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When I, Jeremy, was asked to write about how to get human resources and finance to work together, I nearly spit out my coffee. I flashed back to all the technology projects I've worked on and continue to work on at Hive Tech HR, where the CFO is engaged just enough to add pressure to the situation. Not engaged as in "Boy, I sure stand to benefit from the information that could be flowing between finance and HR," but rather, "How much is this going to cost me, and could you kindly keep that cost down?" That's negative engagement.
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The other time I often see finance and HR work together is to make the business case for technology. Any good vice president of HR recognizes when the technology she uses to manage people has become antiquated. And any CFO worth his salt understands how to calculate return on investment, which typically comes with a new HR system.
But there's still something missing. Where is the desire for these two critical departments to work together once an implementation is over? Once the HR system is in place-- even if it's an integrated system that covers finance and HR -- why isn't information sharing natural? To get to the bottom of this, I had to do what any good game show contestant would do, phone a friend. So I reached out to my colleague, Michael Moon. Here's what she had to say.
The heart of the matter
I recently completed my doctorate in human capital management (HCM) at Bellevue University in Nebraska. Back in 2010, I sat through my first residency, which was with David Vance, executive director of the Center for Talent Reporting. His seminar, "Finance for HR," showed how vital it is for HR practitioners to speak the language of finance and apply financial concepts to HCM to make evidence-based decisions.
Fast forward to 2016. The speed and complexity of change is forcing organizations to look beyond immediate headcount and plan for future workforce needs, including unique employee attributes and position requirements. The process involves more than just the normal workforce planning activities that a financial planning analyst or workforce analytics consultant might go through. Competitive advantage comes from a company's ability to model future states based on predictive outcomes, the alignment of organizational capabilities and the ability to follow through on the strategy to support these areas.
Financial decisions involving staff should not be viewed as just expenses but rather as investments that are expected to bring a return. Organizations should think about how they can either minimize the cost per employee or increase the amount of revenue generated by each one. This cannot be done effectively without a joint effort between finance and HR.
Finance and HR working together
In many companies, finance and HR systems can't interact, and the data is trapped in silos, making it unavailable to business decision makers. Tightly integrated systems are especially important for organizations that want to combine data to explore the links between people data and financial outcomes. Finance and HR departments need to invest in integration technology to collect and analyze employee information. After that, the analytics fun can start.
Many organizations have high-quality HR data residing in a multitude of places, such as human resource management systems or learning management systems, but they still struggle to effectively use the data to predict workforce trends, minimize risks and maximize returns. HR departments need to learn to partner with finance and share access to analytical and business intelligence tools -- and access to people, too.
Top organizations understand the correlation between workforce effort and business results. Furthermore, they understand that business results are depressed when the effort put out by workers is either not aligned with what the company needs or employees are overextended. Businesses must think beyond basic headcount reporting and act more strategically through the use of short- and long-term strategic workforce planning, better business alignment and the use of workforce analytics.
Workforce planning is a process that applies the rigor of financial planning and analysis to optimize workforce decisions. Organizations that combine finance and HR for this purpose are better able to collaborate, unify operational and financial planning with organizational strategy, and remain compliant with regulations. And together the departments can equip the business with data-driven insights that help drive optimal decisions about workers.
About the authors:
Jeremy Ames is co-founder of Hive Tech HR, a consulting company based in Medway, Mass. He is a 15-year veteran of IT implementation projects and sits on the HR Management and Technology Expertise panel of the Society for Human Resource Management. Email him or follow him on Twitter.
Michael Moon is a human capital management and analytics consultant and speaker. She was director of HCM Research at the Aberdeen Group and holds a doctorate that blends HR, finance, economics and organizational psychology. Follow her on Twitter.
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