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Mar 27, 2012

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.