Dick Finnegan, author of several books on employee retention, tackles one of the biggest challenges of staff turnover head on.
“One might wonder why a CFO should care about employee engagement and retention,” said Finnegan, CEO of C-Suite Analytics, a US-based consultancy that helps executives tackle staff turnover problems. “And the answer is, it’s probably their biggest expense.”
His view is backed by the results of surveys conducted by human resources consultancy Robert Half, which show that staff retention is one of CFOs’ major concerns.
CFOs need to assume a leadership role in developing, retaining employees
Costs incurred from workforce churn can be substantial. Yet, too often, CFOs farm out the concern about staffing retention to human resources, and there’s a wall between the finance function and HR, Finnegan said.
“But for finance to truly grapple with the greatest cost and the greatest revenue opportunities, they have got to learn not just that engagement or retention are critical but how to fix them,” he noted
It is critically important for CFOs to assume a leadership role in attracting, developing, and retaining employees, said Paul Young, CPA, CGMA, the CFO at BankMobile, a division of Customers Bank, a regional US bank.
“Employees are the most valuable assets of an organization,” he said. “The costs of replacing employees are high, not just in terms of increased expenses, but also from the lost time invested and negative impact on morale within the company.”
Starting with the hiring process
CFOs are well-positioned to increase retention, starting with the hiring process. They can help ensure that job candidates share the company’s values and have the right cultural fit during the interview process.
Also, CFOs can be leading advocates for employee training and career development by including formal training and career development programs in employees’ and management’s objectives and performance management systems.
“Employees often leave due to poor management, so it’s critical we have the right people trained properly in performance planning roles,” Young said.
"When CFOs are shown the financial impact, they become engaged: Once you know the cost, you can transfer from cost to goals, and goals have to be held by every leader on every level"
CFOs can also structure programs to ensure that employees are being properly rewarded and recognized for their work. A transparent pay-for-performance system combined with celebrating success and the simplicity of just providing positive feedback and saying “thanks” can go a long way.
“We must take the lead on improving the employee work experience,” Young said. “And let’s not forget to make the workplace fun so employees stay and enjoy the journey.”
Perhaps surprisingly, given the financial cost, Finnegan said that CFOs are often reluctant to engage with the issue.
“We have to hit finance people in the language they speak, which is dollars,” he said.
Finnegan has devised a five-step model that estimates the cost of losing a valuable employee and the best approach to reduce that cost. The model works in three stages: the cost of acquiring a new employee, the lost revenue while the job is open, and the lost revenue while the new hire ramps up.
When CFOs are shown the financial impact, they become engaged, Finnegan said. “Once you know the cost, you can now transfer from cost to goals, and goals have to be held by every leader on every level for the organisation for engagement and retention.”
Effective action needs to include ensuring that key staff are content in their jobs, recognizing staff, and showing they are valued. “Stay interviews” are an integral part of this, Finnegan suggested. “You have to win engagement retention, that’s what stay interviews do.”
Quality of the bosses
Another important element of retaining key staff is having a boss whom staff like and respect. “It’s what employees think about, it’s what they talk about over dinner: ‘Do I trust my boss? Do I respect my colleagues? Do I like what I do?’” Finnegan said. “A good workplace is where everybody respects their supervisors. And trusts them.”
It’s not that the best bosses have to be perfect, he added. They may have a difficult time speaking in front of a group. They may not be the best spellers, or they may not be on time. Once they’ve gained their employees’ trust, the shortcomings no longer matter.
“But if they cross the boundary to the other side, or you didn’t trust them, they can do many things right, but they will never win you over again,” Finnegan said.
Follow this five-step process
Finnegan recommends the following five steps to reduce staff turnover and improve retention:
- Put a financial cost on it, so executives, the CFO, and managers understand.
- Set goals and establish these down to the first-line-leader level — the number one reason people leave is because they don’t trust their boss.
- Train those leaders to do stay interviews, asking five questions to learn what is really important to this employee and what the first-line leader can do to make their work better for them.
- Have those leaders use traffic-light colors to rate the likelihood of an employee’s leaving, e.g., green to indicate they are likely to stay longer than a year and red to indicate they may leave within the next six months.
- Be accountable: Have accountability processes in place in meetings, in discussions, in one-on-one reviews. How effectively have you met your retention goals? How accurately have you done your forecast?
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About the Author
Paul Gosling is a freelance writer based in the UK.This article first appeared in FM Financial Management, which is published by the Association of International Certified Professional Accountants. The AICPA combines the strengths of the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA).