Attraction/retention and benefits costs C-suite's biggest concerns

The latest Duke University Fuqua School of Business's latest CFO Global Business Outlook survey reveals that in December 2017, the two most pressing concerns for top management were difficulties attracting and retaining qualified employees, and the costs of benefits.

Neither finding is surprising. Unemployment rates are at their lowest levels since the end of the Great Recession at a time when benefits account for almost one-third of employee compensation costs. At first glance, it might seem as if the C-Suite is worried about overall compensation costs as the competition for labor heats up—yet concerns about rising wages are much lower down the list. What's more, previous Duke surveys show that benefits cost have been the second or third most pressing concern for several years, with a cast of other concerns rotating in and out of first place. By contrast, concern for rising wages has been relatively low.

How can we explain this high concern for benefits costs in light of the low concern for rising wages? Doesn't every dollar spent on employee compensation count equally?

What the study findings might reflect is a tendency to view benefits—particularly health insurance, which makes up the largest category of compensation after wages, exceeding the combined costs of paid leaves and short- and long-term disability insurance—as a cost to be managed, rather than investments in the performance of the business. As a prior IBI survey of CFOs revealed, when it comes to workforce productivity, improving employee health was seen as less important than other factors such as training or satisfaction. This is despite numerous findings showing that healthier employees' better attendance and job performance can contribute greatly to the bottom line.

True, health care costs continue to grow at rates that concern payers. But if a company needs employees who value benefits, it pays the going rate regardless of what external factors drive the costs.

It is also possible that business leaders would less concerned about benefits if their impact on employee health and business performance were more widely understood. IBI has found that CFOs who recognize the link between illness and productivity were more committed to providing health benefits. The bad news is that very few CFOs assessed the performance of their benefits in any meaningful way. Until that changes, benefits costs may continue to concern business leaders regardless of changing business conditions.