all stages, from recruitment to offboarding.
To ensure you have a true people strategy, it’s important to dig deep. Do you know the optimal structure to achieve this year’s business goals? Do you know if your employees are positioned to do their best work? Do you know how connected your employees are to their work and the mission of your company?
Once you’re sure you have a people strategy in place, it’s time to make sure you have the right pieces to execute it successfully. Ask yourself whether you and your colleagues are simply managing headcount targets or looking at where you can further optimize and grow. Determine how well you are connecting people, purpose, and performance to get to the outcomes your company needs to achieve. Do your employees come to work for a paycheck or do they also feel a sense of purpose in what they are doing on a daily basis?
Like with all business goals, the success of your talent management must be measured accordingly. Finding the right metrics can go a long way in determining if you’re making sustainable progress. While there is no “magic” metric, there is magic in seeing how a group of finance and people metrics move together.
For example, as we move closer to our revenue and profit goals, what is happening to revenue per employee, cost per employee, employer net promoter scores, trust in the executive team, etc? In a true performance culture, employees will win for the company while they are winning for themselves and this will show up in the numbers. But even more important than the numbers themselves is the story and the feedback that the numbers are telling.
With this year’s focus on responsible growth, financial leaders can play a transformative role in the integration of a company’s financial and people plans. Answering these five questions is a great jumping-off point for building a culture that integrates people, performance, and profits.
Elaine Mak is chief people and performance officer of Valimail.