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Balancing bear vs. bull: Cautious optimism for staffing up in the recovery

June 14, 2011

Though the current economic recovery is a welcome change from the Great Recession that recently plagued the U.S., it creates a challenge for companies in terms of how they manage their future.

When the economy was struggling, the answer was simple: lower expenses by any means necessary, which typically meant cutting expenses and reducing head count. With the recovery in full swing, companies now have to toe the line between being bold in their financial investments and being conservative in their expenditures. 

Cautious optimism about the economy permeates today’s business world and requires financial professionals within companies to think more strategically about all expenses—but more specifically hiring and HR practices.

Because a company’s success so critically depends on who actually carries out the vision that is so carefully crafted by the C-suite, people are its greatest resource—and very often the biggest expense. According to a study by Accenture, companies spend 25 to 45 percent of their revenue on human capital. It is understandable then why companies trimmed their staff during the recession—and why a recovery creates a need to hire. 

According to a recent survey by Bank of America-Merrill Lynch, half of CFOs expect their companies to add jobs in 2011, up from 28 percent who planned to do so in 2010. Making smart decisions about hiring may be the most important element of a growth strategy because employees, and how they are managed and rewarded, have a fundamental and significant impact on the business.

But before they can think about adding employees to the fold, CFOs must examine their company’s current hiring processes and HR initiatives to ensure they are both cost-effective and robust.

Here are some things for CFOs to consider:

•    Align human capital and business strategy. While this may seem obvious, many companies tend to silo the two and create parallel tracks. This often results in redundancy—using staff to fulfill a given objective after it’s already been conceived, rather than creating an initiative and involving the right employees throughout the process.

•    Understand the workforce. Make a point of knowing all the details about your talent. Develop and implement a way to measure whether employees and teams are on track.  It’s not enough to just assess the workforce annually, though many companies do so. Analysis should be ongoing and use the most sophisticated workforce analytics tools to identify best performers.

•    Mix and match staff. Perhaps even more important than hiring the right people is having the right staffing model. For example, temporary staffing is something that can benefit companies during a time when hiring is necessary, but a company may still be reluctant to fully commit to the long-term expense. Flexible staffing models allow companies to gradually get to know how a worker fits into the company, increasing the likelihood that an eventual full-time position will be filled with someone who is known, with a proven track record, and is already integrated into and aligned with the business.

•    Reward exceptional performance. Employees who are informed, satisfied and engaged are a hallmark of every consistently successful organization. Those who feel they can grow do the best work and employees who feel they are stuck do not. Have infrastructure and systems in place to support core HR processes throughout the business. Incentivizing in the present is one of the best guarantors of the future. Creating—and funding—a supportive environment pays off.

Finance professionals within companies have always been an integral part of the business, but perhaps even more so as the recovery requires careful thinking about what areas to invest in.

Because a company’s biggest expenditure is human capital, CFOs must be more involved in staffing and other HR-related processes than they perhaps have been previously. This may expand the traditional role of finance within a company, but the current economic environment requires finance professionals to be more interwoven in decision making than ever before—and across many areas. 

Finance teams walk the fine lines that ultimately write the bottom line. Their involvement in all aspects of the business that impact growth for the coming year should reflect that. When the role of the finance function grows, the company has a better chance for growth as well.

John Marshall is the president of Accounting Principals.


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