Human resources (HR) departments and the Chief Financial Officer’s (CFO) office have historically not worked as collaborators.
The tide, however, is shifting in disruptive companies where the two worlds of HR and finance have begun to converge, with immediate results. With 2016 drawing to a close and businesses looking ahead to 2020 and beyond, companies are increasingly being tasked to rethink the traditional relationship between finance and human resources – to think more broadly, be more strategic and commercial, and less siloed in structure.
That’s according to a business forum staged in Sydney today hosted by Oracle Corporation where a range of industry leaders were in agreement in how aligning HR and Finance, can create immediate strategic value within an organisation.
New challenges call for new solutions
“As companies seek to grow, the two most likely obstacles they will face are a scarcity of funding and a shortage of human capital. To overcome these finance and talent bottlenecks, CEOs are increasingly coming to rely more heavily on both the CFO and the CHRO,” said Tim Jennings, Chief Research Officer and Research Fellow at analyst firm, Ovum.
He said a growing number of organisations are turning to digital platforms that bridge the traditional divide between the two areas. “This allows both HR and financial decisions to be made based on the most accurate data available within the organisation,” he said.
Another forum speaker, Steve Vamos, Non-Executive Director of Telstra and Fletcher Building Limited, and former CEO of Microsoft ANZ and Ninemsn, said, “In 2016 and fast changing times, to be truly successful, business leaders have to shift their mindset. We need a mindset that is better suited to the world in which we operate and that strongly enables the potential that people and technology have to achieve great things.
“This is particularly important when you consider the relationship between HR and finance. While traditionally separate functions, organisations are finding closer collaboration between the two is generating big results. Working together, HR and Finance can more effectively support new initiatives, explore new ideas and raise productivity. This changed mindset can deliver immediate results and, over time, help boost the business bottom line.”
Where can HR and finance work together?
The forum highlighted a range of key areas CFOs and HR directors need to consider when striving to add value to their business. They included:
• The bottom line: CFOs and CHROs need to work together to reduce their organisation’s Cost-to-Income Ratio through the use of workforce modelling and strategic workforce planning tools.
• Breaking down business silos: Organisations need to strive to break down the traditional barriers that exist between the HR and Finance departments. Collaborative tools can assist in this process.
• Shared metrics of success: Both HR and Finance need to be able to judge the success of their efforts based on similar criteria.
• ROI on top talent: HR wants to attract the best talent and Finance wants to keep costs contained. Methods to determine the ROI of new hires is therefore becoming increasingly important.
• The cost of diversity: Diversity is on everyone’s agenda, however initiatives are not free. The cost of new programs needs to be carefully measured against results achieved.
• Productivity: Productivity is a priority for all businesses, yet it can have different meaning for different stakeholders. A clear, cross-departmental definition is important.
How should HR and finance work together?
Sue Kent, Head of Human Resources at consumer finance business, Pepper Group, said, “While HR deals with people and finance is focused on money, it is vital to build a solid bridge between the two areas. The biggest cost to our business is people and so making sure we retain the very best and make them as productive as possible is important for future growth.”
“It’s also important that no department has its own particular agenda. All must work together towards a shared goal. When information is presented to senior management, whether by one department or together, it needs to be consistent and accurate and this can only come from having a platform that spans the business.”
Kent’s colleague, Cameron Small, Group Chief Financial Officer at Pepper Group, argued that an important factor for his company’s success was having a flat management structure. “Communication and collaboration is key, particularly when it comes to the HR and Finance departments. By understanding the priorities of each, informed decisions can be made that will help the organisation achieve its goals.”
James Finlay, Sales Director, HCM for Oracle in Australia, concluded, “No partnership has more potential for immediate impact on business performance than Chief Human Resources Officers and Chief Finance Officers working in collaboration to create cross-pillar efficiencies, plan a workforce of the future through workforce modeling and strategic workforce planning and increase efficiencies and productivity through changes to operating models.”