In today’s fluid operating environment, organizations must be agile and resilient to deal successfully with unpredictable events and rapid changes in their operating environment. They must stay ahead of business risks and opportunities by having the right people, data, processes and technology to deal with:
Moreover, while addressing these challenges, organizations must simultaneously meet financial objectives and maintain fiscal controls. To deal with these issues in a dynamic environment, Human Resources and Finance departments must collaborate effectively to improve an organization’s performance, and this includes being agile and resilient within a fluid operating environment. When they don’t collaborate well the consequences are often widespread and result in drawn-out efforts to address operational issues. Organizations should use technology to foster better collaboration between finance and HR departments, with the objective of creating new sources of value and increased competitiveness. Two core issues will benefit from HR and Finance collaboration: having the right talent for growth and reducing undesirable, costly turnover.
It is self-evident that to be successful, organizations must attract the best talent. But how to do that while respecting financial constraints is often challenging. HR departments need a clear understanding of changing resource needs across the organization and the skill requirements for each position, team and project. They must have the data to benchmark compensation, ensuring that job offers are competitive and that compensation budgets will allow the retention of top talent while meeting financial objectives. Financial forecasts should reflect both hiring costs and time to value for new hires.
Once the right people are hired, organizations must have the right programs in place to enhance workforce productivity and organizational readiness. The more traditional approaches to talent management, like succession planning and organization design based on roles and responsibilities, are being replaced by newer approaches including skills intelligence and talent mobility that promote agility. This requires systems that can monitor performance and highlight operational impediments and misalignments. Communication and collaboration between executives, line managers, and HR and Finance staff is essential to quickly resolve issues based on clear, agreed-upon priorities, definitions and methods. For example, an organization benefits when it uses technology to manage employee engagement, immediately alerting that turnover is increasing or that jobs are taking longer to fill.
Finance and HR can collaborate on several fronts to ensure organizational objectives are met. For example, the financial planning and analysis (FP&A) group can help by establishing a rolling 12- or 18- month headcount forecast from budget owners that is updated quarterly or even monthly. Budget owners can forecast individual additions or reductions as well as compensation changes, while FP&A’s model would then translate those forecasts into a line-item budget based on HR’s forecast for headcount-related costs. This gives HR departments a longer-term view of the hiring needs of the organization. Managers can see a forecast of their headcount costs without having to get into the details and Finance gets a more accurate forecast of costs. Moreover, by focusing on the people and capabilities necessary to achieve operational or strategic objectives rather than just costs, budget discussions become business-focused without sacrificing financial control. These discussions can also highlight unproductive and unnecessary headcount that take resources away from other areas that can accomplish more.
Another core pillar of human capital management is reducing undesirable turnover, especially where it involves critical or scarce skills. Turnover leads to higher costs because of the direct expense incurred in hiring and because new hires typically require some training and greater supervision. This productivity dip also can sap the competitiveness of the organization. Organizations must ensure that total rewards are market-competitive, but also that all investments in employees are having the greatest impact on their engagement and retention.
Technology plays a critical role in enabling executives and managers to connect strategy and objectives with the people needed to achieve them while meeting financial targets. For example, analytics can assess compensation to ensure it is competitive, and it can also highlight obstacles to a positive employee experience. The latter is key since today’s workers expect more flexibility and more career growth advocacy. As in the example above, having budget discussions in the context of the specific work needed will focus the conversation on business requirements and employee performance within the context of fiscal restraint and other corporate priorities.
HR and Finance teams must collaborate well to achieve an organization’s most strategic objectives. Technology can help facilitate a more robust and effective collaboration that simultaneously addresses people issues, increases productivity and utilizes resources more effectively while respecting financial objectives and fiscal constraints.