Finance and the war for talent
Audit Committee Brief
For the past 20 years, there has been a talent war. Today, fresh from economic battles, domestic and global companies may face shortages in their finance leadership pipelines. This can represent a significant risk, garnering the attention of management and the audit committee.
The Deloitte CFO Signals first quarter 2011 survey reported that one out of four executives anticipates severe shortages of senior and emerging leaders. As companies face greater business challenges in response to increased globalization and financial regulation, the skills required of finance executives continue to expand. These include technical abilities in accounting, auditing, and leveraging financial systems to effectively aggregate data for performing analysis, as well as general business skills such as leadership, industry knowledge, and business process expertise.
In the years ahead, vigilant audit committees and finance organizations may need to focus on identifying and developing finance talent.
The demand for skilled finance talent is occurring during a period of high unemployment. According to the CFO Signals survey, 43 percent of CFOs are actively recruiting talent, but 37 percent of them cannot find the right people for the jobs. With the increasing demands on finance and the focus on growth, CFOs must have qualified individuals in the targeted jobs at the right time.
Furthermore, some estimates indicate that new hires lose a third of their potential value in the first year because they lack familiarity with the culture, relationships in the new company, and knowledge of how decisions are made.
In addition to hiring, an organization must deal with assimilating new talent, retaining seasoned finance professionals, and effectively engaging talent across broad generational categories.
What can audit committees do to address these challenges? How does an organization develop a broad strategy that allows it to retain top finance talent? Consider the following questions:
• Does management have a strategic talent plan and process specific to the finance function? Has the audit committee evaluated and contributed to the plan and process?
• What knowledge, skills, abilities, and experience does the organization need from a technical, behavioral, and leadership perspective?
• What are the critical workforce segments in the finance function?
What specific measures are used to attract, develop, and retain professionals in those segments?
• What steps are taken to identify and develop leaders in the finance organization?
Four important steps audit committees can take to oversee their finance organization talent strategy are evaluating:
• The development of management’s talent strategy specific to finance
• Management’s definition of what finance talent means to your organization
• The critical workforce segments of the finance organization and their development needs
• Finance-specific programs established to develop your
14%
0 10 20 30 40 50 60
Finance Talent
Percent of CFOs who agree with each statement
Increasing use of outsourced/offshore finance talent
Seeing an improved market for finance talent
Having trouble finding the right people for our open finance positions
Actively recruiting new finance talent
Taking new steps to keep top performers
20%
32%
37%
43%
55%
Develop a finance talent strategy
Most organizations have defined a talent strategy for the broader organization, but may not have expanded those strategies to be specific to finance. Therefore, audit committee members may want to ask financial management if it has a talent strategy and process specific to its finance function and if not, should management consider
developing one? Begin by determining the organization’s critical business needs to identify short- and long-term objectives.
Next, examine the state of your finance talent. What does the company have and what is needed?
The resulting gaps that are identified can be addressed by leveraging a variety of resource programs. These would include internal and external talent acquisition; orientation, onboarding, and assimilation; learning and development; performance and succession management; rewards and recognition; and workforce planning.
Finally, audit committees should encourage management to develop a plan that defines, prioritizes, and sequences specific talent initiatives to drive the execution of their finance talent strategy. This plan would include the talent resource programs, with an eye to diversity, employee engagement, leadership, culture, and predictive modeling. As with other areas of oversight, ongoing monitoring of the plan’s execution is critical.
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Defining finance talent
Determining the talent the finance organization has today and will need tomorrow requires a competency model that defines a range of specific functional, behavioral, and managerial competencies at each level and for each type of job in the organization. Functional competencies of finance professionals may include financial analysis, controls, budgeting and planning, leveraging financial systems, accounting, and auditing.
Behavioral and managerial competencies include problem-solving skills, a drive for results, the ability to learn quickly, adaptability in dealing with ambiguity, and a customer focus.
Competencies work as building blocks. Each successive career level brings new requirements, including organizational perspective and the skills necessary to manage projects, teams, and divisions; the ability to motivate and delegate to others, manage conflict, and negotiate; and the knowledge to provide strategic and organizational insight.
A finance competency model creates standards for each career level and each job type. An effective model requires input from the business and an understanding of the current and future finance environment and strategies. It also requires input from internal business partners and a review of leading practices for establishing finance competency models and defining talent.
It is important for the audit committee to set expectations and for the finance organization to take ownership in collaboration with human resources. Encourage management to start small, with a model focused on five to seven core competencies the finance organization must focus on and develop to meet the most critical needs.
Once management has created a competency model, it will need to assess the existing finance organization to understand where gaps exist, assess the talent risks, and define mitigation strategies.
Critical workforce segments
Audit committees should also understand the critical workforce segments in the finance function that are pivotal to business outcomes or value. These segments are central to executing talent and business strategies. Identifying them will help maximize the value of workforce investments and provide the organization with the resources it needs to achieve its business strategy.
Resource Expenditures
Critical workforce segments Opportunity costs
realized/forgone
Maximization of resources
Noncritical workforce segments
Effective talent strategy Focusing on the things that matter
Organizational Value
Ineffective or no Talent strategy
To identify critical workforce segments, finance management will need to answer a few questions:
• Is there a small percentage of the workforce that makes a disproportionate contribution to the performance of the finance organization?
• If you have one unit of resource (or $1 to spend), where would you allocate it to obtain the highest return for the business?
• What segments of your finance organization:
– Have the greatest effect on the value chain?
– Possess the skills hardest to replace?
– Are in shortest supply?
– Provide support critical to optimized performance?
Developing your finance leadership team
Employees give lack of career progress as a leading reason for
departure. In contrast, many senior finance executives do not see their future leaders in the current employee base. Is the problem a lack of talent in the finance organization, or are finance managers not making the investments to develop the existing talent?
Developing leaders internally offers advantages over recruiting for talent. Reliance on the external market limits choices, and it may be better to focus on retaining and developing internal finance talent.
Finance organizations with talent strategies and programs targeted at defining, developing, and retaining the critical finance leaders in their companies may have a distinct advantage over those that do not.
The finance competency model defines, in part, what talent means in the organization and provides a framework for combining the finance and leadership knowledge, skills, and experiences professionals need at each level. The next step is a routine talent review. Most organizations conduct these reviews at least once a year to assess performance and
CFO and other senior leaders. They can be used to identify current or emerging leaders at various levels of the organization. Reviews also aid in identifying those individuals the organization wants to target for a succession management program or a key developmental assignment.
In addition, the audit committee may want to give exposure to those individuals who may have the ability to step into the CFO’s role.
Top companies recognize the role their current and future finance leaders play in driving the success of the business. To improve their ability to meet the challenges of a complex, global business environment, audit committees and executive finance teams are prioritizing the development of finance leaders.
Conclusion
Audit committees should recognize that the issues and risks associated with recruiting, developing, and retaining talent in their finance
organizations are likely to be permanent. The talent wars will continue, and audit committees should encourage strategies that allow their organizations to win the important battles along the way.
Understanding how financial management has developed a talent strategy, defined what finance means to the organization, identified critical workforce segments, and established programs to develop leaders are essential elements for audit committees to consider in assessing the finance organization’s ability to meet future challenges.
This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision
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Additional Resources
• Deloitte Dbriefs: Finance Talent: Attracting and Retaining the Skills You Need Now
• Deloitte CFO Insights: Do You Have a Finance-Talent Strategy?
• Deloitte CFO Insights: Do You Have the Finance Talent You Need Now?
