Culture

By Angelo Carofano, MBA, CPA, CMA

What is the link between the role of a CFO and initiatives to reduce absenteeism?

On the surface, this seems like a mismatch of roles and responsibilities, but in fact there is an underlying connection that, once made, can have a profound impact on employee absenteeism in the workplace.

With The Conference Board of Canada reporting absenteeism costing the Canadian economy $16 billion in 2012 with an average of 9.3 days of employee absences per year, there is little doubt that absenteeism is a cost issue. While many HR professionals know absenteeism is a substantial concern for Canadian employers and continues to kill corporate profitability, the question is: why does it continue to be such a significant problem?

One of the reasons absenteeism continues to grow and has not been solved for many companies is the lack of CFO-led involvement. In other words, when a CFO leads the absenteeism initiative, the focus shifts from an HR issue to a financial and risk management one. With absenteeism growing at an incredible rate, it can be extremely costly, and finance needs to lead the charge.

 

Many companies do not know the size of their absence problem, or have a firm grasp of what their absenteeism rates are and what it is truly costing their organization.


Many companies do not know the size of their absence problem, or have a firm grasp of what their absenteeism rates are and what it is truly costing their organization. Most organizations do not even track this vital information. The Conference Board of Canada reports only 46 per cent of companies track absence data, with only 15 per cent tracking the actual direct costs of absences.

A case in point: when a mid-sized hospital operating in Ontario inquired about onsite nursing services as a way to manage their absences, they needed to first understand the underlying issues before committing to a solution or tactic. They performed a review of the current state of their absence program.

From the review, they discovered that they were facing an all-time high absenteeism rate – with an absence rate of 16 days per employee per year, four days above their peer group average. While they could not initially quantify their absence-related costs, they knew they had a problem as they experienced all the typical symptoms of uncontrolled absenteeism, including:

  • Little and/or inconsistent guidelines and processes to develop effective return to work (RTW) plans
  • Staffing and productivity issues, as well as growing union absence related grievances
  • Inconsistent supervisor involvement, as many managers were not comfortable in dealing with employee medical or personal issues that impact absences
  • Absences being managed by each supervisor, leading to inconsistent program management
  • Little to no notification of absence reporting by employees and ongoing follow-up
  • Poor absence management training
  • Supervisors did not feel confident in dealing with employee doctor note

Once absenteeism is viewed strategically with CFO involvement, the absence program begins to take shape by having a one- to five-year plan with the proper management controls (including key metrics) to ensure the plan is properly executed.

The focus of this engagement was to first define absenteeism as a strategic initiative that required investment in infrastructure while, at the same time, defined an expected return on this investment, both financial and non-financial. What was critically important was not viewing this as a short-term “cost cutting” initiative led by middle management, but rather a fundamental risk management initiative driven by senior executives.

When employers attempt to tackle absenteeism by introducing “Band-Aid” initiatives, the absence problem worsens.

When thinking about the problems and issues that arise from absenteeism, it quickly becomes apparent that absence management impacts most of the responsibilities of a CFO. Once the financial impact of absenteeism is put on their radar, absence costs are no longer hidden in “payroll” or “insurance” costs on the income statement.
To get this on the radar of your CFO, create a financial case for your CFO to get involved in leading an absence management initiative. The second step is to undergo a program audit to uncover the status of your absence management program by:

  • Conducting a GAP analysis compared to industry best practices
  • Ensuring the program is well understood (from employee to supervisor to executive team)
  • Ensuring the program metrics are well tracked (tracking system, goals for employers and managers)
  • Ensuring the absence program and all stakeholders are well supported by investments in training and development

Once absenteeism is viewed strategically with CFO involvement, the absence program begins to take shape by having a one- to five-year plan with the proper management controls (including key metrics) to ensure the plan is properly executed. This allows the employer to successfully achieve financial and non-financial returns.

If we look at the mid-sized hospital example, the senior executive team underwent this process and developed a three-year plan supported by the necessary investments and program goals and objectives. As a result, they experienced the following results within 18 months:

1. Financial: A decrease in the number of days of employee absenteeism per year, which was reduced by four days per year translating into $3M annual cost savings with an annual absence infrastructure investment of $100K.

2. Non-financial:
          a. Absenteeism became a key metric on overall employer performance
          b. Confidence that all absence management stakeholders consistently apply company absence policies and procedures

When it comes down to it, absenteeism falls into the “risk management” category, which is a key responsibility of the CFO and C-level management. It is our responsibility as HR professionals to give absenteeism the attention it deserves, by making it a boardroom discussion with your CFO.

Angelo Carofano, MBA, CPA, CMA, is vice president of finance and administration at Workplace Medical Corp.