Why CFO's don't care about the hours of labour you saved.
Photo by Hunters Race on Unsplash

Why CFO's don't care about the hours of labour you saved.

An example of a better business case that will get your management’s attention.

Quite often I see a very similar scenario. I’ve even fallen into this trap myself. 

Brilliant new employees are given tasks that are boring, redundant, and rife with manual effort and data entry. Why? Simple. 

It’s cheaper to have the work done by newer, less expensive workers than their senior level counterparts getting paid top dollar. 

For the lucky few employees that have a bit of “programming know-how,” they will immediately start automating those mundane tasks with scripts. They’ll spend a few hours experimenting and hacking around to solve a program – and eventually script entire assignments with a button click. Junior workers are suddenly spending a fraction of time doing those mundane tasks.

Hands clicking a button, Automation, Efficiency

Next, you'll show off your creation to management only to get a luke-warm response or non-committal compliment from them.

So why is it so hard to get any real commitment from management and roll it out to everyone?

There are two major reasons...


  1. The bigger the organisation, the stronger the immune response is against changes.
  2. The benefit of automations will fail to win over management if it is based on saved labour hours alone.

Recently, I saw an article from Josh Case describing his fantastic automation – he’s a wiz of a doctor that can code! I highly recommend you check out his article showing how he solved a problem using nothing more than notepad and a few browser queries! 

His story reminds me of the same position I found myself in 13 years ago as a new grad. In my case, when it came time to get support for my automation, I found it hard to get traction with management. 

No alt text provided for this image

Here are a few quick strategies learned the hard way for getting the attention from the higher ups.


The bigger the organization, the stronger the immune response is against change.

First lesson - get ready for mountains push back. Lots of it. Imagine a big company as a collection of systems all working together – like the human body. To prevent risks to its health, there is a natural immune system in place. This leads new innovators and their automations to struggle for a few reasons. 

  • Often automations are someone else's job -- and you'll need to be careful of bruised egos.
  • Making automations available means getting buy-in from IT, Security, Service Improvement, and a host of other groups responsible for safely rolling out technologies to the company. 
  • A technology roadmap exists that will be rolled out to users in “only a few short weeks/months/years” that already has everyone's focus.

However the biggest roadblock usually comes from the decision maker or CFO: 

“I can’t see how this will have a positive return on investment.”

Ouch. That last one is an absolute killer. And it is used often to kill innovations in its tracks.

But wait, you’ve experienced the benefit of not doing that mundane work firsthand! You know that this automation is going to save so much time for you and your peers. 

No alt text provided for this image

Why not just add up all the labour hours that will be saved and use it as a business case. Surely that will win over management, right?

Well…that brings us to my second lesson learned the hard way.




Your automation will fail to win over a CFO if it is based on saved labour hours alone.

Wait, what? How does that make any kind of sense? Often the biggest expense of a company is on labour hours and wages, right? Shouldn’t reducing labour hours on an inefficient task with automations be better for the company?

Absolutely, but saving on labour is a bit tricky. Often, showing a financial benefit means there needs to be an amount of cash that “hits the books” in the accounting department. Let’s take the example from Josh Case’s article:

5 doctors spending 30 minutes every weekday doing reports, as well as 1 doctor spending 1.5 hours each day of the weekend. Assuming we're paying the doctors at overtime rates ($50 per hour), we can cost the labour used for this task annually as follows:

Annual Cost ($AUD) = 50 * (5 * 5 * 0.5 + 2 * 1.5) * 52

Which gives us a grand total of $40,300 annually.

One thing I absolutely love to see is that Josh only used overtime pay in his calculations. Wages are effectively already spent. It’s going to be paid to full time employees no matter how efficient an automation makes them. 

However, Josh was savvy enough to show the overtime payments that will be reclaimed because the automation will eliminate the need for "after hours" work.   

So how do labour savings normally get back on a CFO’s books? In Josh’s case, we stop paying overtime wages for the reports to be done and presto! Validated savings!

Josh just has to prove that eliminating manual reports also removes overtime work to show where the savings comes from.

No alt text provided for this image

Okay, but what happens if we're reducing the normal workday hours instead? As in, junior staff spend 4.5 hours less on mundane tasks each week during core business hours.

Well, for it to appear "on the books" for the CFO, it would mean we need to drop one of the junior workers since we don't need as many anymore. Ouch.

No alt text provided for this image

When we tie the value of automations to the labour time saved – it suggests we need to remove hours or eliminate employees to “realise” that financial benefit.  


Cost savings is okay, but additional revenue is better. 

Okay, so what if the work isn’t done on overtime hours? What alternatives are there for automations that help us during normal core business hours? 

We need to be able to clearly communicate the opportunity to management and the CFO, but how do we do that without tying that value to wages (and possibly eliminating someone's hours)? 

We focus on additional revenue as a proposition instead.

Let's revisit Josh's example and say junior doctors on the floors really can get back 4.5 hours per week during normal business hours. How would that help the organization reach its financial goals? To calculate additional revenue, consider the following:

  1. Know the methods in which your organization generates revenue. 
  2. Show how the “Day in the Life” of a junior doctor becoming more efficient will increase those revenue generating methods with the time they now have “freed up.”

In Josh’s case, let’s assume a junior doctor can normally see eight patients per day, how many more could be seen with 4.5 hours of extra time? And how much revenue is created by the extra patients seen? 

Let’s assume that 4.5 hours extra time means an extra four patients can be seen, averaging an additional reimbursement payment of $200 AUD each.

4.5 hours extra time ~ 4 extra patient seen

Annual Revenue ($AUD) = 4 extra patients seen * (52 weeks * 1 doctor) * $200 reimbursed = $41,600 annually.

Now I admit, that calculation has a few assumptions:

  1. The average reimbursement per patient is only $200 AUD
  2. An additional four patients can be seen weekly by the junior doctors when they are no longer doing manual reports.
  3. Extra time for junior doctors alone is enough to increase patient discharge rates (and the payments to the hospital).

So how would we prove these assumptions are true? Simple. We'd run a Day in the Life (DILO) study. To show the increase in patients and revenue over time, we'd run a study both before the automation is widely available and after the automation gets adopted to prove those assumptions are true with validated data. Then you’ll be able to make a verified case statement to the CFO like so:

Using this automation, an extra four patients per week will be seen by junior doctors amounting to an additional $41,600 revenue to the hospital annually.

No alt text provided for this image

That is a much easier statement to stand behind. First, it is clear to the CFO where to look on the profit/loss statement to see that amount “appear” without needing to eliminate junior workers or their hourly wages. Second, it's easy to prove the finances and assumptions with when those extra four patients are seen each week.

In fact, we even have a TANDM Suite template you can use to hand your CFO a live dashboard that tracks your automation’s financial benefit in real time!

Want help to make a case statement for your new automation? Reach out to us at www.cogniom.com for help to get you started.  

If you like stories about technology, medicine, and research be sure to follow me on LinkedIn.

No alt text provided for this image

If you're a researcher or innovator, with an upcoming project but don't know where to start, I'd love to hear from you. Alternatively, if you're looking to prove your project’s potential ROI or benefits, join our mailing list and we'll be sure to keep you in the loop. Let's chat!

Karen Yap

Regional Sales Manager | Enterprise Software | President's Club

2y

As always Robert - great article!! 👌

Like
Reply
Josh Case

CTO at Go Locum | Medical Doctor

3y

Very very insightful blog post 🔹️ Robert Buehrig 🔹️, thank you for sharing. I learned a lot. Will reply to your email tonight.

Like
Reply
Adam Bean

I help CEO's - GM's & MD's build world class agile cultures without curtailing your innovation or killing your vision. COO in training | SCRUM Master | CSPO | Coach | Investor | Speaker

3y

This article is so spot-on Robert. I spent years trying to drive change/Innovation inside tier-one construction companies only to have it constantly killed off by the immune system response. Love the idea of focusing on additional revenue. Will have to discuss a project I'm working on that this will be perfect for when we chat. Adam

To view or add a comment, sign in

Insights from the community

Others also viewed

Explore topics