HR and Finance: A strong relationship for your business success
Human Resources and Finance are often perceived as two opposite ends of the world. They don’t speak the same language – HR understands the language of people and its impact, while finance understands the language of numbers and ROI. Their core values are different too – HR values people as their best asset, while finance values assets that can be easily quantified.
Despite these differences, HR and finance cannot live without each other and must bond like strands of DNA for an organization to be successful. This is largely because both business functions have common or overlapping goals and are dependent on one another for execution of major organizational strategies.
Dynamics of the Finance and HR relationship
Employees drive business results and create value for the organization. HR as a function has the responsibility of supporting employee well-being, which in turn helps create a competitive advantage by building a happy and healthy workforce. Happy talent generally means lower turnover, which directly benefits finance as it means more money to grow the business. So, if this is the nature of business and one cannot survive without the other, it makes me wonder where the differences or conflicts lie?
It is important to highlight that business results are generally measured in financial terms and not in terms of employee health. Finance and business operations are speaking the same language while HR adds another tangent, putting HR at a slight disadvantage.
Finance and HR need to depend on one another for business success
Any strategy requires resources for execution and one of the key responsibilities of HR is to make sure the organization has resources with the right skills and competencies in the right positions. HR also needs to help keep talent engaged, in turn improving retention. To achieve this objective, HR is largely dependent on finance for things like budget, new hiring activity, or for training the existing workforce for programs that increase employee engagement. This is where finance struggles as they need to rationalize costs when they can’t measure the return on investment and justify the value. Conversely, how does finance make sure they get good top line results from people and get the help from HR to plan either for rewards programs or allocate and distribute budgets to maximize revenue? As per Forrester, Human Capital makes up 70% of operating expenses and this percentage increases as the economy becomes more and more services oriented.
Metrics that speak the same language
So is there anything we can do to remove the cultural barriers between finance and HR and help them work better together? One key development plan that both functions could implement is on the usage of technology and analytics that help quantify any HR Activity or measure the impact of a program. This would help HR speak the language of finance and business through the use of metrics. Demonstrating value through metrics such as Human Capital ROI, engagement and employee satisfaction scores, compensation and budgeting can help HR justify their investment requests.
Technology has made tracking and reporting in any area of business possible. Proactive reporting helps organizations predict events and changes that better prepare them for what lies ahead. Asking finance for budget becomes more straightforward because the business case now has a scorecard with tangible outcomes. Finance and the rest of the business now have the vital information they require for responsible decision making. Businesses simply want to understand the impact of any strategic decision within the workforce. By enabling HR to articulate the value they bring with metrics like employee engagement scores, retention rates or hiring ratios, you give everyone the information they need to be successful.
The level of workforce reporting your organization needs
How hard is it to achieve such a level of reporting capability in an organization? No doubt, it does take real effort to reach such maturity at the reporting level. But the most fundamental decision you can take is to have your HR and finance technology talk to each other. It could be in the form of integrations or data flow in a single solution, which is one of the fastest growing trends in the industry.
FinancialForce offers Human Capital Management (HCM) and Financial Management applications on one, single platform – the world class Salesforce platform. That means you have common controls, a common database and reporting tools that provide finance and HR with real-time information using the same data. The bottom line is that your organization needs to embrace a single technology to bring your finance and HR teams together. This will enable them to deliver the best results for your organization, ensuring future success.