The War for Talent – what it means for the bottom line

14, Sep 2012

Ensuring you attract, retain and motivate employees can be crucial to remaining competitive. We highlight three potential ‘people impacts’ on your bottom line and different ways FDs can drive the competitive advantage.

Sacha Romanovitch Partner, People and Skills, talks with Justin Rix, Partner, Employer Solutions, about three areas where employees can impact on the bottom line or even mean the difference between success and failure of a business. They also discuss how these insights can be used to build a stronger business.

In the current economic climate and in the face of an increasingly competitive and global business stage, the potential competitive advantage of getting your people investment right is too big an opportunity to miss. 

FDs have long recognised that people are among a business’s most valuable assets, and that the effective management of and investment in people is fundamental to achieving an organisation’s growth aspirations. While FDs used to leave the 'people stuff' to HR, the savvy finance director now works closely with his or her colleagues in the people space to drive competitive advantage by ensuring their organisation is attracting and retaining the best talent. 

A recent Grant Thornton event, The War for Talent, looked at the impact of people on the bottom line in the context of three questions:

• What is the impact of an ageing workforce?
• Does it matter if your employees are engaged? 
• Are you maximising the return on your investment in your people?

The event heard that organisations with engaged employees are 16% more profitable than those with poorly engaged employees. 

Engagement and maximising returns generally are not simply a question of spending more. In fact, this can often have the opposite effect. Instead, it is critical that organisations plan for and invest in the skills needed to drive growth as the economic and business landscape continues to evolve. 

So, what should you as an FD be thinking about with regards the ageing workforce, employee engagement and investing in people? 


Leveraging an ageing workforce
An ageing population inevitably means a greater dependency on a declining number of people of traditional working age. In 2011, the UK had a dependency ratio – the number of retired and unemployed as a proportion of the number of people at normal working age – of 25%. This is forecast to increase to 38% by 2050. Therefore, FDs and CFOs should be considering how best to leverage the knowledge, experience and reputation of this ageing workforce. 

The first step is to get to know the likely future shape of your employee demographic. Different groups may have different motivations and understanding these enables a focus on how to maximise that contribution. Therefore, create a culture that embraces older workers. 

Good succession planning can also make a big difference in retaining knowledge and expertise within organisations. The next generation of leaders needs to be developed, and sustainable growth happens when older employees are seen as facilitators rather than blockers of young talent. The experience and knowledge of an older workforce can be used as an integral part of the development of the future leaders through effective mentoring and coaching programmes. 


Driving value through employee engagement
Getting employee engagement right can make all the difference to organisations in a buoyant economic climate, but is arguably even more important in a downturn, where discretionary effort is a low-cost boost to growth. 

The introduction of relatively straightforward and inexpensive initiatives by organisations can positively impact employee engagement, generating substantial, tangible financial benefits. 

Practical examples of how organisations have addressed employee engagement include:

• leadership setting a clear vision that is authentic, inspiring and more than just motivated by profit
• encouraging a culture that enables employees to self-direct their work
• giving employees a voice and being seen to respond
• introduce a culture of praise where the contribution and success of employees is recognized.


Maximising ROI in human capital
People costs are one of the biggest overheads for most businesses. A study of FTSE-listed companies in 2011 showed that unit labour costs as a percentage of sales in the final quarter of 2011 has increased by 38% compared to the first quarter of 2002 and has grown by more than 75% over the last 20 years.

Our experience shows that employee reward is a key issue for the vast majority of the organisations we work with. Some of the strategies they are putting in place to ensure their investment in people is effective, efficient and generating the best return possible include:

• Find out what's working in the current arrangements.
• Review employee benefit plans.
• Review the effectiveness of bonus and incentive arrangements.
• Broaden employee ownership in the organisation.
• Review the effectiveness of learning and development programmes.
• Evaluate the quality of the employee communication processes.

It is clear that the war for talent is very much focused on retaining and getting the most from existing employees, as well as attracting the best new employees.

Grant Thornton has compiled a report that details how you can adopt many of the strategies above and put them into practice. The report is available for download here: The War for Talent – what it means for the bottom line.

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