Employees are often called the greatest asset in any organization. Yet there has been a wide chasm between how CFOs have typically viewed the workforce, and how CHROs and other talent and HR leadership view their people. Chief Financial Officers are known for viewing employees through the lens of expenditure. And they would be correct. SHRM estimated in a study of more than 700 companies, including top Fortune 500 organizations, that ‘total human capital costs average nearly 70 percent of operating expenses.’ This tremendous operating expense should remain top of mind for any executive. But at the same time, CHROs, Chief Talent Officers, Chief People Officers, and Vice Presidents of Talent Acquisition view their people as essential investments who drive the performance of the business. So how can you reconcile these two worldviews?
According to the Partnering for Performance Report by Ernst & Young (EY) from the Master CFO Collection, ‘the differences between the traditional finance focus on certainty and hard measurements, and HR’s focus on softer, less-tangible metrics, have contributed to a rift that many companies have found difficult to bridge.’ However, in the last several years, according to the EY report, ‘the gap between finance and HR has narrowed, as both CFOs and CHROs have broken the traditional molds that defined their roles.’ What is the reason for this? The report names that ‘the high cost and scarcity of talent top the list of factors driving the need for a closer relationship.’
A recent Gartner survey of top executives also supports the need for a collaborative relationship. According to the survey, the talent shortage remains the key concern for business leaders today. This means that it is no longer just a concern for HR or talent acquisition. Instead, finding top talent is a strategic business initiative that contributes to the performance and well-being of the organization.
What Finance Leaders Are Saying
To know what’s on the minds of CFOs, we’ve gathered a few impactful statements as they relate to finance and HR. Take a look at these quotes below from the EY Partnering for Performance Report:
“It’s easy for a company to see when a business is not doing well. What’s more challenging is to figure out why that business might be struggling, particularly if the underlying reasons are people-related. Collaboration between finance and HR creates that visibility. We may find, for example, that the business has low engagement or manager-trust scores. That is vital input to our decision-making, because without it, we might just conclude that it’s a bad business, so we should get out. In fact, it might be a great business, but we’ve got the wrong people managing it."
- Joel Bernstein, CFO, Global Customer Operations, SAP America
“The most important thing for a CFO or CHRO is that they think broadly and have credibility and strategic vision. That requires them to look beyond their functional roles. As CFO, I consider myself to be first and foremost an executive of the corporation, and then, secondly, a leader of the financial organization. I would expect the same kind of outlook from the CHRO."
- Bruce Besanko, CFO, Kohl's, and former CFO, SuperValu, Inc.
“The biggest change in the relationship with my HR counterparts is that we are starting to look at decisions together much further upstream. The earlier the HR lead and finance lead can be aligned on where they’re going, the better the end solution will be and the less time you’ll take to get there.”
- Bill Tofflemire, CFO, Mattamy Homes, and former CFO, Wal-Mart Canada
“The traditional finance and HR roles of the past are blurring. The best finance leaders will have an appreciation of issues that were traditionally in the HR domain. HR might not be as strong as finance at number crunching, but they are now much closer to our business strategy, goals and threats."
- Brian Jemelian, SVP Finance and Administration, Yamaha Corporation of America
High Performing Organizations Collaborate Together
So how can HR leadership, and particularly talent acquisition leaders, collaborate more closely with their CFOs and finance departments to provide the data that support the value of their recruiting functions? The answer is to generate a common set of workforce analytics that bridge the gap between finance and HR. According to a recent HRDive Article, the relationship between HR and finance should be ‘symbiotic.’ More specifically, ‘with the help of finance, HR can better drive talent acquisition, development and management. With the help of HR, finance can better control costs and optimize investment. With access to big data, together they can analyze trends and plan more intentionally.’ Recognizing that there is common ground is the first step to defining a common set of analytics for people and performance related metrics.
The EY report similarly states that top performing organizations collaborate on metrics around strategic workforce planning, employee turnover and retention rates, workforce productivity and its impact on operational performance, ROI from HR projects, employee engagement, and the link from workforce management to financial performance. From a talent acquisition perspective, executive leadership can focus on the following categories of fundamental recruiting metrics and measurement:
#1: Sourcing Effectiveness
Measuring sourcing effectiveness is one of the most actionable metrics that talent acquisition should monitor and improve. It should also be highly transparent to the finance organization. The EY report highlights that ‘recruitment and succession decisions are highly prone to subjective biases and human error. By combining traditional recruitment processes with the use of workforce analytics to screen potential employees, companies can improve hiring decisions, which ultimately leads to higher retention rates and increased productivity.’
#2: Time to Fill
Time to fill is a measure of recruiting efficiency and enables finance to understand how effective the recruiting organization is in hiring new employees. While it should not be an end all metric, it is important to know how long you can expect each hire to take. Time to fill is the time it takes between requisition opened and offer letter signed. This is not to be confused with time to hire, which is the time between when a candidate engaged and when they sign the offer letter.
#3: New Hire Retention Rates
With attrition rates typically between 7 and 12 percent in any workforce, companies spend incredible amounts on recruiting. In fact, globally, the recruiting industry tops more than $200 billion, and in the U.S. alone, more than $160 billion is spent annually on recruiting, according to Bersin by Deloitte. This high cost of recruiting is exactly why talent acquisition should actively measure new hire retention rates. This is a critical measure that makes up overall quality of hire. It is measured by dividing retained new hires by total hires to calculate the total percentage.
#4: Recognizing Internal Mobility Talent
Talent acquisition must be active in not just finding new external candidates, but in recognizing potential within an organization. Recruiting functions should leverage existing workforce analytics to understand who top performing employees are and then identify them for potential career advancement opportunities. These relationship audiences, as defined in the EVOLVE Framework, present an ongoing opportunity for measurement.
#5: Revenue Per Employee
One of the most critical pieces areas for collaboration between talent acquisition and finance is to know the revenue per employee. This should be considered a core metric for recruitment ROI calculations. And you can be sure your CFO knows this number by heart. This measurement is crucial for calculating lost or accelerated productivity when analyzing time to fill.
Remember, when tracking talent acquisition metrics and collaborating with your CFO and finance team, it’s more about the productivity of dollars than it is just the total spend. In other words, it’s about the return your talent acquisition and recruiting investment delivers to the overall performance of the organization.
Drive Predictable Analytics in a Single Platform
So what does your CFO really want to see? The answer is more transparency and predictability. This means developing a roadmap to predictable, scalable and proactive recruiting. And one essential way to do this is to leverage the leading recruitment marketing platform from Talemetry that maximizes talent acquisition by centralizing all candidates into a proprietary talent database to deliver higher quality candidates at scale. A system that provides full source-to-hire analytics, including those critical to sourcing effectiveness, lower time to fill, improved new hire retention, enhanced internal mobility and higher revenue per employee.
Centralizing and growing a proprietary talent pool, and using proactive and measurable recruitment marketing strategies provides a solid basis for hiring the quality and volume of talent you require in a predictable way. And enterprise organizations making this change are experiencing compelling improvements in crucial business outcomes that matter to their CFOs and finance department. Talemetry offers robust, real-time recruiting analytics to track the effectiveness of your recruiting efforts, so you can measure and refine candidate sourcing activity, improve candidate engagement, pinpoint roadblocks and drive recruiting effectiveness. Remember, when HR and finance work together to measure and collaborate on the talent metrics that matter to the business, the company wins. And so do your people.