The role of the Chief Financial Officer (a.k.a. CFO) is a challenging one. In today’s fast-paced and global economy the typical CFO is tasked with more than ever before, and is often called upon to act as an internal business partner and advisor in many business disciplines far outside of the traditional bounds of finance and cash management. One of these emerging focal points for CFOs is total talent management.
At its very core the role of the CFO role is to take fiduciary responsibility for that most basic of business formulas: Revenue minus Expenses equals Profit. Given that the largest single expense for most organizations is people, the importance of effectively managing the total workforce should be clear to the CFO.
In today’s emerging era of Total Talent Management, the labor line item now has two primary components: Traditional employees (both full and part-time), and contingent workers (such as temps, freelancers, consultants, and independent contractors). Given the dramatic growth of the contingent workforce, which many estimate could approach 40% or more of the total US workforce by 2020, the importance of flexible workers within a total talent management strategy is readily apparent.
The management of contingent labor has traditionally been tasked to procurement, human resources, or sometimes both. But with its increasing importance, and significant spend, the modern CFO cannot afford to ignore it. But what role should they play? What can they contribute? And, what should they expect to get out of it? A few thoughts:
- Visibility. Given the significant size of spend and the obvious strategic impacts to the ability of the company to deliver products and/or services, labor costs are of crucial importance to finance. The ability to know what it is being spent, where, and with whom is vital. A comprehensive total talent management program will provide the CFO with spend visibility and cost control across the entire enterprise, for both traditional and flexible workers.
- Insight. For most CFOs visibility is minimum requirement, but to properly manage the treasury function they really need forward looking insight on labor spend. Most companies have a deep understanding of their traditional workforce composition and costs. By its very definition, the flexible workforce is more challenging: Many companies have a fairly static and predictable component of contingent labor spend (staff augmentation, enabled by temps and freelancers) and a more variable component (project driven, enabled by consultants and independent contractors). A good contingent workforce program should provide reporting and data analytics for the entire flexible workforce spend, including headcount forecasts, milestones, delivery dates, and their connection to payments and budgets. This data will allow the CFO and team to better plan and forecast the future. Good data enables them to better estimate talent needs, the funds required to pay for that labor, and the cash flow ramifications of projects that will utilize contingent labor.
- Risk mitigation. Engaging flexible workers can introduce significant new risks to an organization, particularly those workers who are direct sourced (i.e. they aren’t recruited and placed through an agency). Smart CFOs want to ensure proper worker classification (and indemnification for worker misclassification) for every non-employee worker performing services within their organization. They also want to mitigate the risks of co-employment. In addition, they want to make sure that taxes, benefits administration, payroll, consultant invoicing/payment are being handled appropriately for each worker. They often rely on an IC Compliance and Engagement expert for these solutions.
- Category management. While category management is traditionally a procurement function, CFOs want to make sure that vendors are managed strategically. Best practice contingent workforce management programs should address strategic category management issues like: vendor rationalization, rate optimization, contract negotiation, contract standardization and compliance.
The modern CFO is often called upon to do things which have not historically been part of the job description. Fortunately, today’s CFO can rely on a proven partner like TalentWave to help them address the strategic issues surrounding the engagement of flexible workers. We often work with clients to build the business case, and evaluate the positive financial impacts, for implementing a managed IC program as part of an overall total talent management strategy. Partnering with Synergy Services means we design a solution that solves these finance challenges to deliver bottom-line results. Our CFO and Finance sponsors often tell us they enjoy these valuable benefits:
- Discovery and documentation of the flexible workforce population within the organization, along with cost center visibility
- The ability to implement a total talent management strategy where flexible workers are managed as strategically as traditional workers
- Detailed reporting on spend and usage to enable effective category management and the ability to drive cost savings
- A/P process simplification and invoice consolidation
- Risk mitigation and indemnification for worker misclassification
- A consistent enrollment and on-boarding process that ensures standard company contracts are in place for all contractors (both ICs and agencies) along with uniform application of flow-down provisions that protect the company (IP, insurance, etc.)