CEB’s survey of more than 100 midsized company executives clearly showed that executives in finance and HR – including CFOs, chief administrative officers and chief human resources officers (CHROs) – want to work more closely and take advantage of opportunities to help teach and learn from each other.
The same survey highlighted five areas where CFOs and CHROs agree on how they should work together, and four areas that CHROs and CFOs view differently and believe the other should strengthen their expertise.
The previous post looked at how CFOs and CHROs should collaborate to help the line make critical talent management and business decisions.
This post looks at the four business issues over which CFOs and CHROs disagree, and think the other should strengthen their expertise for better collaboration.
Four Areas of Disagreement
CFOs believe the HR team needs to strengthen its knowledge of quantitative metrics:
“HR needs to understand the complexity in the way Finance thinks about things: cash cost versus allocated cost, current year spend versus run-rate spend, etc. Often, meetings with HR take five tries because the analysis or presentation isn’t thought through.”
CFO, Business Services Industry
CFOs should expect CHROs to have the financial expertise to engage in cost–benefit analysis and, if necessary, should assist in strengthening the financial acumen of the HR team.
On the other hand, Finance has to understand the limitations of “communication by metrics.” Finance and HR executives at more forward-thinking companies work together to identify where the other group doesn’t understand technical terms and concepts.
Also, in helping HR mangers become more fluent with data, finance managers get a better understanding of where they are failing to communicate effectively.
CFOs want assurance that CHROs closely monitor and report details on headcount and expenses:
“Many HR leaders do not feel responsible for the overall costs of personnel and simply follow requests for hiring from other senior managers within the company. One of the critical dependencies between HR and Finance relates to headcount planning. HR should be regularly aware of near- and mid-term hiring plans, not only for recruiting and sourcing but also so they can regularly evaluate the organizational structure for necessary adjustments.”
CFO, Business Services Industry
CFOs and CHROs need to involve the line not only in business planning but also in workforce planning. CHROs and CFOs often start out on different pages, resulting in budget-busting and blinkered decisions throughout the year.
CHROs should work with the line to set realistic expectations and then continually update and communicate workforce needs – from a business perspective – to Finance to allow for disciplined decision making.
CHROs want CFOs to understand that labor laws can limit HR action:
“[In the US] HR navigates compliance issues at federal, state, and local levels. Our compliance with those regulations determines how we handle various pay issues. Complacency in dealing with policy and procedural adherence can create unnecessary additional expense, and sometimes problems can surface later when the cost has become substantial.”
CHRO, Food Industry
CFOs must understand the mandatory HR compliance expenses that can’t be shortchanged. The legal expenses resulting from noncompliance can far outweigh any preventative expenses.
However, HR has to understand that “leading with no” can frustrate the business. HR and finance executives should collaborate to find a way around the compliance issue that saves money but doesn’t harm business performance.
CHROs want CFOs to understand that development has strategic value beyond a direct ROI:
“The return on investment of HR initiatives is difficult to accurately demonstrate and easy to shoot holes through. On some level, CFOs must believe that investing in people initiatives has payback in employee engagement and satisfaction. CFOs need to be open to the intangible value of an engaged, motivated, and committed workforce.”
CHRO, Banking Industry
To hit aggressive growth targets, most companies must invest in training to fill critical capability gaps. Often that training is essential to strategy, but it lacks a clear, hard return on investment (ROI).
CFOs should recognize the value of strategic development and the real business risk that a lack of skills, capabilities, and candidates to succeed senior managers represent.
CHROs should teach line managers how to identify capability gaps and work with them to create a clear and compelling case for development dollars based on business risk and opportunity rather than “development for development’s sake.”
Read part 1 of the series, Bridging the CHRO/CFO Divide: 5 Steps to A More Powerful Partnership
Read part 2 of the series, Bridging the CHRO/CFO Divide: Engage in Strategic Planning Early
Read part 3 of the series, Bridging the CHRO/CFO Divide: Integrate Operational and Workforce Planning
Read part 4 of the series, Bridging the CHRO/CFO Divide: Help the Business Use the Right Metrics
Read part 5 of the series, Bridging the CHRO/CFO Divide: Align Compensation and Benefits with Corporate Strategy
Read part 6 of the series, Bridging the CHRO/CFO Divide: Coordinate Your Approach to the Line