What’s Keeping HR and Finance From Being Friends?

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Jun 27, 2019
This article is part of a series called Editor's Pick.

In the current business climate, pressure is on HR and Finance to pull together and manage the workforce more effectively. EY research has shown there’s “a powerful link between a business’ performance and the extent to which its HR and Finance leaders collaborate.”

This shouldn’t be surprising. Both departments work towards the goal of a successful and well-run business, especially when it comes to the workforce. Both want the right people in the right places doing the right things.

Yet, too often, that common ground between HR and Finance is lacking. In our recent study, carried out with 400 HR and Finance professionals, we found that just 25% of Finance decision makers see their relationship with HR as very collaborative, compared to 45% of HR decision makers who see it more positively.

Given the biggest cost of any business is still labor and the success of an organization is dependent on those people performing well within an efficient operating model, stronger collaboration is both a financial and employee engagement goldmine. As it currently stands, only 44% of HR and Finance decision makers can confidently say that their workforce is aligned to their operating plan and investment strategy.

So, where is it going wrong and what can be done about it?

Where to work together

Our research shows that workforce planning is generally seen as HR’s responsibility, except when it comes to cost management. 68% of those we asked said HR should determine future workforce needs, but 71% see managing overall people costs as a Finance responsibility.

To address this gap and produce accurate financial projections, Finance needs to understand what work needs to be done and how much it costs to perform the work. It’s then down to HR to use that information to find the right talent and for Operations to deploy the people to do the work.

Planning for an organization’s future involves asking many questions: How should the business be designed to deliver on strategy? Are people doing the work they should be doing? What skills do we need now and in the years to come? How are employee costs likely to change if we are to meet our goals?

To answer these questions, HR and Finance need to break out of their silos. And it’s not just about getting them to talk more. It’s a wholesale change in the way the two departments communicate, collaborate, and plan. Our study reveals only 28% of HR and Finance departments share reporting systems and processes. Rather than the ad hoc collaboration we see today, it should be systemic and process-driven with dual lines of reporting.

Cultural disconnect and skills gap

Perhaps the most difficult hurdle to overcome is the cultural difference between HR and Finance. While Finance typically views people as an asset, HR sees them as value and skills. Also, HR tends to be more focused on historical reporting, while Finance is more concerned with forecasting.

When it comes to developing capability for analytical thinking, HR lags behind Finance. HR professionals tend to be less confident when it comes to handling data, particularly in large businesses where the workforce can be sprawling and dynamic.

We found that 62% of HR decision makers feel that acquiring the right skills is the single biggest barrier to better people analytics and the most difficult to overcome.

To help forge stronger links with Finance, HR should introduce a routine working relationship with the financial planning and analysis (FP&A) function. But ultimately, HR needs to create an equivalent function, which we call organizational planning and analysis (OP&A), that would enable collaboration on an equal, more focused basis. OP&A should aim to be highly analytical and capable of planning, budgeting, and scenario analysis of new opportunities.

Silos and divergent processes

We know that accurate and timely data is the key to an effective and integrated workforce planning capability, but HR and Finance tend to use different methods to capture people data, creating separate data islands that cause both sides to question the validity of that data. This can lead to distrust and, in turn, inaction.

Without an integrated approach to data, not only will both departments be inefficient, but they risk losing credibility with the rest of the business. Nothing else will have a more detrimental impact on their ability to plan the workforce than a lack of data integration.

A purpose-built platform for the analysis and modeling of data from any source is the foundation of true strategic collaboration between HR and Finance, giving both departments a single view of the business that connects cost and profit.

With this architecture in place, HR would be able to have a more meaningful, data-driven conversation with Finance and the business about changes that need to be made to meet strategic objectives, as well as planning for different scenarios in the future.

Delivering business value

That said, research by CIPD notes that updating technology alone is not enough to improve collaboration: “While technology offers the opportunity to bring people analytics to more HR professionals, in reality the receiving system (the organization, the function, and the team) for the technology must be both prepared and willing to adopt new practice.”

Today’s highly disruptive business environment requires HR to become more forward-looking, to tackle people issues head on and better manage risk by preparing the workforce for the future. Championing collaboration with Finance is central to this and provides a great opportunity for HR to shape critical decisions and establish itself as a true strategic partner to the business.

With shared information and strong two-way communication, together HR and Finance can bring huge value to the business. Not only will the organization benefit from better-quality insight, but it stands to gain significant financial rewards as well. All it takes is for them to take the first step in partnership.

This article is part of a series called Editor's Pick.