August 6, 2020 | Human Resources | Posted by Ascentis
5 Workforce Metrics All CFOs Should Measure
With financial decisions being at the root of nearly all business functions, it’s difficult to think of key metrics that aren’t of keen interest to your CFO. From drafting budgets to determining job costs to complying with regulations to disseminating workforce data, a CFO’s financial knowledge touches nearly every aspect of your daily operations. Studies have found that businesses perform more efficiently when a CFO is closely involved in workforce strategy. With CFO.com estimating that workforce costs can represent up to 70% of a company’s total cost of doing business, that involvement looks all the more essential. Here are a few especially important workforce metrics that should be on every CFO’s radar.
Maintaining a maximally productive workforce is a vital goal for virtually every employer, and measuring productivity includes identifying your business’s weakest spots. Frequent causes of lost productivity can range from workplace distractions (the average office employee spends nearly an hour a day on non-work-related cell phone activity) to employee turnover to a lack of training and resources to health-related absences (the latter being of particular interest during the current pandemic). With health-related losses alone costing U.S. businesses about $1700 per employee annually, identifying and rectifying these pain points is a crucial metric for any CFO.
There will always be unforeseeable factors that impact a budget forecast — 2020 has thus far provided more than ample evidence of that — but budget predictability should be a goal for any business aiming for a consistent experience for both consumers and employees. Making accurate budget forecasts involves careful analysis of historical data such as year-over-year payroll spending, gross margins, year-to-year hiring patterns, and profit-and-loss figures. Other focal points might include developing reliable templates, soliciting input from a wide range of managers and departments, and building in enough flexibility to compensate if the unexpected happens.
Job and labor costing
Making accurate projections of the costs of the various jobs by totaling the costs of labor, materials and overhead is essential for both budgeting and communications purposes. Well-compiled records of scheduling, expenses, overtime and paid time off requests, and other regular factors help management tie labor costs to specific projects and work orders and determine how to best allocate labor for each job. Understanding all of these internal costs ahead of time allows management to plan ahead and bid on future jobs at a competitive rate. These forecasts can also be extremely useful in helping board members visualize how each project generates revenue for the business.
Finance is one of the most heavily regulated aspects of any business. A CFO is expected to be familiar with not only state and federal tax regulations, but also dozens of employment laws from the Fair Labor Standards Act (FLSA) to the Family Medical and Leave Act (FMLA) to the Occupational Safety and Health Administration (OSHA). Take into account a wide range of state and local labor laws, and the hours spent on ensuring compliance start to add up quickly. Even so, non-compliance with any of those regulations can result in heavy fines, suspension of certifications, and loss of reputation that can all do major financial damage to an organization. If and when violations do happen, it is essential to have well-kept, preferably automated records of your organization’s activities. This can help pinpoint where mistakes were made and ensure that the same missteps don’t happen again.
It may seem like an overly obvious focal point, but ensuring that employees are being paid accurately is a complicated and extremely important metric for CFOs to focus on. Without a reliable time-tracking system, for instance, a business can easily lose money to overpayments or excessive overtime hours, or risk violating labor laws and harming employee morale with underpayments. Ensuring that an organization is recording and reporting hours worked in a timely and accurate fashion is vital to a business’s financial well-being.
Any CFO can tell you that there is a lot more to the role than making sure the money goes to the right places. Keeping your CFOs and financial experts closely involved with the metrics that drive your business, from forecasting budgets to maximizing productivity to making certain that everyone is being paid what and when they should be, helps ensure that your decisions are financially sound from beginning to end.
Learn more about how Ascentis can help you identify and track the metrics that matter most to your CFO and your organization, or download a guide that outlines these workforce metrics.