Finance teams deal with an incredibly crucial and broad mandate- one which largely determines the financial health and long-term operational effectiveness of the organisations they work for. Due to the nature of their role, finance teams can sometimes be seen as a bit of a detached element of the wider business structure, dealing in figures and percentages around cash flow and expenditure. It certainly isn’t a function that is traditionally linked to people management but is that a somewhat narrow view with the way modern businesses work?
Fundamentally, the focus for finance teams will be keeping costs down. Soaring business costs coupled with a fiercely competitive jobs market means that organisations and the people who manage their coffers will need to understand where areas of wastage exist and how inefficiencies can present significant roadblocks to cost-cutting strategies.
People management functions – those which deal with both ongoing strategy and the day to day running of the business – are so vital to financial performance. If finance personas have transformational goals in mind and wish to see greater degrees of output and financial efficiency from their wider workforce, it is clear that they cannot afford to disregard the voice of people management within their organisations.
This also extends to the systems and technology which people teams, and indeed all people within a business, rely on daily. People management is an area ripe for digital transformation with tangible, long-term savings and shorter-term productivity gains offered by new solutions. For finance teams, the upsides of transformation are obvious- improving processes, introducing greater levels of efficiency, and cutting back on unnecessary expenditure.
In this blog, we wanted to explore a few of the major impacts poor people management processes can have on your finance teams and why a specific focus on how these challenges manifest will be vital for the long-term health of your people-led strategies.
Recruitment costs
Research by Gartner has found that only 29% of business leaders feel that they have the talent in place they need to meet current operational needs. In times of crisis, these requirements become far more acute, so how exactly can organisations ensure that their talent attraction drives are as focused and effective as possible?
Again, the answer lies in the systems which you rely upon daily. Failure to invest in your people management systems has the potential to severely hinder your ability to find and attract the key talent you need to drive forward success.
Research by the CIPD estimates the average cost of filling a vacancy, including labour costs, is £6,125. And this is the cost of getting it right the first time! If your recruitment processes are lacking in anyway or if you find yourself hamstrung by your systems, you can expect to see these costs spiralling.
Your HR systems should be set up to give you visibility of key gaps in your operational structure which would be best suited to focus on when hiring during a crisis. Older or less sophisticated solutions may simply not be able to offer the granularity of data needed, meaning that you are essentially hiring blind, with little to no measures in place to assess the long-term effectiveness of new hires, or how successful your organizational structure is in recovering investment.
Organisations who insist on clinging to older, more outdated ways of sourcing talent will find themselves hitting a wall in their ability to attract candidates with the skillsets required to drive success. Furthermore, a lack of granularity and oversight offered via HR systems, means that organisations are unable to build an accurate picture of what the ideal candidate looks like to them, opening up the potential for repeated, costly returns to the recruitment cycle when new hires don’t work out.
Payroll errors
Recent research by the Chartered Institute of Payroll Professionals found that a staggering 74% of payroll professionals surveyed said that they were unhappy with inefficiencies in their current solution. Despite this and in spite of the continued complexities demanded of today’s payroll functions, businesses still continue to de-prioritise updating their solutions.
Payroll teams perform a vital role month after month ensuring the accuracy of your payroll and that your people are paid on time. Accuracy with wages is crucial as any discrepancies or delays can seriously impact the financial wellbeing of your employees as well as affecting their levels of engagement at work- Research by PWC found that 70% of the UK's workforce admitted to wasting a fifth of their time at work worrying about their finances. Inaccuracies can also lead to potential legal challenges which any organisation will be keen to avoid.
Overpayment of wages also presents its own unique challenges and ultimately leads to your payroll teams wasting valuable time in their working chasing down the source of errors and correcting them. Recent research has found that the average cost of payroll errors for UK businesses has now hit six figure sums, costing roughly £150,000 per annum. Ultimately, this is where investment in digital payoll transformation comes into its own- being able to cut back on errors and reduce inefficiencies.
Unchecked absenteeism
Good absence management strategy is vital when it comes to insulating yourself from unexpected disruption and ensuring business continuity and success, no matter the circumstances. Unchecked absences can cause an unacceptable domino effect for your business, which in turn can compound existing challenges and severely impact finances more than some may think.
There are some very blunt statistics surrounding absence which serves to highlight just what a crucial element of your people management function it is. A survey by the CIPD found that businesses lose on average £550 per employee in costs related to sick leave or unexpected absences. If left unchecked, these costs can spiral out of control and the working days lost to absence can have far wider reaching impacts on business continuity.
Unchecked absence can spiral into wider inefficiencies for an organisation with shift running managers scrambling to fill positions and allocate resources as best they can. For finance teams a chief cause of concern should be how these struggles may be siloed away- many managers may want to minimise disruption and do what they can to correct errors internally, meaning that legacy or outdated systems which are partly responsible for creating these gaps in data, are kept in use.
Investment in a reliable and accurate absence management solution can help you eliminate those gaps in your processes and provide a complete overview of attendance and output, ultimately meaning that employees are paid fairly and representative of their work and payroll teams don’t have to worry about putting out fires and becoming bogged down in manual course corrections.
Buddy punching and time theft
Buddy punching, time theft or time sheet fraud refers to situations where workers input pin codes or swipe cards to clock in or out on behalf of their colleagues; avoiding managers noticing late arrivals, early departures or general absences. This can lead to employees being paid inaccurately for hours they didn’t work.
So how much money does time theft cost businesses? According to a study, a company can lose as much as 7% of its profits due to time theft. To put this into perspective, if your company is earning £300,000 per year, you could be losing £21,000 annually because of stolen time. While this may not be enough to bankrupt a business, it’s a large sum of money being drained from your business that simply cannot be overlooked.
Buddy punching is often a direct result of employees manipulating known flaws within the systems they use. Manual processes such as time sheets and peripherals like keycards and fobs make it all too easy for time theft to flourish. From a finance perspective, digital transformation of your time and attendance processes means you are shoring up your internal checks and balances and eliminating the conditions which allows buddy punching to flourish, ensuring that your business isn’t spending obscene unseen amounts on ghost-hours that haven’t actually been worked.
Security
Security is a primary concern for any business. Data breaches and lapses in security of systems not only represent a huge financial and legal risk for organisations but they also impact the reputation of your brand. These issues are even more heightened when we talk about people management solutions, which deal with processing sensitive personal information on a daily basis.
From a finance perspective, the legal and reputational costs of severe security breaches can be far ranging and hold the potential to put organisations at risk, wholesale. According to Statista, the average cost of data breaches for UK businesses now stands at £1200. Although their remit may not be focused on IT focused considerations such as security, the far-reaching impacts of data breaches very much is within their wheelhouse.
Lapse security measures and a lack of data integrity which this can entail, represents a key danger for finance teams, not to mention presenting an unacceptable cost burden should financial penalties be introduced for any breaches. At a time when mitigating the impact of rising business costs is the focus for many, it’s understandable that finance teams will want to avoid any unnecessary risks.
What’s next?
Today’s finance teams are facing an almost herculean task of trying to drive forward continuous growth and productivity, whilst at the same time, introducing policy and procedure which can help mitigate the worst impacts of the rising cost of doing business.
In order to achieve the level of success required, businesses and their finance teams will need to take risks and ideate bold policy and strategy to support their aims. One area where risk is untenable however is in their people management processes and as organisations make strides to implement future growth strategies, they will need to understand that their people management function- as well as the systems and technology which supports it, are up to the task. Modern people management solutions have shifted the world of people management from unmeasurable cost-centres to processes and strategies with clearly quantifiable ROI.
We’ve created our range of Advanced People Management solutions in order to help organisations overcome everyday challenges holding back their people management function and to support all areas of the business in delivering sustained excellence.
From Time and Attendance to Payroll, HR and Performance Management, Advanced People Management solutions have been created by experts in the industry in order to help organisations transform the way they engage with their people and to eliminate the risk of fines from non-compliance with legislation and most importantly- eliminate waste expenditure and drive down costs.
To discover more about how Advanced People Management can help your finance teams overcome hurdles presented by poor people management processes, get in touch today.