I. Understanding the Drivers of Tax Staff Retention and Engagement

Transcription

1 I. Understanding the Drivers of Tax Staff Retention and Engagement TA X 8 J Y I N T 2007 Corporate Executive Board. All Rights Reserved.

2 A Quick Note on Research Methodology Timeline of the Initiative Finance Quantitative Analysis Identifying Survey Employee of Finance Staff Best Practices Administration Preferences Recruitment and and Key Leverage and Data Collection Survey Retention Drivers Points Presentation of Findings Question One: Question Two: Question Three: Question Four: Question One: Question Two: Question Three: Question Four: Model of Turnover Job Fit Turnover Intentions 2 3 Overview of Research Methodology Finance Employee Preferences Survey Survey instrument tested over six years by the Corporate Executive Board Tailored to capture the workplace attitudes and preferences of fi nance staff, including Tax Survey Administration and Data Collection Analysis based on a robust sample of 5,662 fi nance staff, including 354 Tax staff Gauged staff attitudes toward the current fi nance work environment Assessed preferences across multiple aspects of the fi nance job offer Quantitative Analysis of Finance Staff Recruitment and Retention Drivers Measured fi nance employees organizational commitment and perceptions of the fi nance workplace Identifi ed key leverage points to address perceived weaknesses in the existing fi nance employment offer Source: CFO Executive Board research; Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 0 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

3 Lulled into a False Sense of Security Traditional employee satisfaction surveys fail to highlight finance retention risk Job Satisfaction of Finance Employees Intending to Leave 2006 and dramatically underestimate at risk finance high performers Job Satisfaction of Finance High Performers Intending to Leave 2006 Dissatisfi ed Satisfi ed Dissatisfi ed 46% 40% 35% 53% Satisfi ed 4% More than half of likely attrition would come as a surprise to managers and executives. Neutral 2% Neutral Satisfaction drivers fail to alert executives to three out of fi ve likely losses of key performers. n = 907. n = 35. Technical Note: Calculating Intention to Leave Intention to leave captures the extent to which employees intend to leave their current employer. It is based on a series of survey questions assessing an employee s intention to leave within the next year, as well as questions about actual job search behavior for example, the degree to which respondents agree or disagree with the following statement: I have recently made phone calls or sent out my résumé in order to fi nd a job with another company. Source: CFO Executive Board 2006 Finance Employee Preferences Survey, Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. Section I: Understanding the Drivers of Tax Staff Retention and Engagement

4 Finance is at a particularly high risk of losing key employees Employee Retention Index Score By Work Function Finance in the Crosshairs with nearly one-third of all finance departures composed of high-value talent Finance Employees Intending to Leave By Performance Rating Higher Intention to Leave Lower Intention to Leave Low Performers 8% 30% High Performers Employee Retention Index Score 62% Marketing IT/Systems HR/Education/Training Finance/Accounting Procurement Sales Operations/Distribution/Logistics Manufacturing Corporate Administration Research & Engineering & Design Quality Control/Assurance Customer Service Retail Management Core Performers n = 200,473. n = 448. Source: CLC Solutions; Corporate Leadership Council 2004 Employee Preferences Database; CFO Executive Board 2006 Finance Employee Preferences Survey; CFO Executive Board research, Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 2 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

5 Diagnosing Tax Turnover Risk Tax staff defection risk is higher than Finance overall and accelerates with tenure Tax and Finance Staff Turnover Risk By Age Group 40% Tax Staff Finance Staff 28.0% 29.0% Intention to Leave 20% 8.0% 9.0% 2.0% 9.2% 9.0% 23.0% 6.8% 20.0% 23.0% 3.7%.6% 8.4% 0% n Tax Staff = 354. n Finance = 7,593. Age Group Source: CFO Executive Board 2006 Finance Employee Preference Survey; Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 3 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

6 Nearly a quarter of Tax staff intend to or could be swayed to leave Tax Staff Retention % Intend to Leave 7% Leaving the Door Open Neutral 24% of Tax staff could potentially leave within one year. More Likely to Stay particularly those in the tax accounting ranks Retention by Tax Functional Area Based on Survey Data Tax Attorney 76% Intend to Stay More Likely to Leave Low Tax Accountant Relative Pay Scale High n = 354. Technical Note: Interpreting the Employee Retention Index The Employee Retention Index (ERI) is a predictive measure of turnover risk based on data related to employees turnover intentions. Similar to the intention to leave measure, the ERI is based on a series of survey questions assessing an employee s intention to leave within the next year, as well as questions about actual job search behavior. An increase in the ERI score of 0. correlates to a 2 4-point decrease in turnover rates. Source: Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 4 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

7 Hidden Costs Turnover leads to major direct and indirect costs Representation of Turnover Costs for Typical Middle Manager in Finance Visible Costs Typically Captured Invisible Costs Seldom Captured Lost Productivity of Incumbent Separation² Lost Productivity of Other Employees¹ Vacancy³ Recruiting Lost Productivity of Vacant Position Selection Lost Productivity of Other Employees¹ Hiring 4 Orientation Learning Curve of New Hire Training Lost Productivity of Other Employees¹ Total Cost Direct Costs to Hire (5 30%) Indirect Cost of Lost Productivity (70 85%) On average, every employee departure results in a $200,000 cost. Predeparture Vacancy Ramp-Up Employee Leaves New Employee Hired New Employee Fully Effective Includes coworkers, supervisors, subordinates. 2 Includes cost of exit interviews, accrued vacation, continued benefi ts, etc. Source: The Hay Group; Corporate Leadership Council; CFO Executive Board research, Tax Director Roundtable research. 3 Includes cost of temporary workers, overtime coverage. 4 Includes relocation costs, agency/search fees, signing bonus, etc. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 5 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

8 CFOs continue to emphasize financial rewards to discourage turnover What Are You Doing to Retain Existing Finance Staff? 2004 Survey Money Doesn t Buy Commitment despite the ineffectiveness of pay-related strategies in battling defections Impact of Drivers on Intent to Stay by Category* 2004 Survey 45% Direct Manager Quality 30% 32% Culture Traits 27% 6% Day-to-Day Work Environment Learning and 5% 20% Compensation Strategies 9% Increasing Pay/Benefi ts Defi ning Career Paths Within Finance Better Easing Workloads by Hiring Additional Full-Time Staff Benefi ts Strategies n = % 0% 5% 30% Maximum Impact on Intent to Stay and recognition that greater compensation alone fails to generate long-term commitment Upping the Ante Compensation is like bubble gum, it runs out of flavor after a while. You might be able to keep somebody in the short term, but you can t afford to make them stay forever. CFO Financial Services Company * Each data point represents a statistical estimate of the maximum total impact each driver will produce on discretionary effort or intent to stay. The maximum total impact is calculated by comparing two statistical estimates: the predicted impact for an employee who scores high on the driver versus an employee who scores low on the driver. Each driver is modeled separately to isolate unique individual impact. Source: Corporate Leadership Council 2004 Employee Performance Database; CFO.com; CFO Executive Board research, Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 6 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

9 By addressing dissatisfaction across multiple aspects of the workplace Dimensions of the Tax/Finance Employment Offer Compensation and Benefits. Base Pay 2. Bonus 3. External Equity 2 4. Health Benefits 5. Internal Equity 3 6. Retirement Benefits 7. Stock Options 2006 A War on Many Fronts Job Opportunity and Work Environment 8. Coworker Quality 9. Empowerment 0. Internal Mobility. Job Fit Project Responsibility 4. Promotion Opportunity Work Challenge High Intent to Leave Intent to Leave Heads of Tax can improve job fit and reduce Tax staff flight risk Intent to Leave by Number of Dissatisfi ers 5 in Current Offer Illustrative Intent to leave increases as employees become dissatisfi ed with more and more aspects of their employment relationship. Work Life Balance 7. Flexible Work Environment 8. Hours 9. Location 20. Travel 2. Vacation 22. Work Life Programs Company Environment 23. Company/Product Brand 24. Diversity 25. Risk Taking Senior Team Quality Low Intent to Leave (2.5) A critical threshold: On average, employees become more likely to leave than to stay when dissatisfi ed with more than 0 components of their offer Number of Dissatisfi ers Shading represents areas that Tax professionals value most. 2 External equity is defi ned as the typical pay provided to employees relative to the external market. Source: Corporate Leadership Council; CFO Executive Board research, Tax Director Roundtable research. 3 Internal equity refl ects the pay differential between high-performing and low-performing employees. 4 Risk taking refers to the expected level of experimentation and risk taking by the company s employees. 5 A dissatisfi er is defi ned as an element of the employment package with which an employee is dissatisfi ed. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 7 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

10 The Intersection of Importance and Satisfaction Tax staff value aspects of their jobs slightly differently than the rest of Finance Employees More Satisfi ed Satisfaction Score 0.5 Red Herrings Internal Mobility Stock Options Stock Options Job Fit Matrix: Tax and Finance Staff Internal Mobility 2006 Job Fit Job Fit Promotion Opportunity Promotion Opportunity Travel Travel Internal Equity Internal Equity Focus Area Hours Hours Base Pay Base Pay Tax is less satisfi ed with base pay than peers in Finance but still relatively satisfi ed overall while top satisfaction drivers fall into work-life balance and work environment categories. Leveraged Investments Employees Less Satisfi ed (0.5) Less Important to Employees 3.85 Absolute Importance Score More Important to Employees 7 Tax Staff n = 5,405. Other Finance Note: The vertical Axis measures job attribute satisfaction. The horizontal axis refl ects the absolute importance score assigned to each aspect of the job offer. This score indicates employees willingness to trade away each attribute in favor of another. The average importance score across all attributes is Source: CFO Executive Board research; Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 8 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

11 Core Attributes for Employee Attraction and Commitment In developed economies, there are universal and unique drivers for attraction and commitment of employees across all major talent segments Developed Economies Core Attributes 2 Across All Major Segments Certain attributes become uniquely important in developed economies at attraction Compensation Location Work Life Balance Meritocracy Ethics Collegial Work Environment People Management while others become critical at driving commitment. Top Drivers: Attraction Top Drivers: Commitment Note: Bold attributes are part of the developed economies core Employee Value Proposition (EVP) but not the global core EVP. This analysis is based on respondents from Australia, Canada, France, Germany, Japan, New Zealand, United Kingdom, and United States. 2 Some non-core attributes may be of critical importance for particular segments. Source: Corporate Leadership Council, Employment Value Proposition Survey; Corporate Leadership Council research; Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 9 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

12 Attraction Drivers: By Geography Rank Order of Employee Value Proposition Attraction Drivers By Geography France Germany United Kingdom Australia Canada United States Japan Compensation Compensation Work Life Balance Work Life Balance Compensation Compensation Compensation 2 Work Life Balance Collegial Work Environment Work Life Balance Health Benefi ts Work Life Balance 3 Location Compensation Compensation 4 Location Work Life Balance Vacation 5 Location 6 Technology Level 7 Product Quality Work Life Balance Health Benefi ts 8 Camaraderie Location Location Location Organization Growth Rate 9 Ethics Retirement Benefi ts 0 Coworker Quality Empowerment Empowerment Ethics Product Quality Source: Corporate Leadership Council research; Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 20 Section I: Understanding the Drivers of Tax Staff Retention and Engagement

13 Commitment Drivers: By Geography Rank Order of Commitment Drivers By Geography France Germany United Kingdom Australia Canada United States Japan Innovation People Management Senior Leadership Reputation 2 Great Employer Job-Interests Innovation People Management Coworker Quality 3 People Management Empowerment Ethics 4 Senior Leadership Reputation Senior Leadership Reputation 5 Meritocracy Empowerment People Management Great Employer Senior Leadership Reputation Empowerment 6 Ethics Great Employer 7 Diversity Coworker Quality Senior Leadership Reputation Risk Taking 8 Innovation Product Quality Empowerment Ethics 9 Informal Environment Ethics Meritocracy Great Employer 0 Ethics Great Place to Work Collegial Work Environment Meritocracy People Management Source: Corporate Leadership Council research; Tax Director Roundtable research. TAX8JYINT 2007 Corporate Executive Board. All Rights Reserved. 2 Section I: Understanding the Drivers of Tax Staff Retention and Engagement