While reading a recent article from Forbes on the top challenges CFOs face for 2016, I was reminded of some of the conversations I have with financial leaders of growing companies on a regular basis and the conversations that SHOULD be happening but often aren’t.
The opportunity exists for CFOs to radically change the conversation with human resources and payroll, but few companies fully take advantage of the relief that technology provides.
Safra Catz, CEO of Oracle put it like this:
“By working intimately with LOB heads to help them capture, measure, and report – in real time – on the data and information that are most important … helps reverse the company’s financial focus from rearview-mirror history to future priorities and opportunities.”
Below are three simple data driven conversations you can start having today to leverage what is typically your 1st or 2nd highest expense as a company to identify opportunities for efficiency.
1. Where is our biggest back door right now and what are we doing to close it?
With all of the focus on recruiting software and technology, it amazes me how few companies are addressing the “back door.” Recruiting software has done a fantastic job of helping businesses understand the parallels between recruiting and marketing. Just like new revenue, a company continually needs new talent to find and support this new revenue.
However, with all the focus on recruiting, I find in my conversations with financial and HR leaders a glaring omission of understanding where the back door is and working to close it! It’s like we are bailing water from our ship without ever addressing the gaping hole in our hull!
Analytics can help us understand WHERE there are PATTERNS of high turnover so that we can strategically address. Here at Netchex, we were able to leverage data like this to identify a pattern where one specific demographic of our employee population was leaving after about 12 months. What this demographic had in common was their commute to work. Once we allowed the data to show us the area that needed improvement, we created a new policy to allow these employees to work from home once a week and have seen immediate improvements in productivity from this department.
What does that data tell you about where your back door is and what are you doing to address it?
2. What benefits are we spending money on that people aren’t electing?
If you’re like most companies I talk to, you offer benefits to your employees as a key part of your recruiting and retention strategy. While there is significant cost associated, there is also great “value” in the benefits you offer. That being said, very few companies look at the data to see WHERE they are spending their benefits dollars and how employees are responding to that benefit spend.
Part of the issue is that there are often multiple brokers in play with competing agendas – the 401k broker want employees to elect a retirement plan while the life insurance guy believes more money should be spent in his bucket.
Rarely does anyone ever look at the data for the BIG PICTURE to see where money is spent, that employees are then declining. Companies that look at the data like this often determine that they could shift some of their employer cost from a dental plan that employees don’t seem to participate in to perhaps a retirement plan that would then encourage greater participation, or vice versa.
Again, what is the data telling your company about WHERE benefit dollars are being spent and HOW they could be spent more effectively?
3. Do we have money walking out the back door and if so how much?
Probably the most concerning and easiest to remedy of these 3 conversations is this one. With all the focus on reducing overtime, managing headcount, etc, I still find very few companies who reconcile their benefits well.
With the added rules of the Affordable Care Act and the inclusion of newly defined “Full Time Equivalent” employees on company health plans, the likelihood of employee being enrolled but not earning enough income on an individual pay period to pay their portion is substantially higher. Without good measures and processes in place, I have personally seen this cost rise in to the tens of thousands for a company who was simply paying the bill without looking at the data.
A good CFO/HR partnership will be looking at where these events are occurring by leaning on the real-time data and develop strategies to correct before they wake up with a giant loss on their financials.
Looking Forward Instead of Backward:
Technology affords us a great opportunity to move beyond simply “reporting the financials” from our HCM software and instead to get strategic! We should expect more out of our HR software than just looking back at what happened last pay period, but begin to ask how can I leverage this data in real-time to help me look forward and grow the business!