June 21, 2024 How CFOs Can Manage a Shifting Labor Landscape

Best practices to usher in a new talent generation and a new wave of innovation.

While there are many reasons that labor costs are rising in finance and procurement related roles, they all stem from one core reality. CFOs have benefitted for decades from unusually high retention rates.

Back in the day, it wouldn’t have been unusual at all for the senior leaders at manufacturing firms to be ‘lifers’ – routinely clocking in decades of experience at the same organization. Just the other day, I was talking to a CFO at a steel manufacturing company who shared that he had been with his company for an incredible 35 year tenure. While this is high even for industry standards, it means that now procurement, especially in the manufacturing sector, is dealing with a wave of retirements.

Just about every CFO shudders at the thought of what will happen to operational costs, performance, and efficiency in response to sudden employee turnover like this  – particularly when we are talking about those workers who are the keepers of critical institutional knowledge.

Getting the transition right at this changing of the generational guard is critical to the success of the finance and procurement function long term. So what should leaders do to tackle this problem and turn a tumultuous period of change into an opportunity to drive innovation?

Getting Your House In Order

We have all been there. Desperately looking for that record, email chain, or file from a few years back before realizing that only Bob from finance who left three years ago knew anything about that particular transaction or project.

Many employees with longstanding tenures come from a time where data was tracked not even in Excel spreadsheets, but manually on pieces of paper tucked away in a file cabinet. Whereas today’s generation takes for granted that all the information they need will be at their fingertips. It is essential to get ahead of this challenge, as the loss of institutional knowledge and poor or inconsistent data management is the number one enemy when you have a rapidly changing workforce.

To counteract this, many firms are focusing on ensuring their employees within sight of retirement are studiously documenting their processes and metaphorically downloading their brains into databases so the people that come in to fill the roles will have a repository to work from.

It is so important to have centralized repositories for things like the master list of suppliers, records of transactions, and even item numbers of parts procured so it can be a simple task to identify which purchases are prone to recur and streamline the decision-making and speed of approval for the procurement function.

But it’s also vital to capture the softer insights, knowledge, and skills that need to be transferred. In the past, senior leaders may have relied on black books filled with notes on supplier relations for insight into how people work, but these observations must be tracked and translated in a way that enables newcomers to benefit from the experience of their predecessors.

For many, the challenging task of consolidating various data sources is a crucial step. Fortunately, once this is accomplished, there are tools that can transform these disparate data sets into a user-friendly, machine-readable format.

Driving Value & Employee Outcomes With Automation

Once you have all your data sources gathered in one place, then it’s time to make the most of it. Using tools like Arkestro, companies can import their data from a wide range of sources and transform them into a cohesive, actionable set. This enables immediate automation of routine tasks and the use of predictive models and AI in procurement, cutting down costs and boosting productivity.

The promise of automation is becoming increasingly attractive to CFOs, especially when you consider the per hit headcount for return on investment of procurement professionals. Automation enables CFOs to reallocate resources to higher-value activities like strategic planning, analysis, and decision-making. This not only drives greater value for the organization as a whole, but also increases employee satisfaction by removing repetitive, arduous tasks.

This is critical to talent retention. The workforce coming through not only expects competitive compensation and benefits, but also access to the technologies they need to do their jobs in the most efficient way possible. In order to stay competitive, organizations must ensure they’re giving employees the tools and resources they need to work smarter, not harder. This is particularly true in procurement, where workloads are on the rise and pressure is on to add value and drive savings.

Leveraging procurement technology and automation not only helps employers meet the expectations of employees, it also enables them to maximize efficiency and outputs for the teams they have in place.

Lean into organizational change to drive a new generation of talent & innovation

Between rising labor costs, inflation, and supply chain scarcity, CFOs are certainly under fire from every direction. But attracting and retaining talent remains top of a stacked priority list with research from Deloitte showing a staggering 8 in 10 (83%) manufacturers seeing this as a top challenge.

As manufacturing finance and procurement teams specifically undergo profound transformation with this generational shift in the workforce, CFOs must adopt a forward-thinking mindset and embrace innovative strategies to address the labor cost dilemma.

It’s no secret that digital transformation can be challenging in any organization, especially for those that have operated with the same tools and processes for decades. But yesterday’s tools are not equipped to meet the needs of today’s talent generation – or the business challenges they now face.

But leaders should take heart and remember – oftentimes change is what is needed to trigger some of the most brilliant innovations.

About the Author:
Edmund Zagorin is a proud procurement nerd obsessed with the power of recommendations to fix broken processes and supply chains. Prior to founding Arkestro, Edmund worked as a consultant focused on data-driven supplier negotiations for large healthcare providers, contract manufacturers and multi-campus retail brands. Edmund is widely recognized as a thought leader on the emerging role of machine learning and artificial intelligence in procurement and has presented executive briefings on this topic to leadership teams at 3M, BASF, General Motors, Volkswagen, PwC, Kearney, EY, Accenture, OneValley, Plug & Play Tech Center and has been featured by Forbes, Shared Services and Outsourcing Network and ProcureTech.

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