As a CFO, you have to balance a complex set of roles. Often, it includes oversight of and direction for finance, legal, compliance and human resources. However, above all, you’re expected to create long term value by driving revenue generation.
Uncertain economic conditions and volatile markets in the coming year can make this feel like a daunting task. However, you mustn’t let trepidation of the unknown deter you from forging ahead. Instead, focus your efforts on areas where you have the power to make an impact, such as compensation.
Here are three ways you can have a direct impact on what is likely your organization’s greatest expense: payroll.
PayScale’s latest Compensation Best Practices Report (CBPR) revealed that more organizations (66 percent) cited employee retention as a major concern than they did in 2018 (59 percent).
This concern is well founded. Work Institute’s 2019 Retention Report reveals that the average cost of an employee quitting is conservatively around $15,000, costing U.S organizations more than $600 billion per year in voluntary turnover.
So, what’s the best way to retain your valued employees? In short, it’s essential for you to solidify your company’s pay brand. The most popular retention tactics from our CBPR are the merit-based pay plan, learning and development opportunities and discretionary bonuses.
Use Compensation Efficiently
By using compensation efficiently, you can lower operating costs and boost net revenue. Your compensation strategy in the coming year will need to be more efficient than ever. You’ll be expected to create more returns on investment, albeit with fewer resources.
In fact, CBPR research confirmed that 62 percent of survey respondents agree or strongly agree that compensation is becoming more important for executives (a four percentage point increase from the previous year).
Organizations are turning their concern into action: 31 percent of organizations have a compensation strategy and another 39 percent are working on developing one. Don’t get left behind.
Use Reliable Compensation Data
An effective compensation strategy requires accurate, reliable data. Furthermore, the data you choose must accurately reflect the needs of your organization.
According to the CBPR, the four most common types of data include:
- Traditional third-party surveys
- Paid online data sources
- Government data
- Industry surveys
How many data sources do you need? It depends on the needs of your organization. Generally, the more jobs you have and the more talent markets you compete in, the more data sources you will need to cover all your jobs.
For more detailed information, check out our new whitepaper, CFO’s Guide To Compensation Best Practices