The need for human resource leaders and chief financial officers (CFOs) to create a close working relationship is growing increasingly apparent, hastening the two to reconcile their biggest concerns - human capital and funding.
HR leader's primary domain of management is the development of employees. These workers are a company's human capital; they are the keys to success, the determiner of a business' future. As such, they require great investment - both in terms of time and money. This latter factor is where the needs and interests of HR leaders and CFOs converge and sometimes collide, especially as human capital occupies the bulk of a company's expenses, with some experts estimating it makes up 70 percent of operating costs, according to research from the Korn Ferry Institute.
With this much of your annual budget going toward human capital, ensuring the most effective development strategies are in place is critical. Collaboration between HR leaders and CFOs is proving key to structuring and maintaining a high-performing workforce that puts a company on the track to success.
A company's biggest challenges
With a shortage of human capital and sufficient funding being the primary problems any company faces, the roles of CFO and HR leaders have only grown in importance. As they have done so, effective leaders have needed to break out of the traditional silos of these roles to see the bigger picture and redefine the responsibilities of the CFO and HR leaders from administrative to strategic.
For example, adopting a long-term, broad perspective of a company requires CFOs and HR leaders to recognize the spaces where finance and HR overlap and how greater collaboration can address their biggest challenges: human capital and funding.
Efforts at increasing collaboration are already underway by many companies. In fact, a recent report from Ernst & Young found that of the 550 finance and HR leaders surveyed, 80 percent said their relationship has become more collaborative, with 42 percent reporting it had become "much more collaborative."
Benefits of collaboration
As CFOs and HR leaders begin to emphasize a collaborative partnership, what are the benefits companies can expect to reap?
When CFOs and HR leaders work together to manage human capital and its costs, it helps companies grow. The same study from Ernst & Young reported 41 percent of respondent claimed improving their working relationship contributed to a 10 percent boost in earnings, and 43 percent saw workforce productivity increase.
Bringing CFOs and HR leaders together can make sure that when it comes to decision-making, both the financial and people effects are addressed and weighed at the start rather than after the fact. It allows companies to be forward-thinking instead of focusing on rectifying problems created in the past.
Tackling data culture
Data is another area where CFOs and HR leaders have diverged. While both recognize the utility of data, the way in which it is used is where these two departments go their separate ways.
One of the biggest problems companies have in successfully deploying data-based initiatives is the traditional corporate structure.
"Common vertical hierarchies undermine the ability for a company to use existing skill sets, collaborate effectively and execute initiatives swiftly, especially in response to the "information overload" that big data brings," explained an article in CFO, adding that CFOs are in a prime position to empower other departments to utilize data.
HR analytics, in particular, are enhanced by finance's approach to data and vice versa. Working together, the power of big data can be harnessed to translate employee engagement and productivity into numbers. This allows for HR to fine-tune, or even scrap, initiatives, and it adds depth to finance's understanding of the company's overall state.
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