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Forging A Link Between Finance & HR

Many see the two departments as polar opposites, but this isn't necessarily the case

4Nov

HR and finance departments are often seen as diametrically opposed, constantly in conflict, the East and West of business functions. Finance professionals see HR as having their head in the clouds. HR, meanwhile, sees finance as bean counting robots.

There is, however, a huge body of research that suggests such attitudes are detrimental to company performance and stifle company growth. A report from the Chartered Institute of Management Accountants in 2009, for instance, came to the conclusion that there are a number of benefits to both functions that can be realized through the establishment of a mutual respect. Researcher John Innes, summarized the research, noting that: 'It was commonly considered that while HR can benefit from getting financial input on how to structure bonus schemes and strategies, that finance can equally benefit from working with HR to understand how viewing employees as 'assets' rather than 'costs' can lead to a net positive effect on an organization's long-term performance.'

Innes touches on the heart of the issue here. It can be easy for those in finance to see employees simply as costs, and training as further costs, with no obvious return coming from HR who are dealing with them. They should, however, be looking at employees as assets, with training and other HR initiatives as investments that can grow these assets.

This should be easily done. Finance too manages company assets, supporting revenue rather than directly driving it. By integrating and working together, companies can achieve lower costs, streamlined operations, increased productivity, and major improvements in managing the talent within the organization.

This is particularly true because of the influx of data now available to both HR and finance, made possible by cloud technology and improved analytics capabilities. By pulling together financial and people assets even further. The information that finance gathers on earnings, productivity and customer satisfaction offers a number of insights into the staffing and development needs of an organization. A recent survey of 40 CFOs also found that 83% want help with talent management, and more than half are looking for support with succession planning. What finance manages in terms of salaries, bonuses, expenses and purchase orders all track back to the expectations and culture created by HR.

Collaboration between HR and finance is critical in optimizing the decision making of both parties. Finance has all the information as to where employees are adding value and what processes are succeeding, while HR can help finance understand when training is necessary. Building the ties can be a case of merging the departments - as some companies have done - or it can be a more subtle approach whereby controllers or the CFO take time explaining the numbers to HR leaders and help them understand why an initiative or a new software is not cost effective. HR's expertise in areas such as recruitment, training and development, communication, motivation, dispute resolution, termination, can be equally useful to finance in looking past the numbers, as well as helping the finance function develop.

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