HR and finance: The power duo
It may not come as a surprise that business success depends on a productive relationship between HR and finance – or, more specifically, the Chief Human Resources Officer (CHRO) and Chief Financial Officer (CFO). The problem is the functions’ respective day-to-day tasks are erroneously perceived to be worlds apart, and often there is little attempt to forge a strong connection.
The HR and finance legacy
The HR and finance functions have inherited a legacy from older generations – one where they did not have equal standing in a company. The finance function was responsible for accounting and preparing important financial statements, whereas on the other side of the functional wall, HR was purely administrative, responsible for ‘hiring and firing’ and employee record keeping.
However, a lot has changed in recent years: HR has proven it is more than just transactional – it is influential. HR is wholly responsible for the wellbeing of employees and building a happy and satisfied workforce and is certainly a revenue driver. As such, the CHRO has earned a seat at the table, alongside the CEO and CFO.
According to recent research by Ernst & Young, private company CFOs have stronger relationships with IT and operations teams than they do with HR colleagues. Over half (55%) of CFOs reported they had limited or no collaboration with CHROs. See the graph below.
Why is a good relationship between HR and finance so important?
Below are three reasons why a harmonious relationship between the CHRO and CFO is integral:
- CFOs often have the final approval of HR projects
- CFOs are a trusted advisor of the CEO
- In some organisations, the CFO is directly responsible for HR and related areas like training
Collaboration provides each function with a greater understanding of how the other contributes to overall organisational outcomes, as well as their purpose, vision and values. When HR and finance work in tandem, they can yield a wealth of organisational benefits.
How to strengthen the relationship between HR and finance
Below are three tips on how to kickstart a strong relationship between HR and finance.
1. Collaborate on overlapping programs
A starting point to fostering a stronger HR/finance relationship is to recognise that the two functions share some important organisational priorities. In order to capitalise on this, the functions should work purposefully on programs where there is a natural functional overlap.
The main areas of overlap are recruitment, payroll, employee records, expense management and incentive programs. Both functions should dissect the area in question and look at objectives, outcomes and types of information or data they can use or share to help the organisation achieve desired results.
2. Break down silos
Siloed teams are typically symptomatic of larger organisations, where teams – and therefore ideas, purpose and strategies – become disjointed. Siloed teams may also be reactive, rather than proactive. This can cause inconsistency, inaccuracy and frustration, which can be felt by the customers.
One way to remedy this is to implement job shadowing. This is where representatives from each department are assigned to fully understand the ins and outs of the other – the day-to-day activities, team goals, challenges, processes, etc. They should then provide feedback to their department, and work with the other department’s ‘representative’ to identify areas where they can cooperate and add value. This will also help to identify overlaps in personnel and duties that can be streamlined.
3. Harness workforce data and analytics
Another way to unify HR and finance is to enhance HR’s data-literacy. When a HR professional is comfortable with data and metrics, they will be more confident talking to finance in their language: numbers. And, armed with data, HR will be more prepared to communicate how HR initiatives serve the organisation’s bottom line.
Both functions should work together to quantify and measure the impact of certain programs using key HR metrics, thus demonstrating human capital ROI and validating investments.
Workforce analytics also affords HR the opportunity to be involved in strategic decision-making and workforce planning, rather than just implementation.
Only when both parties show sustained effort and dedication to create a collaborative and cooperative environment can a business reach its full potential in today’s world.
The content in this blog is an excerpt from ELMO’s whitepaper: The CHRO/CFO Power Couple: Enhancing the Partnership Between HR and finance to Improve Organisational Outcomes. To download the full whitepaper, click here.
ELMO Software offers people, process and pay solutions in an all-in-one cloud-based platform. This includes recruitment, learning, performance management, payroll, expenses, and more. ELMO has helped thousands of organisations across Australia, New Zealand and the UK better manage, engage and inspire their people. For further information, contact us.
 “How will soft skills give CFOs a sharper edge?”, EY, February 2021