The global business environment is constantly changing, driven by market forces, technology and even unforeseen black swan events like the pandemic and resulting lockdowns. As a Chief Financial Officer, adaptation is your superpower, making pivots and adjustments to your company’s financial plan to ensure longevity and success in the future.
With that in mind, every CFO should be thinking about how work will be done post-pandemic and what it says about the nature of work going forward.
The largest expense for most businesses is labor—accounting for up to 70% of direct costs in some cases. As wage inflation rears its ugly head for the first time in more than a generation, the questions of how we work, who does the work and how much we pay for it quickly goes from a simple tactical question to one of greater strategic importance. Our focus must shift accordingly.
Historically, a company hired an employee from the cities and towns where its offices were located, invested large sums in generous benefits and retirement packages and expected to keep that employee on the payroll for the length of a career. The 40+ hour workweek produced a biweekly salary that supported a family with 2.2 kids. The idea seems almost quaint to us now. In recent years, the rise of telework, the gig economy and other megatrends in the workplace have suggested that something new was coming, but it was still hard for us to envision.
Then Covid came along and everything changed.
Of course, Covid didn’t create any of these new developments. It accelerated them. While the global pandemic and resulting lockdowns created serious challenges for most businesses, they also created new opportunities. More important, they have created changes to the business environment, particularly in the workforce, that we need to adapt to if we want to thrive through the coming years.
When the pandemic began, many businesses were forced to implement a remote workforce strategy, starting from zero. Many of us were surprised by just how easy it was to send our employees to work from home despite concerns over safety, productivity and even profitability. It became so normal, so fast that people began tirelessly referring to the new work-from-home model as the “new normal.”
Businesses still have employees working remotely, of course, but large numbers have already returned to the office, and the “return to work” is well underway. Just as many of us assumed that working from home was going to become the standard, many now assume that things will go back to the way they’ve always been, too. Nothing could be further from the truth.
The entire work-from-home experience has taught us that we can source and house talented members of our teams in various remote locations without compromising greatly on results. It’s been an eye-opener for many employers. If our employees can work from anywhere, doesn’t this mean that we can hire them anywhere, too?
Over the past several years, I’ve assembled a team of key contributors that live all over the world, outperform my local talent pool by leaps and bounds, cost a fraction of what I would pay in local wages and taxes, and are thrilled to be a part of my work. My Executive Assistant is British; she runs my calendar, responds to email and keeps my life on track from behind the scenes. I’ve never laid eyes on her in person. The newest member of my marketing team lives in Minneapolis, bills me only for the hours she works, produces better deliverables than anyone I’ve ever worked with, and I’ve only ever met her on a Zoom call. My graphic designer is from Moldova, a country I had to scour a map to find. The work he does for me costs 10% of what I pay U.S. designers and he is typically at work while I sleep so that I wake to completed projects ready for my approval.
Talent outsourcing isn’t something that’s coming. It’s something that’s here. Companies that aren’t investigating it as a competitive advantage are choosing a less competitive human capital strategy.
While the benefits of outsourcing are obvious—reduced costs, a larger pool of qualified candidates and around-the-clock capabilities—there are risks to be considered, too. Tasks to be completed, roles to be filled, results to be delivered—each of these must be well communicated to people with different language heritages, cultural expectations and educational backgrounds. Management activities must be tweaked to accommodate these realities while embracing the challenges inherent in managing people who aren’t just down the hall.
But proactive CFOs should begin investigating the costs and benefits of outsourcing certain human capital needs today. The benefits of having a strategy to fill vacant positions, improve management and reporting, and invest in the future of work will be obvious to your shareholders in due time.