When I was 18, my father told me to get an accountancy qualification. 'You'll have a meal ticket for life.' It wasn't. In the era of re-engineering and downsizing, many men in their 40s and 50s were made redundant, leaving a vacuum which has yet to be filled. By Terry Carroll, Group Finance Director of Eatonfield Group plc.
For many years, the growth and change in finance and industry meant a golden age for accountants, especially if they had people management skills. This was extended by rapid change and the commercialisation of the public sector, particularly from the early 1990s. Some accountants displaced by industry during the recession found employers in the public sector, hungry for their commercial experience. PFI and other initiatives would have struggled otherwise.
Recorded unemployment was falling steadily until recently and we now have 'skills shortages' across industry, so severe in some sectors, such as Teaching and Nursing that immigration has been actively encouraged. Anti-age legislation arrived in 2006. Progressive employers are now tapping back into the 'grey hairs'. These developments have specific and general implications for the Finance Director.
New anti-discrimination legislation
The UK Government has chosen to implement the EU Employment Directive on Equal Treatment. It requires all Member States to introduce legislation prohibiting direct and indirect discrimination at work on the grounds of age, sexual orientation, religion and belief and disability. The final stage outlawed age discrimination in employment and vocational training in the UK.
This article deals not so much with the potential consequences of ignoring the new law but more the potential advantages of adopting a proactive approach, whether in Finance or the organisation at large. Leading and astute organisations, especially in the public sector, are already taking progressive steps to get ahead of the pack and many are realising the untapped potential of a workforce that is fitter than its parents, with different aspirations, facing the looming prospect of the retirement age being raised to 70.
Skills Shortages in Business and Finance
For the 3rd edition of 'The Role of the Finance Director', 200 FDs were surveyed from all sectors and many FTSE companies. To the question 'what are the biggest challenges you face?' the most common response was 'getting and keeping good people.' We discuss employee retention later. In the meantime, what are the factors that led to this response?
Clearly there are skills shortages across most sectors and industries. If you want your offspring to be millionaires, get them to train as plumbers, plasterers, fitters or electricians. But there are growing shortages across many roles in business, especially specialisms such as IT and Finance.
It's not just that there aren't enough accountants with inter-personal and communication skills. There has been a preoccupation with 'youth' – and good for that, because it often took years to get responsibility in the old days of 'dead men's shoes'. One of the inevitable consequences is that the proportion of women in the workforce, including management, has increased – and not before time.
The trouble is that these changes have usually been driven by need or laggard response to legislation (viz the proportional response to disability legislation). There are real benefits for the organisation that recognises and attracts undervalued talent before the pack climbs on the bandwagon.
Undervalued Talent
There has been much ignorance and prejudice against under-represented groups in the workforce. One of the old myths about women was 'women leave and have babies'. Asking a woman about her marital or family plans has now been outlawed but progressive employers had already noticed that women were more loyal than men, especially when they were supported and encouraged to return to work after a family. (Sadly, the growth in female employment may still be largely due to the 25% disparity in average pay scales. Ultimately this may drag down men's pay also.)
In 1991, as FD of a public sector organisation, Government policy was to increase the proportion of women accountants to 20% by 2000. This was nonsensical approach, but sadly reflected the dreadful under-representation of women, despite them representing more than 50% of accounting trainees.
We adopted a different approach. Adverts were worded 'do you feel undervalued in your present role?' We never positively discriminated but instead appointed or promoted on merit whenever presented with an undervalued talent. They blossomed. We benefited. Our reputation as a fair employer spread, including ethnic minorities. From 1991 to 1994, our proportion of women accountants grew from 14% to 50%. Most went on to be FDs elsewhere. We received a constant flow of unsolicited cvs from talented individuals.
The Myths of Age
Progressive organisations can adopt the same strategy for age. But let's dispel the myths.
Older people get ill more often. They are fitter, take more care of themselves and are much more relaxed in their outlook to life than ever before.
Older people have less energy. Thousands of over 50s regularly complete Marathons, Half Marathons, Triathlons, etc.
Older people are set in their ways. There is a growing concern about the proportion of younger people who are irresponsible in relation to alcohol, diet, drugs, fitness, health and sexual promiscuity. Older people are often more reliable, smoke and drink less.
Older people are harder to manage. They often listen and communicate better, are more customer-focused, committed and harder working than many younger people.
Older people are only there for the short run. Many young people don't want careers, live for the moment, job-hop for extra money, take more away days and cost more to train.
The truth: older people are loyal, hard working, respond well to good management, are more at ease with themselves, preferring security to a progressive income.
Part of Employee Retention
Some organisations in the UK have staff turnover rates as high as 200%pa. 15-20% is common. Among the most important reasons are: job-hopping for more money; and poor employee relations.
A major employer in the North has published its employee values on its website, including: 'Our intention is to create the best workplace for our employees.' The reality is that people are steadily leaving and their exit interviews tell the same story: over-worked, undervalued, underpaid, broken promises, poor communication, etc.
People don't leave for more money. They leave because they're unhappy, undervalued or unsettled. An organisation that develops an employee retention strategy based around valuing people will have lower staff turnover. Where it understands values, attitudes and management styles conducive and receptive to older employees, not only will its staff turnover rate drop, but also the workplace will be more relaxed and productivity improve.
Customer Awareness
At last, especially retail organisations are becoming aware of the importance of the customer. Markets are changing. Women make up more than 50% of the workforce and are involved in all major spending decisions in the household. Women on average are more people aware. Just as important is the growing dominance of the 'grey market' in every aspect of life but especially retail consumer goods, fashion and financial services.
Apart from the practical value of employing people who know personally what their customers' attitudes and aspirations are, customers are intuitively aware if an organisation's values and behaviours match their own. You wouldn't send an army of British accountants to sell women's wear to Japanese pensioners.
Coaching, Mentoring and the Value of Experience
Management sometimes thinks older people are harder to manage and won't work for younger managers. Younger people sometimes think they know all there is to know. In practice, very few older people cause problems and younger people often find they benefit from the experience and wisdom of older colleagues. There is no longer an automatic assumption of a correlation between age and seniority. After all, many of the over 40s were got rid of! (Elsewhere, the recent Tory leader was 62 and many politicians and captains of industry are in their 60s or even 70s.)
The open-minded organisation values 'expert' knowledge. When you make someone redundant after 30 years, that much experience walks out the door. It is hardly ever 'downloaded'. Older people do not have to be more senior in order to make excellent formal or informal coaches or mentors. Those hired back in are likely to be more humble and more modest in their aspirations. They are eager to learn and grow and grateful to be valued once again. Soaring self-esteem can be a benefit for the whole organisation.
Starting Now
So there are many positive reasons and values for capitalising on undervalued employees in under-represented groups. Now that women are more than equally represented in the workforce, the next opportunity is older people.
Most organisations will drag their feet and wake up at the last minute to the new legislation. They will be ill prepared, poorly presented, badly researched and without the first idea as to how to attract this new sector. (Some may be stupid enough to advertise 'older people wanted' – and find themselves in front of the EOC!)
Progressive organisations are ahead of the game. For the best, the legislation may be incidental. They will already have progressive HR and employee recruitment, development and retention practices. They are already open-minded to the advantages described earlier and are cherry-picking the best. Companies like Asda, M&S and B&Q have been at it for years.
Messages for the FD
All of the foregoing is relevant for the FD. People cost money. Some estimates put the cost of a lost employee at between 50-100% of a year's salary. Skills shortages and staff turnover are just as prevalent in Finance. When Finance people leave, they also take years of accumulated wisdom, knowledge and expertise.
Interim management is growing fast – not just to fill temporary (or even long-term) gaps, but also to hire in expert knowledge for a particular project or change programme. Exactly because of the redundancy practices of the 1990s, the proportion of over 45s in interim management is growing rapidly. They are not a cheap resource – so why not hire them permanently? The potential advantages have been identified earlier. Once again, it is an opportunity for the progressive FD to lead change in sound management practice.
Terry Carroll is Group Finance Director of Eatonfield Group plc. An accountant, banker and stockbroker, he has previously been CEO or FD of a number of unquoted companies.
Contact: +44(0)1352 757008 or terrycarroll[at]tiscali.co.uk
The articles published here in the Thinking CEO are internet updates of the latest management knowledge and practice, which have been commissioned by Sovereign Publications for their bi-annual magazine, CEO Today, and will appear later in the first 2007 issue of this publication. To contact Sovereign and CEO Today, go to:
http://www.sovereign-publications.com/ceo-art.htm
