Canadian HR Reporter

FEATURES By Laura Bobak N irvana, that elusive state of eternal peace of mind or bliss, would mean having a "defi ned and accepted return on investment on human capital measure" — at least ac- cording to victoria davies, a Toronto-based Cfo. While that might not be every- one's cup of chai, for Canadian CFOs, it's becoming increasingly important to be able to measure whether they are getting a good bang for their labour bucks. Senior fi nancial executives are becoming more involved in the oversight of HR functions. Howev- er, a large proportion of them rate their knowledge of HR functions as moderate or average. is admis- sion suggests a widening skills gap among fi nance executives who are starting to oversee HR managers and payroll functions. Study results ese are the results of a study re- leased by the Canadian Financial Executives Research Foundation (CFERF), the research arm of FEI Canada, and sponsored by Cerid- ian. An online survey of fi nancial executives found 61 per cent re- ported they had taken on more accountability for HR functions — including payroll, recruitment, talent management, training, benefi ts and bonus management — in the past fi ve years. In addition, more than one- third expect to see their involve- ment in HR and payroll expand in the next fi ve years. Despite the increasing sphere of responsibility, a relatively large proportion of those surveyed did not rate their knowledge of HR functions highly: ree in four ranked their own skills in this fi eld as two or three on a scale of one to fi ve, while only 11 per cent de- scribed themselves as extremely knowledgeable. at's why a streamlined but eff ective approach is ideal, says John Forester, CFO of DBG Metal Manufacturing in Toronto. "Get- ting a simplifi ed approach is what we would like to get out of HR measurement." Traditionally, fi nance and HR executives operated in separate spheres within most organiza- tions. But rapid globalization has caused a growing number of com- panies to focus much more inten- sively on labour costs and human capital, as well as their role in de- livering value to shareholders. "Financial executives manage many moving pieces on the mod- ern business landscape. They need to think strategically about all levels of their business, while managing risk, staying ahead of technology, fostering innovation and working with fellow execu- tive team members to build enter- prise value," says Michael Conway, president and CEO of FEI Canada in Toronto. "Human resources is another area where CFOs are being held accountable and we continue to seek insights into helping our executives improve their skills in this area." HR is frequently becoming more aligned with fi nance, ac- cording to Rob Rose, senior vice- president of product management at Ceridian in Ottawa. "Reporting for fi nance and HR can be extensive since employ- ees are typically a large expense for many organizations. In some cases, HR reports directly under fi nance or some type of a parallel relationship exists. Moreover, the relationship between fi nance and HR is becoming much stronger than what we've seen in the past." Many senior fi nancial execu- tives are taking an increasingly active role in the oversight of payroll and HR divisions. As the organizational overlap between these two corporate functions expands, fi nance executives are looking for better ways to mea- sure and benchmark HR/payroll outlays, which means relying on, and learning to interpret, a wide range of HR metrics. CFERF canvassed senior fi- nancial executives for their views, combining the results of an online survey with insights gathered at roundtables. e executives were asked for their views on the relative importance of a range of key HR benchmarks and ratios. e goal was to determine what sorts of measures fi nancial executives rely on most heavily, and whether there are opportunities for companies to develop other useful metrics. Some key fi ndings: •Respondents said they paid the most attention to the average cost of employer-paid sick days and personal leaves, with 73 per cent ranking these HR expenses as moderately to most important in their analysis. •Almost four in fi ve reported that they rely heavily on a per capita- based formula for evaluating per- formance management, tracking revenue, cost, profi t, EBITDA or return on investment per full time equivalent (FTE). When it comes to absenteeism, part of it is the challenge just to collect the data, says Davies. "Everyone wants their employees to be more effi cient, so collecting time sheet information from employees can con- tribute to ineffi ciency," she says. "In addition, absenteeism may not be a fair measure if someone is checking emails from home. ere are a lot of tra- ditional measures that don't refl ect technolo- gy and business chal- lenges today, and we haven't come up with new ones for a workers in a non-production environment." Many fi nance executives assign less importance to more granular HR- or payroll-related metrics that focus on areas such as ab- senteeism, turnover, recruitment and talent management costs and human capital, found the survey: •While some participants indi- cated the return on investment in human capital metric needs more development, many were seeking a comprehensive mea- sure such as this, with 53 per cent indicating it was moderately to very important. •Eighteen per cent said they did not pay any attention to data on voluntary separation of high performers, while 10 per cent thought such data was crucial. Several roundtable participants expressed the view that fi nance ex- ecutives should track HR metrics, but felt the measurement function itself was secondary to the impor- tance of setting legible and clear targets for improvement. "Executives are all about getting things done as opposed to mea- suring things," says Forester. " e measurements are expected. If you can't measure it, you cannot manage it. e question becomes 'How do these things help you identify the opportunities and ac- tions that need to be taken?' And then, more importantly, 'Have you taken the action, have you made a diff erence?'" As Rose says: "Metrics them- selves are easy. Setting targets is hard." Laura Bobak is research and com- munications manager at Financial Executives International Canada (FEI Canada) and the Canadian Fi- nancial Executives Research Founda- tion (CFERF) in Toronto. She can be reached at lbobak@feicanada.org. finance increasingly looking for roI of Hr functions BANG FOR BUCKS BANG FOR BUCKS BANG Credit: Pressmaster/Shutterstock How IMporTaNT are THese perforMaNce MaNaGeMeNT MeTrIcs To Your orGaNIZaTIoN? Very important Important Moderately important somewhat unimportant Not at all important Revenue, cost, profi t, EBitDa, ROi per ftE 30% 27% 21% 11% 4% Compensation, variable compensation, performance bonus, salary increase differential by performance rating 19% 35% 19% 17% 6% Use of professional development programs 9% 29% 33% 18% 11% Metrics by performance ratings, separations, promotion rate, compa ratio 4% 19% 32% 24% 16% BeNcHMarkING

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