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CFO Decision-Making That Drives Employee Retention

In organizations nationwide, job descriptions are being rewritten. Spurred by necessity or inspired by the opportunity inherent in challenging times, companies are re-envisioning employees’ roles from the frontlines to the c-suite.

Although many job descriptions within a company may change, the chief financial officer’s (CFO) role has recently been one of the most significantly redefined.

CFOs have always been key decision-makers regarding the financial implications and outcomes behind various components of nonqualified executive benefits. But when companies elevate the value of human capital, boosting it from a human resources component to a driver of financial strategy, CFOs become an even greater force in creative nonqualified plan design and implementation.

Recognizing the potential of certain nonqualified executive benefits as a powerful executive retention strategy, many CFOs are actively advancing the utilization or revision of these plans.

The World Is Different Now

Evolution in the role of the CFO was well underway when a global pandemic and recessionary economy catapulted it ahead. According to research from McKinsey & Company, the expansion of CFO responsibilities started perhaps as early as a decade ago.

Data that tracked CFOs from 2016 to 2021 helps us better understand how the CFO position is expanding. New or increased duties often include board engagement, digital technology oversight, post-M&A integration and even responsibility for areas as varied as information technology and corporate security.

When the primary responsibility of CFOs was to analyze and safeguard an organization’s financial wellness, their perspective on executive benefits often focused solely on how the plan would impact the company’s balance sheet and cash flow. But in addition to the continuing transformation of the CFO’s role, a company’s reasons for offering nonqualified plans as part of its executive benefits strategy are also changing.

For CFOs, the next-step questions to ask may be, “What do today’s workplace differences look like? And what steps can I be taking to help my organization identify and retain its most valued employees?”

Identifying an Organization’s Human Capital Assets

Who a company relies on most in its workforce isn’t always as apparent as you might expect. In some cases, work stoppages or cutbacks during the height of the pandemic helped organizations identify which employees were key to organizational success. Equipped with the most in-depth knowledge of the organization’s costs, efficiencies and productivity, the CFO is well positioned to help other leaders in the company incorporate analytical insight into their workplace observations.

Viewing human capital through a fresh lens, many successful CFOs now work in strategic partnership with the organization’s HR team.

Turnover is Costly

While losing any employee is expensive, losing key employees can come at a substantial cost. A properly designed nonqualified executive plan provides a valuable employee retention tool while having little impact on the organization’s Profit and Loss Statement (P&L).

While the benefits of a qualified plan must, by law, be offered companywide, a nonqualified plan provides a strategy to selectively reward employees whose contributions make them critical to organizational success. Many CFOs now value more than ever how effectively a well-designed nonqualified plan helps stabilize the company’s essential human capital.

As roles and responsibilities change, the questions CFOs ask about nonqualified deferred compensation plans may sound different than they did in the past. Yet the motivation behind the questions remains the same. Today’s CFOs want to build stable, profitable companies for the betterment of employees, stakeholders and the marketplace.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Investment advice offered through OneDigital Investment Advisors, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital a registered investment adviser.