When thinking about employee benefits management, we naturally turn our focus to human resources professionals. After all, their role is to architect, communicate and implement your company’s benefits. The HR team is the direct liaison to your workers, helping employees select, understand and utilize the benefits your company so carefully selects. They answer hard questions, sort out individual concerns, and handle the tedious details of administration. Yet, despite the HR team’s expertise on employee benefits, let’s be real. The final decision comes from the C-Suite.
This is why the chief financial officer (CFO) plays such a critical role. Having been long involved in decisions regarding the financing and management of employee benefits, the shifts in the industry and options available have become more and more complex. The implications are certainly top-of-mind. In fact, a recent industry survey* ranks their top concerns as follows:
- Attracting and retaining qualified employees
- Cost of benefits
- Regulatory requirements
- Government policies
- Data security
- Employee productivity
- Rising wages and salaries
- Corporate tax code
- Access to capital
- Weak demand for products/services
We’ve added the bold text above to illustrate the degree to which your employee benefits program affects big picture financial decision-making. Three of the areas of most concern to CFO’s are – you guessed it – affected by the overall health of your employee benefits program. Listed as the top concern, “attracting and retaining qualified employees” is at an all-time high on this quarter’s survey, with 45% of US firms listing it as a top 4 concern. That’s huge.
Is CFO involvement in employee benefits important to overall business stability?
The answer is a resounding YES. Not only are decisions regarding benefits becoming more complicated, but they also impact a wide range of strategies and risks that must be carefully considered by the CFO. Let’s face it. This is a huge financial commitment, one that can either improve your company’s competitive position or eat up huge chunks of profit. The CFO must manage risks that impact the well-being of the entire organization.
As caretaker of the budget, the CFO knows that healthcare expenses can make or break goals. Managing this line item expense is typically more important than others seemingly integral to the business you operate. This comment from Warren Buffet comes to mind: “GM (General Motors) is a health and benefits company with an auto company attached.” And it’s true, considering they spend more on healthcare than they spend on steel.
Decisions that control employee benefits costs ultimately come from the C-Suite. When those costs are effectively managed, the result is a stronger organization, higher company morale, and retention of top employees. The cost of turnover and low productivity is obvious, so the CFO must become the loudest voice in advising and advocating on behalf of their HR team. Together, the CFO and HR leaders can evaluate, select and manage a plan that becomes and operational machine – one that doesn’t crush the bottom line.
*Source: Duke CFO Global Business Outlook, March 2018, http://www.cfosurvey.org/2018q1/US-KeyNumbers.pdf