HR Insights, HR Management

5 Things That HR Can — and Should — Learn From the CFO

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There was a lot of great conversation happening at February’s inaugural TLNT Transform conference in Austin, Texas. But there was one conversation, however, which stood out to me as being of particular importance.

In a breakout session moderated by John Hollon, Nick Araco — co-founder and CEO of The CFO Alliance — discussed a very interesting trend. In the post-recession C-Suite, an increasing number of HR chiefs are now reporting directly to the CFO rather than the CEO.

While the rationale for this may be sound — aligning people processes with the company’s financial strategy is never a bad idea — it is meeting resistance from HR. The idea of reporting to the stereotypical “cold-hearted number cruncher” who doesn’t understand human resources is objectionable, if not intimidating, to many HR leaders.

5 lessons from the CFO – Keys to Strategic HR

But can HR leaders learn from the CFO? Most definitely. I caught up with Araco last week to find out what — and how. Based on our conversation, there are five things HR leaders need to learn before they can step up their game and become key players in business strategy and execution:

  1. Business perspective – What ramifications will your decisions have on the company’s overall business performance? The CFO wants to know. For example: What return do you anticipate for the money invested in a new hire? HR’s ability to think Big Picture and have some business perspective is invaluable in a post-recession economy.
  2. Use your people data — Araco says, “There should be information flow that occurs on an ongoing basis. HR data should influence decisions on business goals and performance metrics.” But, many HR professionals lack best practices and systems for collecting, tracking and reporting on people data. For the CFO, that’s blasphemous. Though HR reporting to the CFO presents a golden opportunity to grow in this key ability, success will require the CFO to take an interest in what HR is doing with data and how they’re doing it.
  3. Quantification and qualification — HR needs to learn how to quantify and qualify more strategic investments in people process, otherwise, we’ll never be able to break away from the traditional cost center, administrative or compliance function of old school HR. The more that HR can learn from the CFO how best to apply financial principles to decision making, the greater opportunity for them to position HR as a strategic function.
  4. Reinforce the Human Element — CFO’s are frequently the naysayer. And in the recession, his or her tough decisions often kept the company alive. As we move into a period of recovery, Araco suggests that it’s up to HR to inject a human element into the CFO’s decision-making process. “I think it’s natural that these roles work together.” To that end, Araco says soft skill development is key, and that HR is in a prime position to enhance the CFO’s ability to look beyond spreadsheets when weighing options.
  5. Leverage HR expertise to enhance business vision — Your ability to contribute expertise in talent management should be invaluable to leadership when big decisions are being made on business goals and strategy. A forward-thinking CFO knows that. “Finance is better off giving HR a seat at the table,” says Araco, “and on making sure the right person is sitting in it.” An HR leader who is able to tie opportunity to measurable performance metrics is going to work well as a member of senior leadership.

Out with the old, in with the new

“There’s a new generation of CFOs whose aspirations and goals are better than simply crunching numbers,” says Araco. “They view the greatest value having someone seated next to not under.” By elevating performance in both roles, there’s an opportunity to transform HR and Finance simultaneously.

But that opportunity is only available to those leaders who can work together to that end. As Araco warns, “Those who fight this are going to be left in the dust.”

This is a condensed version of the original article. For the post, check out the original article on Kyle Lagunas’ blog.

As a tech enthusiast and senior analyst at Independent Insights, Kyle Lagunas is dedicated to keeping today's business leaders in touch with important trends and hot topics in the world of work. Connecting with thought leaders and in-the-trenches professionals, he offers a fresh take on best practices in recruiting, human resources, and talent management. Contact him at kdlagunas@gmail.com
  • Jacque Vilet

    This is not a new trend.  HR fought this tooth and nail back in the 90′s and won.   They started reporting to either the CEO or COO.   But in all fairness/truthfulness now HR has fallen behind the curve —- I cannot argue that reporting to the CFO is a bad thing.   If HR had its act together this would not have happened.   So they have no one to blame but themselves.

  • Ysnatak

    İ dont agree this artice. Because CFO’s focus on budget. For this reason they are not interested to HR businees.

  • Debra Nortje

    Whether or not HR reports directly to the CFO of CEO, what is important is that there is a close relationship with Finance.  Adopting and utilizing best practices with regard to HR metrics, as well as being able to intelligently interpret them to EXCO will forge a stronger relationship and greater respect.

  • Tmm

    As a long time HR professional, I truly believe HR must report to its own VP or directly to the CEO. Reporting to the CFO still allows all people decisions to be put through the financial filter and people just do not fit into a financial filter.  Finance is ‘black and white’ whereas people issues are always ‘grey’.  Perhaps that is part of what is wrong with organizations today – that we try to reduce our employees to KPIs and financial statistics? 
    I agree many financial professionals are more aware of employee issues and that there is more training in financial degree courses around people management.  However their primary focus will always be on the finance side.

  • Jacque Vilet

    HR like it or not is part of the business.   It is not just people.   It is about how to get  people to be productive, engaged, etc.  for the SAKE OF THE BUSINESS.    Companies are  not in business for people.   People are in business for the company.   That’s facts.   Like it or not.  And because someone has to understand business and HR does not —- it can/will be lumped under Finance.   HR has a choice —- either understand the business — or report to someone that does.   It would be best if HR reports to the CEO —– but it is HR’s decision.   It can start thinking about business and people in a whole new light or not.   Up to them.