CFOs must not consider workforce analytics and insights to be the HR team’s responsibilities, Jack Freker, President and CEO of HR consulting firm Buck, wrote in an article for CFO.com Monday.
"With access to [the] financial data and the analytic tools to turn the information into insight, CFOs are certainly no strangers to the power of big data," Freker said in the article.
"Today’s CFOs are not just on point to guide company financial performance," Freker continued. "They need to touch everything in the company’s value chain, most definitely including the workforce. Talent analytics must become a strategic priority."
The nature of the divide between the HR and finance teams, Freker acknowledges, means CFOs may be less well-versed in "workforce data, covering employee performance, compensation, demographics, career history, benefits, employee behaviors, time utilization, and attrition."
He sees this lack of awareness as a risk, principally because, for a typical company, workforce costs can accumulate to 70% of the cost of doing business. Freker points to a 2014 study from Ernst & Young that evaluated the CFO and chief human resources officer (CHRO) partnership. The study, which does not list a publication date, found correlations between CFO involvement in strategic workforce planning and improved business performance.
Additionally, a 2013 survey by CEB (which has since become Gartner) found that organizations could increase their gross profit margins by about 4%, and save about $12 million in revenue per every $1 billion, if they take a financial leadership position in workforce analytics specifically.
Today, Freker said, CFOs working closely with HR have the advantage of using market and industry trends to "identify workforce patterns and talent risks, forecast productivity, uncover recruitment and retention challenges, project ROI from HR initiatives, and pinpoint leadership opportunities that could otherwise be missed."
He provides a bullet point list outlining some of the ways CFOs can use talent data to bring strategic insight to talent acquisition and deployment. These include:
Identifying ways to lower hiring costs and engaging existing talent
Ensuring compensation and benefits align with business performance
Targeting better ways of capturing ROI from HR development and well-being programs
Determining and addressing signs of faltering performance
These strategies, he said, will remove "much of the guesswork behind key management and operational issues," which will result in boosted performance and better talent decisions going forward.
Freker asks which specific data and analytics CFOs and CHROs should prioritize in order to manage financial risk and ensure adequate return on labor costs. How should companies break down workforce analytics to provide strategic insight?
Freker recommends CFOs take the time to study people, predictive, healthcare, financial, diversity and engagement analytics. Each of these, taken together, can help a CFO identify cost anomalies, reveal management decision-making blind spots, and support successful diversity and inclusion initiatives. Freker says these analytics provide the necessary insight for CFOs to make the best workforce investments.
"Without that clear connection between employee performance and the organization’s performance, managers can’t properly evaluate and reward individuals," Freker says. "Employees lose sight of where they fit into the big picture and become less engaged in the work. The company’s overall performance suffers."