Kelly Kubicek is the Co-Founder and CEO of Fulcrum HR Consulting.
There’s an intrinsic link between HR and finance: employees and their innate expenses. Every company has people and every person costs money, in the form of salary, bonuses and benefits. Given this, it’s a no-brainer that these two departments would work closely together. Interestingly, that’s not always the case. A 2019 research study by OrgVue (via HR Executive) revealed that 45% of HR leaders think their relationship with finance is “productive,” and only 25% think they’re “collaborative” with finance.
A major hurdle has been the lack of expectation for HR leaders to be involved in greater strategic initiatives and development. Gartner research indicates a major shift is underway: “70% of chief executive officers (CEO) expect their chief human resources officer (CHRO) to be key players in enterprise strategy, but only 55% say their CHRO meets this expectation. Even fewer chief financial officers (CFO) agree (30%). Many HR executives are ill-prepared for this greater responsibility. In fact, only 20% of Fortune 250 chief human resources officers have experience outside the HR function.”
The pandemic amplified the need for HR and finance to work together. With the sudden move to remote work, businesses were forced to readjust priorities. Finance teams and HR teams that usually didn’t communicate were forced to address and solve immediate human capital issues. Finance, usually focused on customer experience, was suddenly dealing with employee experience. The businesses that helped these two functions worked well together during this heightened time were the ones that emerged from the pandemic successfully.
HR And Finance Are More Alike Than Different
At first glance, the human resources and finance teams seem totally dissimilar. One focuses on the happiness and productivity of internal employees, and the other is laser-focused on generating and increasing revenue. But when you look closer and truly distill what each of these teams do, they’re actually pretty similar. And when their goals are aligned, revenue usually sees quite a significant boost.
HR and finance are both investment-based. One is focused on the investment of people and the other is focused on creating and securing assets and investments to meet financial goals. But at the end of the day, both are selecting and procuring assets.
This means dealing with turnover as well as growing and enhancing assets. The global head of HR solutions at Anaplan, a performance-focused SAS, explains it well: “Finance often calls such periodic adjusting and replacing of investments ‘rebalancing the portfolio.’ HR similarly needs to manage the attrition, turnover, churn, and associated costs of the organization’s workforce investments. People will always be joining and leaving the organization. To meet performance goals, HR needs to ensure optimal talent pipelines and capacity at all times.”
Finance Speak Versus HR Speak
Given the innate similarities, and their obvious connection to revenue, why aren’t these two teams working more closely together? Many experts think it’s due to communication, or more accurately, the lack of communication.
Each function uses different vernacular, which makes regular and ongoing communication difficult. Finance teams want HR teams to speak their language—ROI/money/cost/etc.—and HR professionals think other functions should start to learn their language of human capital. Common terminology that is universally used would solve the problem, yet many organizations are lagging behind.
The Society for Human Resource Management (SHRM) describes the conundrum well. If most of the leadership in companies across the business world use and understand business financial speak, should that majority be expected to learn HR language? Or should the smaller group of HR professionals learn the language of business?
At the leadership level, it’s critical for HR and finance to work as partners. It’s time to break down the barriers that have long been standing between these two functions.
Making sure these two teams are communicating and collaborating is one of the best ways to increase revenue and ensure alignment across all of management. Collaborative workforce planning—including training and upskilling, two very hot topics during the Great Resignation—will increase productivity and better arm leadership to plan and execute business strategy.