Stan Lepeak, Global Research Director, KPMG LLP Advisory
KPMG recently completed its semiannual global market study on the state of the finance function. KPMG released the first of an ongoing wave of findings and analysis from this study in early November. In addition to assessing organizations’ finance functions’ performance levels, key issues and needs, and future investment plans, this year’s study examined finance from the perspective of four additional themes: finance and risk alignment, data and analytics, lean finance and the use of finance global business services, and talent in the finance function. Collectively, these fed into the overarching theme of this year’s study of the role of next-generation finance target operating models in enabling the “intelligent” finance function. This market study complements and extends recent and ongoing research performed by the U.S. firm on the intelligent finance organization and other KPMG member firms’ research efforts globally.
Adequate and skilled talent, outfitted with the best available tools and with a clear, strategic direction provided by management, are intuitively core to creating an intelligent—or at least pretty bright and competitive—finance function. Talent is and has been for several years a hot topic in finance circles as well as in other functional organizational circles such as human resources, information technology, and perhaps most importantly executive management. There are talent shortages and resultant wars for talent. Organizations are struggling as to how best to attract, retain, and grow their talent. Aging workforces retiring with their talent, succession planning, and grooming talent are all topics of angst, as is what to do with “legacy” talent and those employees or candidates with little talent while seeking more higher skilled but often fickle cross-border, transnational, “gen-y,” and millennial talent. Talent as a broad topic, or problem, is critical, self-evident, and lucrative. Addressing and solving talent challenges and successfully using talent as a competitive weapon requires taking the issue down a level, in this case to what does it mean in the context of the finance organization.
Going beyond the intuitive or conceptual point of the importance of talent, finance organizations need to build solid business cases to improve talent capabilities. This is not just about throwing more money at top talent, though in some cases this is required, but rather about fundamentally changing overall talent management practice and philosophies from perspectives as diverse as what talent is needed to succeed to when organizations should contract talent from outside the organization (e.g., partner or outsource) to what are the most critical skills required in next-generation executive leadership (hint: not likely the same as last generation). Key to building this business case is creating a real sense of directed urgency versus an ongoing drone of lip service to the importance of overhauling talent practices. On this point, this year’s global finance study offers some compelling findings.
Reiterating the problem, processes for attracting talent, retaining staff, and maintaining technical knowledge of finance personnel were most often cited as a weakness among study participants (19 percent of respondents) and least likely to be cited as a strength (41 percent, as opposed to the top category of treasury activities identified by 59 percent of participants). Further, the finance “process” cited as the most difficult to improve was processes for attracting talent, retaining staff, and maintaining technical knowledge of finance personnel. Study results identified one likely contributor to organizations’ talent challenge and shortcomings: collaborating with the human resources group (ideally a key element of bettering talent capabilities) was the finance activity most frequently cited as a weakness (15 percent of respondents) and least likely cited as a strength (35 percent of respondents). On a more positive note, 56 percent of study participants felt their organizations were somewhat (41 percent) or very skilled and strong (15 percent) at talent management. Given the findings that talent management is generally still perceived as a weakness in most finance organizations; clearly these skill levels need to further improve.
Perhaps most telling, 44 percent of study participants indicated that talent management was the factor and capability most important to the success and competitiveness and value-add of their organization’s finance function. Segmenting “high performing” organizations (defined as those with revenue and EBITDA [earnings before interest, tax, depreciation, and amortization] of greater than 10 percent over the past three years) further reinforced the importance of talent. Sixty-one percent of high-performing organizations rank talent management as the most important finance function capability (see Figure 1). Less than 30 percent of “low performers” (respondent organizations with revenue and EBITDA declines over the past three years) scored talent management as the most important factor to the success of the finance function. This is the tangible, financial business case for improving finance functional talent management capabilities.
So what can and should a CFO and the finance function do to improve their talent management capabilities? Here are a few starting points.
- Go global: To enable an effective talent management strategy, CFOs need to take a global view of their finance talent. The employees in various finance functions should be treated as one diverse pool of talent. Roles, responsibilities, and career paths should be clear for all finance people at all levels. Further, the company’s approach to career paths should be broadened to create prospects for mobility across finance teams and to encourage linkage and knowledge transfer between embedded and offshore teams.
- Build the finance brand: This involves emphasizing the value proposition of working with the finance function within the company, both to attract new recruits and retain them in today’s highly competitive job markets. CFOs need to articulate the benefits of working for the finance function within the company and what sets their finance function apart as an employer of choice.
- Create a consistent recruitment policy and plan for the finance function globally.
- Leverage liberally global business services models to augment or in some cases replace traditional talent pools.
- Deploy reward and incentive programs that motivate the right behavior and celebrate accomplishments in a meaningful way to employees, not just the HR group.
- Employ training programs that address skills development (of the skills really needed) and (meaningfully) promote knowledge transfer at all layers of the organization.
- Utilize targeted interventions (such as coaching programs and buddy systems) for specific employees or employee groups to equip them with new skills in anticipation of emerging needs and improve their ability to add value.
- Take a proactive, transparent approach to succession planning of the best people for the job at hand.
Finally and perhaps most importantly, senior finance executives must take ownership of the talent agenda. They need to consider the implications of business changes on their staff and ensure that qualified resources are in place to meet current and future business needs. They must respect the divergent needs of their employees, for example, as transaction-oriented service providers or strategic business partners. Above all, they need to create an organization-wide HR strategy that attracts appropriately skilled finance employees and supports their aspirations at all levels throughout their careers.
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