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You’re just now considering “Human Capital”…?

February 16th, 2009 Comments off

     With an 8-hour layover in the London-Heathrow airport I finally had a chance to catch up on so much of the reading I had fallen behind on. A more recent publication that I brought with me was the Feb-09 edition of CFO magazine. Needless to say, I was a surprised that one of the key articles was titled “How to Talk About Layoffs”. Are you joking? We’re essentially 17-months into slowdown that started back in Q4-07 and this leading publication is now talking about how to discuss the topics of layoffs, effective recruitment, and employee morale?  I’d say a bit late to the party.

 

     While I certainly wouldn’t confess to being on the leading edge of “Human Capital Management”, this area should always be an absolute area of focus for every CFO. Unless you are a very R&D intensive firm, the personnel portion of the operating budget is typically the largest consolidated expense within a company, especially when you consider all the peripheral expenses tied to this area. Perhaps I was also fortunate in that my first CFO stint had me working for a French manufacturing company, in which margins were thin, and we had to squeeze every bit of productivity we could out of existing personnel. Nor did we achieve the productivity with a Stalag 17 approach either. Our staff was able to maintain a great balance between their work and personal lives, but certainly delivered on our expected financial results.

 

     Recalling back to our FY06, FY07, and FY08 Budgets, I put a particular emphasis in my presentations to managers that had them questioning their staff and the contributions they were making. I had countless discussions where the message was that every person needed to have a contributory effect on the bottom line. We couldn’t afford to carry personnel that were simply an expense at the end of the day. Whether the contribution was improved quality controls, higher productivity levels in the field, or improved reporting for key-decision makers, we could not afford to carry “C-Players”.

 

     My concern for any Finance person who is only now starting to take a hard look at their personnel costs and get comfortable with “How to Talk About Layoffs” is that any actions at this point will be reactionary and likely not well thought out. I take a very hardline view of this area since employees are also the most important asset of the company. For any Finance person only now looking at this, I would see the sign of a Finance person who does not understand their business, long-term strategic planning, or the ability to properly deploy resources.  What a shame . . . .

 

Thanks for reading . . . .

 

Jeffrey Ishmael