Generations Y and Z will become the largest living
generations in 2019, having already have surpassed Generation X in the workplace,
and by next year will represent half of all workers globally. With so many
working for you, understanding what makes them tick – and stick with you – is
essential to attracting and retaining the best available talent to support your
business goals.
You’ve got your work cut out for you: the younger
generations don’t have a very high opinion of business. The 2019 Deloitte
Global Millennial Survey found a decreasing percentage of Gen Y – 55% in 2019
versus 61% in 2018 — believe business has a positive impact on society and
that 67% of businesses “have no ambition beyond wanting to make money.” That’s
important because Generations Y and Z often put purpose before their paycheck.
But despite their reputation as job hoppers, Generations Y
and Z are slightly less likely to leave a job after a short time than
Generation X. In 2018 about 50% of Gen Y reported working for their current
employer for at least five years, and 80% said they had stayed at their job at
least 13 months.
Jobvite noted a 20% drop in workers who say they change jobs
every one to three years (16% in 2018 versus 20% in 2017). However, despite job
satisfaction at 68%, workers say they’re still open to other opportunities.
With unemployment at record lows, these workers have more possibilities if they
choose to leave.
What’s driving them away? Gallup’s 2017 “State of the American
Workforce” report noted 91% of the thousands surveyed said they left their last
job because there wasn’t a compelling reason to stay. And Deloitte found that
almost half would quit their current job within two years if they had a choice.
It’s well past the time to rethink your recruiting, hiring,
and retention practices to keep Generations Y and Z in your workforce.
In this post, we will discuss the state of employment in
2019 as well as what the younger generations believe is important at work, what
Gen Y and Gen Z don’t value at work, and strategies to keep these employees
working for you. We’ll cover:
What’s not important to Millennials at work:
Perks such as free food and games
Certain benefits, such as 401(k), are less
important
Being told the company holds their values –
without backing it up with action
Maintaining the status quo
What’s important to Millennials at work:
Company values and transparency
Work-life balance, including flexible work
hours, working from home
Diverse and inclusive culture
A variety of benefits
Strategies to keep Millennials working for your
organization:
Create a company culture with their input
Develop their talent
What’s not important to Gen Y and Gen Z at work
Pointless Work Perks
The startup and tech culture of the West Coast perpetuated
the idea that free cereal bars and fancy coffee machines in the breakroom,
foosball and ping pong tables in the hallways, and artsy open concept office
spaces were all that was needed to attract and retain workers. This is not so. Gen
Y and X employees know that perks like these don’t equal benefits – or say much
about the true nature of a company’s culture.
Lip-Service-Only
Values
If your recruiting materials and HR discuss a company
culture that embraces diversity and inclusion, but leadership at all levels
doesn’t support those ideals, Gen Y and X will figure that out quickly – and
they don’t appreciate these inconsistencies. In fact, about two-thirds of those
surveyed by Deloitte said business leaders only give lip service to diversity
and inclusion in the workplace.
Retirement-Focused
Benefits
The younger generation saves for retirement and wants you to
contribute to their 401(k). However, this cash-strapped generation saddled with
student debt also emphasizes other financial benefits available to them now and
emphasize financial wellness such as access to financial education platforms,
budgeting tools, and financial coaches.
Change-Adverse
Workplace
A “this is the way we’ve always done it” philosophy
perpetuated by managers and staff resistant to change will turn off younger
employees. They want to be heard, and have their suggestions taken seriously.
They have spent their lives adapting to ever-changing technologies and expect
to use technology to enhance work productivity.
What is important to Gen Y and Gen X at work
Company Values
How they spend their time, who they work for, and what they
do is often more important to Gen Y and X than earning a big paycheck. These generations
do not only expect their employers to strive for financial success, but also
want the organization to make a positive impact on the world. Working for an
organization that supports charitable causes and gives back is also important
to 75% of job seekers.
They’ll also expect you to maintain transparency by
communicating about finances and leadership. Generations Y and X want to learn
about challenges and mistakes made by their organization from leadership, not
the rumor mill.
Work/Life Balance
Flexible schedules and work-from-home options are no longer
benefits offered to favorite employees. Employees from the younger generations
understand that technology makes it easy for them to work remotely and they
don’t want to commute to the office every day. They expect you to treat them as
adults and understand they will be productive from home and outside of the
traditional 9 to 5 working hours. This isn’t a new concept: the 2015
AfterCollege Career Insight Survey noted 68% of Gen Y wanted the option to work
remotely.
The United States isn’t exactly known for work/life balance:
employees are expected to work long hours, take work home, and skip vacations. But
the AfterCollege survey noted that 68.78% of entry-level job seekers value
work/life balance more than any other factor after salary. A flexible work
schedule was No. 4 on the list, with 53.8% noting flexibility as an essential
factor.
Diverse and Inclusive
Culture
It won’t take employees from Gen Y and X long to learn
whether you back up your diversity and inclusion policies with real action.
They will review your leadership – C-suite and corporate board – for diversity
of race, ethnicity, age, gender identity, and more. In the era of the Me Too
Movement, these employees won’t settle for an organization that’s mostly-male
with a top-down management style.
Good Benefits
Don’t be mistaken, a focus on values and flexible work
schedules does not mean Gen Y and X are willing to forego traditional benefits.
Gen Y and X are more cash-strapped than previous generations because of student
loan debt, and many entered the workforce during the Great Recession. In
addition to flexible work schedules, traditional and non-traditional benefits
that are important to Millennials include:
Financial wellness and literacy programs
Student loan repayment assistance
Unlimited PTO plans
Opportunities for advancement
Health and wellness benefits
What you can do to keep Gen Y and Gen X working for you
Company Culture
Gen Y and X want to work for companies that understand and
support their values and understand their differences and the challenges they
face. Generally speaking, generations Y and X are better educated than previous
generations – and a higher percentage of women have degrees than men. But they
also have more student debt. They are more racially and ethnically diverse.
Many delay marriages and creating a home longer, often living with their
parents. More would rather travel and experience the world than buy a home. And
they’re delaying parenthood.
Diversity and
Inclusion
There is a correlation between Gen Y and Xers who want to
stay with their current employer and their belief that the organization
supports diversity and inclusion. How they define diversity and inclusion
varies from typical demographics to ideas/ways of thinking, and tolerance,
inclusiveness, and openness in the workplace, Deloitte’s global survey noted.
Share how your leadership defines diversity and inclusion.
To understand what your workforce values under diversity and inclusion, ask
them. Then develop policies that support these values and train all levels of
employees as these definitions evolve.
Work/Life Balance
These generations often value experiences over financial
gain and possession. However, they also want to be paid for the work they do
rather than work long hours in salaried positions that cause their work/life
balance to suffer.
Because they’re choosing to delay becoming parents, flexible
and work-from-home work options help retain Gen Y and Xers who want to keep
working for you but still be close to their kids.
These generations also want the flexibility to work a
schedule that supports vacation time for travel. And employers are responding:
the State of American Vacation 2018 found that employers are beginning to
encourage vacation cultures and as a result, employees are feeling more
confident about using earned time off. For three years in a row, the amount of
vacation time used increased. Still, 52% of American workers didn’t use up all
their vacation time in 2017. The younger generations are likely to decrease
that number.
Talent Development
Career growth opportunities rank No. 1 on the list of
factors most important to job seekers surveyed for a 2019 report by Jobvite.
The same survey noted only 17% of those who left their jobs within the previous
12 months did so for more money.
Accurate Job
Descriptions
Providing Gen Y and X with clear expectations of their work
begins during recruitment and hiring. A Jobvite study found that 43% of new
hires who left within their first 90 days did so because their job duties were
different than their expectations based on job descriptions and interviews.
Training that Adapts
Nearly two-thirds of employees are concerned about the
impact of AI and robotics on the workforce. Although generations Y and X are a
tech-savvy generation, many feel unprepared for Industry 4.0. They expect their
employer to provide the training they need to be productive and successful.
Just because purpose may be more important to many younger
workers than the size of their paycheck, don’t think that means Gen Y and X aren’t
ambitious: Deloitte found that more than half strive to be high-earners.
They’ll seek out opportunities for training and advancement at work, and if
they don’t find what they want, they’ll move on. They are more comfortable than
other generations in striving for jobs for which they don’t have all the
required skills if training is offered.
Key Takeaways
The great news is that making your workplace more friendly
for Gen Y and X will benefit your employees of all ages. Offering flexible work
schedules and work-from-home options not only appeal to younger workers but
also Baby Boomer caretakers of aging parents and grandchildren. Supporting a
variety of community organizations better ensures your employers will feel you
value what’s important to them. Developing the talents and strengths of every
employee while training them to adapt to ongoing changes in technology
increases productivity and adds to your bottom line.
As a CFO, your job isn’t easy even at the best of times.
You’re responsible for managing the company’s financial health, capital
investments, and return on those investments. And as if that wasn’t enough, many
modern CFOs have now been given ownership over their company’s HR.
This change can be particularly difficult because as a CFO,
you’re probably a numbers person – now you’re supposed to be people person too?
You may well be wondering how you’re going to juggle it all.
The good news is that, with the right approach, managing HR
as a CFO can be extremely rewarding and empowering. You get to guide the
financial and people side of your business, coordinating the two to maximize
your company’s growth. That’s a pretty good position to find yourself in, as
long as you know how to handle it.
The two main uses of a company’s capital are technology and
people. As a CFO who is also responsible for managing HR, you get to guide the
success of your investments in human capital. Instead of seeing your hybrid
role as an irritating added responsibility, you can see it as an opportunity
for greater control over your company’s growth and financial health. You
get to use your financial expertise and familiarity with the company’s business
strategy to maximize the return on investment in your company’s people.
The best way to do this is to align the HR strategy with the
business strategy so that all parts of the company are working in sync towards
the company’s goals. That doesn’t just mean approaching HR from a finance
perspective, though. For the best results, you must aim to see things from an
HR perspective.
It’s important to bring in the right people and to make sure
that they stick around for the long-haul. At the same time, cross-department
alignment is critical. Every department needs to be aligned with each other and
with the company’s goals so that the company can work as efficiently and
productively as possible.
Many companies dismiss the impact that HR can have on their
growth and continued success. They underestimate the cost of turnover and so under-invest
in their people. But the fact of the matter is that talent acquisition,
development, and retention are critical to a company’s long-term success. And
as a CFO in charge of HR, you have control over these processes.
Build and Maintain Your Company Culture
Company culture is one of the main drivers of employee
acquisition, productivity, and retention. A culture based on the company’s
mission/vision and in-line with business strategy motivates exceptional
employee performance. Employees who are driven by the company mission are not
just contributing to a company’s profits in exchange for a salary, they are
part of a greater community working towards higher goals.
That matters because providing meaningful work is one of the
main challenges that companies face in today’s market. The truth of the matter
is that a good salary and benefits package isn’t enough to keep employees
around anymore, and as a result, turnover rates continue to increase year over
year. By creating an intentional culture that is genuinely integrated into company
operations, you can solve many of your HR challenges and reduce talent-related
expenses.
When it comes to company culture, you need to establish a
strong foundation that will set you up for future success. Mistakes early-on
will lead to bigger problems down the road, so it really is worth taking the
time to get your company culture right. That’s especially true for growing
companies since maintaining a focused and effective culture and strategy gets
harder as companies scale. Not taking the time to get things right while you’re
still small can come back to bite you as you grow.
You want your team to be aligned with your vision, driven by
your values, and focused on your core objectives. The first step to
accomplishing that is deciding what your values are and how you can express
them in your company culture. After that, you should establish an excellent
team of key management-level employees who will direct how that culture will
become part of the lived reality for their departments or teams. Then make sure
that all of your managers are dedicated to the company’s mission/vision and
driven by your culture, objectives, and career progression.
Examine HR Processes
Now it’s time to get down to the nitty-gritty of how your
company operates. In order to effectively guide your company’s HR, you need to
understand how the processes in place work and start to mold those processes to
support the company’s business strategy.
The first step is to conduct an audit of your HR situation.
Take a look at what the current HR processes are and who owns what
responsibilities. Examine workflows and interview key employees to get a sense
of the current state of affairs. Then, think about what works and what can be
changed to establish an effective and sustainable workflow.
The next step is to look at your own responsibilities as the
company’s “HR generalist”. Generally speaking, these are:
Human capital decisions: who to hire, promote, or fire.
Day-to-day people operations: ensuring individuals, teams, and departments are operating smoothly and working together towards the company’s goals.
Compliance: making sure that your company is following labor rules & laws regarding fair labor standards, anti-discrimination, sexual harassment and more.
Payroll: managing employee salaries, adding new employee files and editing existing files, complying with tax laws.
When examining these responsibilities, it’s a good idea to
think about what you can handle yourself, what you can delegate, and what you
can outsource to third-party providers. You want to establish a sustainable HR
approach that leaves you with enough time and energy to manage your more
traditional CFO responsibilities. Think of your managers as allies in
establishing and maintaining effective HR processes in addition to the
company’s HR professionals.
Once you’ve established your HR processes, it’s time to
figure out how to track and evaluate HR performance.
Key HR Metrics to Evaluate
Identifying key HR metrics can be a huge asset when
evaluating your current HR situation and future HR performance. That way you
can make your human capital decisions backed by concrete data and clear trends.
You should look for metrics that you can use to measure performance on the
individual, team, department, and company level.
Starting with the broad-strokes metrics, you can establish
departmental KPI’s and objectives to track performance between departments.
These metrics should help you answer the question of which departments are
performing better than others, and why. You also can and should track turnover
rates on the company, department, and manager level to measure employee
engagement and avoid the costs associated with turnover.
Ultimately, the most important metrics for planning and
evaluating your HR initiatives and processes occur on the individual level.
After all, HR is about building, maintaining, and leveraging the company’s
people power – which is made up of individual contributions. That means that
some of the most useful metrics to look at include employee engagement,
employee happiness, and cultural health. These may seem difficult to measure,
but you can collect invaluable data by gathering employee feedback.
Learn More About Managing HR as a CFO
In this article, we’ve covered several of the basics of effectively
managing your HR responsibilities as a CFO, including:
How and why you should align business strategy and HR strategy
Building and maintaining an effective and sustainable company culture
Evaluating and establishing HR processes
Identifying key metrics that will allow you to plan and measure the success of your HR initiatives
There’s a lot more to learn about becoming an effective HR leader as a CFO, though. That’s why we put together a webinar that covers many of the key aspects of managing HR as a CFO. Learn what webinar panelists Dan Gloede, President and CFO of Codeverse, Jim Taylor, Founder and CEO of Launchways, and George Nissan, Director of Finance at BenchPrep have to say about what they’ve learned about guiding HR as a CFO.
The U.S. Bureau of Labor Statistics announced that April 2019 marked the lowest unemployment rate in 50 years and that year-over-year average hourly earnings have risen at or above 3% for nine straight months.
While that’s good news for the U.S.
economy, as an HR professional you know both decreasing unemployment and
increasing wages affect your ability to recruit and retain talent.
Just as customer experience is
driving brand loyalty, employee experience – their perception of the way your organization
treats them – will become the employment differentiator in an increasingly
competitive market for talent. If your HR team hasn’t prioritized technology
that collects then analyzes employee data, how will you understand what your
differentiators are?
The technology already exists to help
you analyze your workforce and plan for future needs. However, HR has been
slower than other areas of a business to adapt to the digital age.
Two-thirds agree HR has undergone or is
undergoing a digital transformation, but only 40% have a digital work plan in
place at the enterprise or HR level
HR execs who believe HR has a strategic role in
their business are more likely to be pursuing digital transformation; 67% support
a strategic role compared to 48% who view the HR role as unchanged
There are many reasons you should
use data and analytics in HR. In this post we’ll discuss a few reasons that
will help you make the decision to invest time and resources in the technology
you need.
Become more analytical. To be taken seriously as an HR pro, have conversations around data and look at initiatives analytically.
Build a business case for HR initiatives. Data-driven HR will allow you to build a business case for initiatives and get the budget you need approved.
Keep your job. As more HR tasks are automated, becoming an expert on understanding and using HR analytics will increase your value as a team member.
Use HR data to become more analytical — and be taken seriously
A PricewaterhouseCoopers survey
found 77% of CEOs believe the limited availability of skilled workers is the
single biggest threat to their business. They feel pressure to find and retain
talent. It seems counterintuitive, then, that HR doesn’t always have a seat at
the leadership table.
Often that’s because there is the
perception that because HR is people-focused, HR professionals make critical
decisions based on relationships or personal experience rather than facts. As
an HR professional, you must lead your organization to adapt HR processes that
are tech-driven to assure leadership that your recommendations are based on
data, not intuition.
And, if you’re still focused on
reporting the same tired statistics such as how many employees you have and cost
of compensation and benefits, it’s time to step up and report more meaningful
information. With the right technology, HR can glean more meaningful insights
from the information you already have. Some experts refer to this as “people
analytics.”
“Headcount, turnover, and tenure
are helpful metrics, but people analytics are really about uncovering more
meaningful insights that drive better workforce decisions, productivity, and
business outcomes,” Paylocity’s Ted
Gaty noted.
Data Builds the Business Case for HR Initiatives
Sales and marketing professionals collect
and analyze data about customers, then make decisions based on what they find.
So why should the approach be any different for your organization’s most
valuable resource – talent?
You likely have the data you need
already: you just need the tools and training to analyze the information in
ways that tell what’s happening now and help you build a competitive talent
strategy for the future.
As an HR professional, you need to
integrate data into processes so you can collaborate better with your
organization’s leadership to make better business decisions. To get resources
allocated to HR, focus on how HR can deliver new value for the organization.
For example, data can aid in making
decisions about the right time to hire by compiling all of the costs that go
into recruiting and retaining each position, beyond just salary and benefits
costs.
Your organization’s leadership may
only take a critical look at culture and retention when there is a crisis, such
as a huge upset when a key employee unexpectedly quits. Educate them that data
analytics can track slow-moving trends that warn of potential problems. With constant
monitoring, you can collect data – then act on it.
After initiatives are implemented,
use data to prove Return on Investment by showcasing positive changes in key
people metrics.
Keep Your Job
HR tasks that once were paper-based
transactions are becoming increasingly automated. Technology has automated
everything from payroll to recruitment and performance reviews, and new HR tech
to tackle more tasks is being developed every day.
Rather than seeing technology as a
threat to your role, view the digital transformation of HR as a way to provide
you with more time for higher-level strategic tasks. Show the importance of
your role by becoming your organization’s expert on analyzing HR data as it
relates to overall strategic goals.
In this way, being a data-driven HR
person will allow you to contribute more to your organization’s leadership team.
But you must act decisively rather than standing back and watching what other
organizations are doing.
Understanding what your data means
will help you to forecast the future and make intelligent decisions about
talent needs that propel goals for revenue growth.
We agree with Paylocity’s Ted
Gaty: “There’s a lot of data out there about your workforce and if you can
take that data and make use of it with advanced analytics, then you will start
to optimize your workforce and design programs that improve key HR metrics.”
Many
CFOs have built their careers on technical skills and financial smarts, but
performance today is no longer solely measured on those abilities. For the
modern CFO, a new set of soft skills built around emotional intelligence have
become increasingly important in recent years for their ability to help
business leaders build relationships, resolve conflicts, and motivate
high-performing teams.
From understanding and managing emotions to
aligning talent with business needs, the CFO as coach, collaborator and
motivator is a growing trend. In this post, we’ll look at how emotional
intelligence has become a critical skill set for today’s CFO and examine the
five core components of emotional intelligence and the role they play in
helping to bolster leadership performance.
These key components include:
Self-awareness
Self-regulation
Internal motivation
Empathy
Social skills
Changing
the CFO skill set equation
The skill of emotional
intelligence refers to the ability to identify, use, understand and manage the
emotions of themselves and others in a positive way. For some individuals, the
ability to understand and assess emotions may come effortlessly, but for
others, not so much.
Since CFOs need to be
able to induce change through others, this ability to inspire and influence has
become a valuable skill in today’s collaboration-centered workplace. CFOs need to
be able to respond to divergent points of view and differences in the way
people think. By extension, they need to harness their emotional intelligence
to get through difficult situations.
With fewer layers of management in today’s organizations, leadership styles lean toward less authoritative. Moreover, the shift towards more knowledge-focused, team-based roles means that workers tend to have more independence and self-governance, even with lower levels of an organization. As a result, CFOs are finding themselves connecting and collaborating with people they would not likely have interacted with in the past.
Previously, the
finance function required a number of core skills, including technical
expertise, analytical thinking, comprehension, and assertiveness. While these
attributes may not have changed, today’s CFO also needs to exhibit a wide range
of soft skills, including an ability to collaborate effectively, build
relationships and perceive, evaluate and manage emotions.
Clearly
emotional intelligence is important to everyday social interactions, but how
does it relate to CFO performance? When you make tough decisions based on hard
data that can have an impact on non-finance departments, you could come across
as tough or inflexible. Not a good reputation for a leader. That’s where
emotional intelligence comes into play.
Growing
need drives resurgence
Emotional intelligence first gained
widespread attention back in mid 90s with the release of a book by Daniel
Goleman simply titled, “Emotional Intelligence”. The subject has since been the
focus of numerous studies, many of which point to it being a better predictor
of leadership success than a person’s general cognitive ability. The
reasoning? An executive skilled at understanding what makes people tick can better
motivate teams and drive more effective interactions.
Several factors are contributing
to a renewed interest and growing need for leaders with strong emotional
intelligence skills:
Market disruption. New and emerging technologies are creating substantial market disruption and business transformation across industry sectors, resulting in corporate restructuring, flatter hierarchies and greater cultural diversity.
New workplace demands. The digital
age and broader enterprise connectivity is intensifying workplace pressures,
creating the need for leaders with greater self-awareness, better emotional
understanding and superb social skills.
The
need to innovate. Rapid technology acceleration and the
speed of new service deployments requires better collaboration, agile teams and
a culture that allows for continuous feedback, honest communication and individual
empowerment, which are core emotional intelligence-based attributes.
Service-oriented economy. As we move to a more service-based economy and a more customer-centric focus, relationship building, superior communication skills and better self-management abilities become more important than ever.
Globalization. The ability to empathize and relate to different attitudes, perspectives and cultures is essential in today’s global environment. When managed properly, this diversity can lead to higher performance and better outcomes.
A recent report
from World Economic Forum ranked emotional intelligence as the sixth most
important skill needed in 2020 in order to manage the coming fourth industrial
revolution. Emotional Intelligence wasn’t even on the list for 2015. This
may explain why many organizations have begun offering employees more opportunities
to improve their emotional intelligence.
Gaining a performance
advantage
According to the model developed by Goleman,
emotional intelligence consists of five core components.
Self-awareness. Self-awareness is knowing your own feelings and understanding your strengths and weaknesses in relation to how they affect behavior. Leaders who are in tune with their own emotions are better able to control their own impulses and tend to enjoy better relationships. To improve self-awareness, take time to better know and evaluate yourself. Then understand how you relate to others.
Self-regulation. CFOs need the emotional flexibility to collaborate effectively without letting egos interfere. Self-regulation is the ability to control outbursts, disruptive impulses, and moods. It also encourages a “think before acting” attitude. Instead of being held hostage by your emotions, learn to use them strategically as a performance improvement tool.
Internal motivation. Internal motivation is the passion to work for internal reasons such as personal joy, curiosity or mental satisfaction. CFOs need to be continuously monitoring their performance, making sure they’re hitting their targets and dealing with issues when they arise. Internal motivation provides the clarity of focus and the drive needed to initiate change and take action while opening the door to positive feedback and learning.
Empathy. Most of us are not taught how to deal with our emotions or the emotions of others. Empathy requires reading feelings and understanding the needs of others. Learning to control your own emotions will enable you to help others manage theirs. By becoming more aware and understanding how others feel in various situations, you’ll be better equipped to inspire, motivate, and connect with others across the organization.
Social skills. Having good social skills and sound situational awareness can be a powerful tool for leading a team. While a clash of opinions is sometimes inevitable in a cross-functional team, the ability to negotiate the needs and viewpoints of others and find common ground is vital for a CFO. Creating the harmony and agreement needed to move initiatives forward hinges largely on the ability to managing relationships.
Key
takeaways
It turns out cognitive intelligence and
technical skills are an incomplete predictor of performance. The ability to
influence, collaborate, and communicate effectively across departments,
cultures and generations is a key component of effective leadership.
The
reality is there is a strong link between the emotional intelligence of its leaders
and the financial performance of an organization. Today’s CFO needs to
be both a strategic and tactical thinker. Not surprisingly, hiring
managers are increasingly placing higher value on emotional intelligence and
are incorporating these characteristics in their leadership search criteria.
While technical and financial expertise is important, CFOs can take their performance to the next level by combining financial know-how with emotional intelligence. Like any form of self-improvement, building and strengthening your emotional intelligence will stretch your comfort zone and challenge some long-held notions about effective leadership styles. The good news is the effort you make to improve your emotional intelligence will pay dividends far beyond the initial investment.
Why is it important for you to learn how to craft a powerful
business case for your HR initiatives? Well, like any other major business
undertaking, HR initiatives require time and resources in order to be effective
and result in real change. Unfortunately, the people who hold the company
purse-strings, namely the CEO, CFO, and other senior leadership, tend to
undervalue HR transformation. They frequently think that HR is around to make
sure nothing goes too wrong, but that it cannot deliver real business results.
As an HR professional, you know this mindset isn’t correct. People
are what drive a business’ success, and you make sure that the company’s people
power is being cultivated and leveraged as effectively as possible. If HR isn’t
doing an effective job, then none of the company’s goals will be achievable.
The challenge, then, is making senior leadership understand
what you already know. If you are planning and pitching an HR initiative, then
you have a good reason to believe that it will transform how the company
operates and performs. Articulating that potential in a powerful business case
allows you to speak the leadership’s language and get the resources you need to
implement your initiatives.
So, how do you go about putting together a business case
that will win over senior leadership? Let’s examine the key components of an
effective HR business case, using an employee engagement campaign as an
example:
Craft your messaging to leadership pain points and priorities
Diagnose business challenges and opportunities
Develop your solution
Outline desired results for both HR and the company as a whole
General Approach
Before we get into the specific steps for crafting your
business case, let’s consider how you should frame your messaging throughout
each step. While following the advice laid out in this article, always keep
your audience in mind.
You know why you want to implement this initiative from an
HR perspective, but leadership will not come at the issue from that same
perspective. For instance, you may see more efficient processes or happier
employees as an end to themselves, but your leadership team might not – at
least not enough to justify a significant investment. That is why it’s a good
idea to try whenever possible to break out of an HR mindset, or at least link
the issues you identify as an HR expert to issues and perspectives that senior
leadership will prioritize.
One great way to appeal to a broader audience and make a
compelling business case is to be as objective as possible, and to quantify
whenever possible. Complex human issues cannot just be broken down into numbers
and dollar signs, and it can be frustrating when the CFO or CEO wants you to do
just that. At the same time, though, linking your initiative and the issues it
is meant to solve to concrete business results can make or break your bid to
get the resources you need.
Speaking of business results, another great approach is to
frame the initiative within the context of the company’s bigger picture. That
means that you should try to link the issues, solutions, and results that you
outline in the business case to the company’s business strategies, goals, and
bottom-line whenever possible. This will help you show key stakeholders how your
initiative will make their jobs easier and help them to accomplish their goals.
Finally, don’t be afraid to enlist outside help when
crafting your business case. Think of your counterparts in other departments as
your allies in building the case, even and especially if they are also part of
the case’s audience. Seeking outside input will help you identify stakeholder
pain points and get a better sense of the initiative’s effects throughout the
company. Similarly, reaching out can give you access to vital data that will
help you prove your case and track your success. For instance, the CFO could
provide you with financial information that helps you connect the dots and show
the true cost of low employee engagement. As a bonus, getting leadership input
while creating the business case will also increase your odds of success. They
will feel as though they had a hand in crafting the business case and so will
be invested in the project, giving you a leg up in getting the resources you
need.
Now that we’ve covered the general best-practices for
approaching an HR business case, let’s take a look at each major step in
building the case.
Step One: Diagnosis
In order to make the case for why leadership should invest
in your initiative, you first have to establish the need for the initiative.
This involves identifying business challenges, processes that could be
optimized, and opportunities for change. This step will help build the value
proposition for the initiative and provide valuable context to help your audience
understand the reasons behind the initiative.
First, identify the business challenges that you are trying
to address. In our case, this would be low employee engagement. This might be
signaled by low productivity, high absenteeism, and high turnover. Next, link
this challenge to the company’s performance and financial health. Continuing
with our example, it might be a good idea to calculate the cost of replacing
employees, among other things.
Once you have established the problem, it’s time to look for
causes. Try to find the gaps in how things work now that are contributing to
the business challenges. These could be ineffective processes or missing
processes. In our case, some issues you might discover are poor communication
of company direction and employee contribution to it, inaccessible leadership,
too few or too many meetings, and unclear advancement procedures. As always,
try to pin down as many details and data as possible when identifying the
causes. For instance, quantify the extent to which each issue contributes to
the lack of engagement. You can use that data later to justify the expense for
each part of the solution.
After you have identified the challenges and causes, look
for opportunities for solutions. You will create the detailed solution in the
next step, so for now keep it general. What broad-strokes plan or plans could
solve the causes and address the challenges?
Now the good news is that you have probably given the
challenges, causes, and opportunities a significant amount of thought while you
developed the initiative. That means that you will have a good idea of where to
start and what to look for in this step. Much of the work will have to do with
framing what you have already considered in terms that will resonate with senior
leadership.
Step Two: Solution
Now that you have communicated the need for your initiative,
it is time to explain the initiative and why what you are suggesting is the
right solution for the problems that you identified.
Be as specific and concrete as possible about what new
policies and procedures you want to establish. Outline what will be changed,
added, and removed and how that will be accomplished. For each step, describe
what resources you will need and how they will be allocated, along with how the
step will contribute to the solution. This will help you present a clear
cost/benefit analysis and justify each expense.
It is also a good idea to provide a timeline for project
execution and completion. Describe when you will implement each component of
the initiative and when the complete solution will be in place. Then establish
follow-up procedures and key metrics to measure project success. Leadership
will feel more at ease investing in a project when you give them a way to tell
whether or not the initiative worked and what return they got on that
investment.
Let’s move on to the last step, in which you will show what
the initiative will achieve for the company.
Step Three: Desired Results
In step one you identified challenges that you wanted to
address. In this step you outline what effect your initiatives will have on
those challenges, and what that will do for the company’s performance and
financial health. This section is divided into two sub-sections: internal
effects and ultimate project impact.
The internal effects are the intermediate steps that drive
the ROI. Fundamentally, they are improvements in the way that the company
operates. Describe how your initiative will make the company more effective. In
our example, you might outline the benefits to employee performance, individual
and team productivity, collaboration, turnover, and reported sense of
engagement.
The project impacts affect the company’s bottom-line. If you
are unclear whether a result would fall under the first or second category,
consider whether or not it has a dollar-value attached to it. If it does, it’s
in this second category. Returning to the example of the employee engagement
campaign, impacts might include the revenue generated by increased productivity
or savings from decreased turnover.
Round this step off with clear takeaways that will resonate
with senior leadership. These combine the effects and impacts that you
identified above into bigger-picture ROI and cost/benefit analyses. Paint a
picture of what the company will look like after the initiative. You gave your
audience the stick in the first step by showing what challenges the company
will continue to face without the initiative, now present them with the carrot
of what they will gain by giving you the resources you need. If you’ve done a
thorough job on the previous steps, you should leave your audience with a clear
narrative for why your initiative is not only beneficial, but necessary.
Key Takeaways
It’s important to make sure that you build a compelling
case. And in order to do that you should:
Speak to leadership pain points and priorities
Be as specific and quantitative as you can
Identify key business challenges that your initiative will address
Outline the initiative, complete with the cost and time required for each step
Show why the proposed initiative is the most effective solution for the challenges
Present the results you expect to see from the initiative, both in terms of internal processes and business success
HR leaders and CFOs often see their roles as diametrically
opposed and even in conflict with each other. Finance professionals can be
frustrated by a perceived lack of ROI and measurability in HR, while HR leaders
sometimes see their finance counterparts as narrow-minded and too focused on
details. But the truth of the matter is that CHROs and CFOs need each other,
and both can do their job better when they work with the other.
HR manages the people side of business success, and people
power is ultimately responsible for a company’s performance and its
bottom-line. The finance department manages the company’s resources to avoid
waste and maximize return on investment, and the CFO is responsible for the
financial side of business success. Since these two departments are responsible
for the two sides of the same coin, business success, it only makes sense for
them to work together whenever possible.
That being said, the relationship is not without its
difficulties. That is why it is important for HR leaders to learn how to speak
the CFO’s language and help the CFO understand their language in turn. Let’s
take a look at how you can have a more productive relationship with the CFO as
an HR leader, including:
Why you should foster better communication
between your departments
How to build an effective business case for HR
initiatives
How to prove ROI to the CFO
How to measure the success and impact of HR
activities
Why Communicating with the CFO Matters
CFOs hold the company’s purse-strings, and nowadays they are
holding them tighter than ever. That means that if you want to get the
financing you need to lead effective HR initiatives, you’re going to have to
learn how to understand the CFO’s language and how to speak to their pain
points. The good news is that you actually are working towards a common goal,
you just need to put in the work to help each other see it. On your end that
means developing effective business cases, displaying ROI, and measuring
objective HR metrics.
Do you need more convincing? Companies with a high level of
collaboration between HR and finance see an increase in top-line revenue, an
increase of 10% or more in operational cash flow, and an increase in employee
performance and engagement.
Perhaps most importantly, learning how to track key metrics,
build business cases, and discuss budgets, investments, and ROI are all
necessary skills for you to be taken seriously by your company’s entire
leadership team, not just the CFO, and for you to become a credible
decision-maker on the C-suite.
Build Business Cases for HR initiatives
One of the most important steps to creating productive
communication with your finance team and obtaining the financing you need to
achieve your HR goals is to build an effective business case for each HR
initiative and requisition request.
A business case is an outline of the proposed initiative,
including its goals and the reasons why it is good for the company as a whole.
Creating compelling business cases will not only streamline your interactions
with the CFO, it will help you communicate better with the CEO and other
internal stakeholders as well.
So how do you create a business case? There are many
in-depth guides
that you should draw upon, but let’s take a quick look at some of the key
components of an effective business case.
The first step is to set the stage for your initiative by
presenting the business trends and challenges that provide the context of the
initiative. This will help you frame the initiative as well as its goals and
impact on the company. Essentially, this is the “why” for your initiative.
The next step is to identify the key goals of the
initiative. This part outlines what you hope to accomplish as a result of the
project. Try to limit the number of goals to a handful so that your messaging
stays clear. You do not have to list every benefit you think the initiative
will bring to the company, just outline the specific personnel-related results
you wish to achieve through the initiative.
Then lay out how you plan to achieve the goals. Keep it
simple and big-picture but provide a concrete plan to reach each of the goals
you outlined in the step above. This includes each major component of the
initiative and how it contributes to a specific goal or goals. When possible,
you should include time-frames and cost breakdowns to appeal to the CFO and CEO
alike.
Finally, and perhaps most importantly, you should
communicate the impact of the initiative on the company’s bottom-line and
overall success. Think about what matters most to the stakeholders who will
review the business case, particularly the CEO and CFO. Show them which of
their pain-points the initiative will address. And if you can frame the impact
in terms of revenue generated or costs cut, all the better.
This last part will be much easier and more effective if you
develop a consistent strategy for proving ROI on HR investments, so let’s take
a look at that next.
Showing ROI for Investments in HR Initiatives
When it comes to developing effective communication with the
company’s CFO, the single most important thing you can do is to start thinking
in terms of return on investment, or ROI. CFOs operate almost entirely in terms
of ROI – they need to in order to effectively manage the company’s finances.
Presenting your initiatives and justifying your activities
becomes a whole lot easier when you frame it in terms of ROI, and you make the
CFO’s job easier at the same time. That being said, this isn’t always an easy
task.
One reason is that you may have to fight an uphill battle.
The unfortunate truth is that almost
two-thirds of CFOs do not believe that HR affects the company’s
bottom-line! The good news is that they couldn’t be more wrong, the trick is proving
this to them in a way that they will understand.
Because the truth is that HR is responsible for an enormous
portion of a company’s success or failure. The challenges of attracting,
retaining, and engaging top talent are some of the main drivers of business
performance and how HR handles these challenges has a measurable impact on a
company’s financial well-being.
This means there can be significant ROI for investments in
HR initiatives, you just need to think about what objective metrics you can
measure and use to prove ROI. To better communicate ROI to the CFO, try to
attach a dollar-value to each metric whenever possible. For instance, do not
just show how an initiative will increase productivity. Instead, show how much
revenue that productivity will generate.
Once you start tracking key HR metrics and framing them in
terms of financial impact, it will become easier to show how your activities
solve financial issues that the CFO may be struggling with.
Measuring HR Impact and Performance
Measuring and tracking metrics is the key to fostering
productive communication with the CFO, and not just when it comes to justifying
HR expenses. Collecting and sharing the right data can make it easier for the
CFO to do their jobs, and the CFO may be tracking metrics that can shed light
on the performance of your HR initiatives in turn. Think of metrics as the
common language that you need to master in order to communicate with the CFO.
Communication isn’t a one-way street, there’s plenty that you can learn from
the CFO once you speak the same language.
In order to develop metrics to measure HR impact and
performance, you should start collecting and analyzing data. Think about what
you can track, and start recording it methodically. Some information, such as
turnover data, is easily tracked in an objective and measurable manner. Other
data is trickier, but not impossible to record. Employee engagement is a
perfect example, since it can seem entirely subjective. However, anonymous
surveys asking employees to rank key metrics on a numerical scale can easily
generate measurable data that can be tracked and can produce trends over time.
Some examples of useful metrics to track to measure your
performance, as well as the impact of HR initiatives, include:
Revenue per employee
Revenue lost due to position vacancy
New hire failure rate
Applications per employee
Spend on HR costs vs HR revenue production
Financial impact of preventable turnover as
identified in exit interviews
Dollar impact of turnover in specific positions
When it comes to tracking HR impact and performance, you
don’t have to do it alone. You can enlist the CFO as an ally in your efforts.
You may complain that CFOs live and breathe metrics and data, but that is
exactly why they can be so useful. Instead of seeing their obsession with
numbers as a challenge to your authority, enlist that expertise to help you
craft meaningful metrics.
Key Takeaways
Learning how to communicate effectively with your CFO can
not only help you convince them to give you the funding you need to achieve
your HR goals, it can also help you do your job more effectively. Creating a
clear and compelling business case and measuring ROI allows you to form better
strategies based on real-world impacts and proven trends and performance. That
means that you can be more strategic in your own decisions. It also can help
you earn your rightful place in key strategy discussions. Just remember to:
Create an effective business case for any major initiatives
Think in terms of CFO pain-points
Show ROI by framing results in terms of key metrics, particularly financial metrics
Track the performance and impact of HR initiatives through objective metrics, perhaps even enlisting the CFO to help
