Strategies for Engaging and Retaining Top Finance Talent in 2023
In the wake of the Great Resignation of 2021 and the subsequent Great Disconnection of 2022, small and mid-sized businesses have become increasingly aware of the steep costs associated with employee turnover in 2023. Among all functional areas, finance teams face an even more pronounced challenge due to the notorious difficulty in recruiting for financial roles. Surprisingly, a recent study conducted by Datarails revealed that financial executives experience a higher turnover rate than any other department.
Reducing turnover within finance teams is an often overlooked yet highly effective strategy for cost reduction. Aside from its cost savings, tackling turnover also cultivates a more vibrant company culture and promotes employee happiness.
Throughout this article, we’ll delve into various strategies that your finance teams can use to mitigate burnout, enhance employee engagement, and measure the effectiveness of your retention efforts. Additionally, we’ll provide a comprehensive guide to spearheading cultural initiatives throughout your entire organization.
Challenges and Costs of High Turnover in Finance Teams
According to a Gallup study, replacing a current employee can cost up to twice their annual salary. These expenses become even more significant when considering the recruitment, onboarding, and training process for new hires – not to mention the intangible costs of losing institutional knowledge and dealing with the disruptions caused by an employee's departure.
The impact of turnover is especially profound for finance teams. A substantial number of CFOs consider recruiting and retention as their key challenges. In a LinkedIn poll shared last month by Jack McCullough, President of CFO Leadership Council, 48% of finance executives stated that recruiting and retention in 2023 are proving to be more arduous compared to the previous year.
High turnover rates not only disrupt productivity but also create a ripple effect within a team. When a key employee leaves, it often creates a sense of confusion and stress among remaining team members, subsequently lowering morale and affecting productivity. The introduction of a new hire also puts a strain on the workflow, as existing staff have to set aside their core tasks to assist in onboarding and training. Teams operating with fewer resources may find themselves overstretched and at risk of burnout, a situation that worsens the longer the vacancy goes unfilled.
However, the real cost of losing a skilled employee extends beyond recruitment expenses. It also erodes the overall well-being and output of the existing team. CFOs and finance executives aiming to optimize costs should focus on a strategic plan that emphasizes employee engagement, skill development, and retention through specific, targeted tactics.
The Role of Leadership and Culture
Like any strategic business initiative, employee retention strategies are most effective when they start with the support of organizational leadership. And because engaged employees are both more productive and less likely to voluntarily turnover, there’s a clear business case for engaging employees.
CFOs and other financial executives should come to the leadership table ready to advocate for employee engagement programs that reduce turnover, including:
- Using employee pulse and eNPS surveys to measure employee satisfaction. You can’t fix the problems you don’t identify, so it’s crucial to poll employees on what is and isn’t working. Tools like OfficeVibe make it easy to keep a continuous pulse on employee happiness, engagement, and wellbeing, and can help finance departments measure how they stack up against other departments in employee satisfaction.
- Conducting exit interviews. If you’re not already, it’s important to collect qualitative data on why employees are turning over, and commit to addressing any common issues that correlate with turnover. Exit interviews should be conducted by a neutral third party, usually a representative from Human Resources.
- Recognizing high performers. The data on recognition is clear – according to Zippia, 80% of employees report that they’d work harder if they felt their work was recognized more significantly, and superior recognition programs can reduce turnover by 31%. Finance leaders should advocate for compensation programs that reward top performers, and implement tools like Bonusly that build a culture of appreciation using incentive programs.
- Fostering collaboration across departments. Leadership should actively promote opportunities to facilitate cross-departmental collaboration. Tools like Slack and Microsoft Teams can create work streams to break down silos between departments.
- Developing individual growth plans. A recent survey by Monster found that advancement opportunities are top of mind for Gen Z employees, and 54% of recent grads said that they would turn down a job that didn’t offer clear career growth paths. It’s important to talk to your employees about what they want out of their future career, and set a vision for how they can grow into the role they want down the line.
How to Track Employee Retention
Monitoring and measuring key performance indicators (KPIs) is essential for finance teams to effectively understand employee retention and engagement. The following list of metrics will help you measure how well your business is doing in these critical areas, and can help guide your strategies and initiatives.
- Turnover Rate - This KPI measures the percentage of your employees who leave the company during a specified period. It's crucial to track this because a high turnover rate can indicate issues with job satisfaction, organizational culture, or compensation. Calculate your turnover rate by dividing the number of employees who left the company by the average number of employees during the period, then multiplying by 100.
Turnover Rate (%) = (Number of Departures / Average Number of Employees) * 100
- Voluntary vs. Involuntary Turnover - Breaking down turnover into voluntary departures (employees who choose to leave) and involuntary departures (employees who are let go) provides deeper insights. High voluntary turnover could suggest problems with employee satisfaction or career progression, while high involuntary turnover might reflect recruitment or management issues.
Voluntary Turnover Rate (%) = (Number of Voluntary Departures / Average Number of Employees) * 100
Involuntary Turnover Rate (%) = (Number of Involuntary Departures / Average Number of Employees) * 100
- Retention Rate - Retention rate is the flip side of the turnover rate. It measures the percentage of employees who stay with the company for a given period. A high retention rate usually indicates that employees are both happy and engaged, which is beneficial for productivity and company culture.
Retention Rate (%) = ((Number of Employees at End - Number of New Hires) / Number of Employees at Start) * 100
- Early Turnover Rate - This KPI tracks the number of new hires who leave within a certain period (usually the first year). A high early turnover rate could indicate problems with onboarding, role clarity, or unrealistic expectations set during the hiring process.
Early Turnover Rate (%) = (Number of Employees Leaving within Time Frame / Number of Employees at Start of Time Frame) * 100
- Average Tenure - This KPI shows the average length of time employees stay with your company. A shorter average tenure could suggest a lack of long-term engagement or career development opportunities.
Average Employee Tenure = Sum of All Employees' Length of Service / Total Number of Employees
- Employee Engagement Survey Scores - Regular employee engagement surveys can provide a wealth of information about how employees feel about their work, their colleagues, and the company. Low scores might indicate low morale or engagement, which could lead to higher turnover.
Setting benchmarks for these KPIs is crucial to understand how your team performs compared to other businesses in your industry or of your size. When benchmarking, consider factors such as industry norms, the local job market, and your company's unique circumstances and goals.
Finance professionals can use the above list of KPIs to assess their progress towards improving employee retention and reducing turnover. Monitoring and analyzing these metrics regularly can help identify areas for improvement and inform strategies to enhance engagement and satisfaction. Remember, these metrics are not just numbers; they represent your most valuable asset - your employees.
Accounts Payable Practices for Employee Retention
Streamlining accounts payable processes is a powerful strategy to reduce manual tasks and boost employee satisfaction for finance teams. By freeing your AP staff from tedious and manual administrative processes, you liberate them to focus on activities that drive more value for the business, and ultimately more enrichment and satisfaction for the employee. Here are a few ways that you can support your AP staff more effectively:
- Automation and Digital Tools for Invoice Processing - Manual invoice processing can be time-consuming, error-prone, and frustrating for employees. By implementing automated systems and digital tools, you can drastically reduce these issues. Automation not only speeds up the process but also minimizes errors, leading to more accurate payments and financial reports. This frees up employees to then focus their skills and attention on more strategic, rewarding tasks. Learn more about automating AP with Centime.
- Enhanced Vendor Relationships Through Effective Communication - Streamlined accounts payable processes can lead to improved communication with vendors. Prompt, accurate payments foster trust and goodwill, which can strengthen vendor relationships and contribute to better negotiation outcomes. Additionally, effective communication can resolve issues more quickly, reducing stress for AP staff and vendors alike.
- Professional Development Opportunities for AP Staff - When you streamline your accounts payable processes, you free up time and resources that can be invested in professional development for your AP team. This could include training in new technologies or methodologies, opportunities for cross-functional collaboration, or pathways to advancement within the organization. Investing in your employees' growth not only boosts their job satisfaction but can also bring fresh insights and capabilities to your team.
Streamlining your accounts payable processes with Centime's solutions can lead to significant improvements in efficiency, accuracy, and employee satisfaction. By embracing automation, enhancing vendor communication, and investing in your team's professional development, you can transform your AP operations into a strategic asset for your business. Book a demo today to learn more about how Centime’s AP automation solution can help you achieve these benefits.
Accounts Receivable Practices for Employee Retention
Streamlining your accounts receivable (AR) processes not only improves your cash flow and customer relationships but also makes life easier for your employees, potentially reducing turnover. Here's how:
- Accelerating Invoicing and Collections Processes - Slow invoicing can lead to delayed payments, disrupting your cash flow and causing unnecessary stress for your AR team. By speeding up these processes, you ensure prompt payments, allowing your team to focus on strategic tasks rather than chasing down late payments. This can lead to a more rewarding work experience and increased job satisfaction for your team.
- Utilizing AR Automation Solutions - Administrative tasks can be tedious, time-consuming, and prone to error. By implementing Centime's AR automation solution, you can automate these tasks, allowing your team to work more efficiently and accurately. Automated reminders and payment processing can also help reduce the burden of collection efforts, making the job less stressful and more satisfying for your employees.
- Strengthening Customer Relationships and Communication - Effective communication is crucial in maintaining positive customer relationships. Streamlined AR processes can improve communication by providing timely, accurate billing information, reducing disputes and misunderstandings. This not only enhances customer satisfaction but also reduces the strain on your AR team, leading to a more pleasant work environment.
- Offering Incentives and Bonuses Tied to AR Performance - Recognizing and rewarding your team's hard work can greatly boost morale and job satisfaction. By tying incentives and bonuses to AR performance, you encourage efficient, effective work practices and give your team a tangible goal to strive toward. This can lead to increased job satisfaction, improved performance, and ultimately, reduced employee turnover.
Streamlining your accounts receivable processes with Centime's solutions can significantly improve job satisfaction and reduce employee turnover. By accelerating invoicing and collections, utilizing automation, enhancing customer communication, and offering performance-based rewards, you can create a more efficient, rewarding work environment for your AR team. Book a demo today to learn more about how Centime’s AR Automation solution can help you achieve these benefits.
Additional Employee Retention Strategies
Given the high cost of turnover, it's essential for finance teams to utilize innovative strategies to boost employee engagement and improve retention. Adopting flexible work schedules, offering competitive compensation packages, implementing wellness programs, providing support for working parents, promoting diversity, equity, and inclusion (DEI) initiatives, and organizing regular employee engagement events are critical components that contribute to these objectives.
- Flexible Work Schedules and PTO - Flexible work arrangements allow employees to balance their personal and professional lives more effectively. This flexibility can increase job satisfaction, productivity, and retention. Paid time off (PTO) further enhances work-life balance by providing time for rest, recuperation, and personal interests, reducing burnout and promoting overall well-being.
- Remote or Hybrid Work - According to a survey by PlanSponsor, remote and hybrid work arrangements are more effective for employee retention. In fact, Owl Labs found that 84% of those who work remotely at least some of the time reported improved morale and work-life balance. This shift towards flexibility is not just a temporary response to recent global events. According to HR Dive, more than 70% of U.S. employers appear to be sticking with hybrid arrangements, indicating a long-term commitment to this model.
- Competitive Salary, Benefits, 401k, and Equity Plans - A competitive compensation package is essential for attracting and retaining top talent. This should include not only a competitive salary but also comprehensive benefits, a robust 401k plan, and potentially equity options. To evaluate your competitiveness, benchmark against industry standards, regional cost of living, and the specific skills and experience your roles require.
- Wellness Programs - Employee wellness programs can have a profound impact on both physical and mental health. These programs can include fitness initiatives, mental health resources, and nutritional guidance. By promoting health and well-being, wellness programs can reduce stress, improve productivity, and enhance job satisfaction, contributing to retention.
- Support for Working Parents - Comprehensive support for working parents can include paid parental leave, childcare stipends, fertility benefits, and time off for school volunteering. Asynchronous meetings can provide additional flexibility, allowing parents to balance their professional responsibilities with their parenting duties. These supports can significantly enhance job satisfaction and retention among working parents.
- DEI Programs - Diversity, Equity, and Inclusion (DEI) programs promote a diverse, inclusive workplace where all employees feel valued and heard. This respect for diversity can enhance team dynamics, foster innovation, and improve employee satisfaction and retention.
- Employee Engagement Events - Regular engagement events can foster a sense of belonging and camaraderie among your team, enhancing job satisfaction. These events can range from team-building activities to company-wide celebrations, providing opportunities for connection and collaboration.
In conclusion, reducing turnover in finance teams is not just a matter of operational efficiency—it's a strategic imperative. High turnover rates can lead to disruption, decreased productivity and increased costs. Conversely, improved retention contributes to organizational stability, enhanced performance, and a more engaged and motivated workforce.
Essential to this goal are effective accounts payable and accounts receivable processes. Smooth, streamlined operations not only increase efficiency but also contribute to employee job satisfaction by reducing frustration and increasing the sense of accomplishment that comes from a job well done.
With Gen Z entering the workforce at a rapid rate, now is the time for finance leaders to take action. Investments made in employee retention today will pay dividends in your organization's future success. By implementing the strategies discussed in this article, you can foster a rewarding, inclusive work environment that attracts and retains top talent—ultimately driving your organization's performance and growth.