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CFOs are Taking on More HR: What This Means for You

CFOs are Taking on More HR: What This Means for You

If you’re like many CFOs, your role includes overseeing many human resources functions beyond management of your finance and accounting team. Human capital, talent, workforce, personnel, human resources, or just HR – no matter which term your organizations uses it comes down to the same issues: recruiting, training, and managing everyone who works for your organization and the associated short- and long-term costs.

However, there’s more to HR than managing costs. CFOs are strategists, and in today’s competitive labor market, your company’s growth is tied to retaining and recruiting top talent. That means putting together a competitive compensation and benefits package while creating long-term strategies to develop essential leadership positions.

In this post, we’ll explore why CFOs may take on HR duties as well as four reasons why it makes sense for a modern CFO to oversee HR – and a couple of situations in which CFOs may need to take a step back from HR.  

CFOs and HR: Four Reasons it Makes Sense

The typical CFO job description may not include the management of human resources. However, that’s precisely what many CFOs are doing.

As a CFO during the Recession, cost-cutting was paramount to your company’s survival. Eliminating an executive position often meant yours remained while HR was cut. Your traditional role was altered as you took on HR responsibilities; there was just no one else left to do the work.

You were in good company: about one-fifth of CFOs surveyed in 2011 had taken on more HR duties during the previous three years, according to a survey by Robert Half Management Resources.

Working for an early-stage company is another route CFOs take to HR. Newer companies often lack the financial resources to add an HR executive and with few employees to manage, there really isn’t a need.

Regardless of how you got here, as CFO you are now managing HR. While lower-level HR staff handle job postings, onboarding, payroll, and forms needed to maintain compliance, you handle more strategic HR duties:

•    Putting together a competitive but cost-effective benefits package

•    Developing employee performance evaluations process

•    Strategizing and building an executive team

•    Keeping the organization in compliance with employment law requirements

A CFOs skillset is a good fit for these and other aspects of HR. We’ll discuss a few.

1. Employee compensation and benefits costs are going up.

With labor and benefits costs comprising an ever-growing slice of your budget, as the person charged with financial forecasting and budgets, a CFO’s management of HR can make a lot of sense.

As CFO, your job is to manage the finances and watch the bottom line. Rising healthcare costs, as well as increased wages in a competitive job market, will continue to impact that bottom line. As CFO you’re likely spending more time analyzing expenditures and devising ways to cut those costs.

That’s not an easy task: health benefits costs increased by 3.6% in 2018, according to Mercer’s “National Survey of Employer-Sponsored Health Plans.” Smaller employers – those with 10 to 499 employees – took an even harder hit with an average increase of 5.4%. The 2019 increase is expected to rise by 4% this year, continuing to outpace both workers’ earnings growth and inflation.

Moreover, reducing costs isn’t going to get any easier: data from HealthAffairs indicates the cost of healthcare goods and services will continue to rise through 2027 and at a faster growth than we’ve experienced over the last ten years.

It’s no wonder that the Mercer report also noted midsized and large employers ranked “managing high-cost claimants and “creating a culture of health” as top strategies for the next five years. Considering the per-employee average healthcare cost is nearing $13,000, keeping that number from increasing is critical.

Other benefits that need financial management include those not traditionally under a CFO’s administration, such as employee training expenses, and those that are, such as retirement plans and employment claims legal expenses.

2. Financial know-how is necessary during negotiation with benefits vendors.

A CFO’s understanding of financial lingo mean involvement during negotiations with benefits vendors is critical to getting the most bang for your buck. CFOs may also better understand modeling tools offered by benefits vendors because financial modeling is a strength for financial executives.

Using a combined finance and HR team approach to negotiating benefits packages and costs will result in the best options for the budget and employee needs.

3. CFOs are data-driven and compliance- and process-oriented.

A CFO’s strengths include being process-oriented and making decisions based on collected data. Those qualities are needed in HR but are often overlooked by busy HR professionals preoccupied with day-to-day tasks.

A survey by Launchways vendor partner Paycor noted 43% of small and medium-sized organization (SMBs) don’t track costs associated with recruiting, hiring, and onboarding new employees.

Creating a consistent process for reviewing, rewarding, or removing employees is essential no matter your company size. Then, your data analysis skills can make sense of data collected to find opportunities for efficiencies.

Even when processes are effective, without the data to back up their claims, HR may have a difficult time convincing their executives that employee engagement dollars are money well spent. That’s particularly true if HR hasn’t made developing C-suite relationships a priority.

Process-driven and already in the C-suite, a CFO is often an organization’s best option for this combined role of tracking and analyzing HR spending and communicating the value to executives.

4. CFOs develop long-term strategic plans which include talent and leadership.

When you took on HR duties during the Recession, it’s likely you focused on obtaining the best results with the fewest number of employees. You made strategic talent decisions based not just on the cost of talent and benefits, but also on getting the most productivity for your money.

Talent issues have changed dramatically since then. Now, retaining employees is crucial to the bottom line as companies compete for a shrinking pool of available, qualified candidates. In fact, a 2019 Deloitte survey of CFOs found that 80% rated leadership as a high priority for their organizations.

However, you know it’s not all about the money: low unemployment and an aging population mean fewer qualified workers available to help your company grow. Compensation, benefits and perks, opportunities, and culture are all part of the mix.

As a CFO, you likely either manage or work with the CEO to manage the creation of essential strategic responsibilities such as developing a leadership team and defining employee roles and objectives as well as managing the entire team’s performance.

Cases Where a CFO May Need to Step Away from HR

As your company grows and becomes more complex, there are good reasons to hand over some of the HR duties you’ve assumed.

1. HR is taking up too much CFO time.

If non-urgent and non-strategic issues such as employee discipline or hiring are taking up too much of your time, it might be time to hand over some of your HR duties to a strategic HR partner.

Even if you offload some HR responsibilities, you can continue to maintain oversight of benefits and insurance and lead your organization’s long-term strategic talent retention and recruitment efforts. With the insight you gained tackling less strategic HR duties, you can continue to advocate for more tools to capture and analyze HR data as well as training, benefits, and perks that result in improved employee satisfaction, engagement, and productivity.

2. It’s time to hire someone with different people skills.

Another reason for stepping away from HR can be admitting that you may not have the necessary people and communication skills needed to handle employee issues one-on-one. It’s not that you’re a lousy communicator, it’s just that employees may assume as CFO you’re only interested in finances, not people.

Alternatively, as finance chief, you may be excellent at presenting high-level financial information to executives and your board but struggle to explain personnel issues in terms other than dollars and cents. If your organization can hire an HR professional whose people-focused skillset complements your more analytical side, it could be a sound business decision.

Key Takeaways

Increasing compensation and benefits costs continue to affect the bottom line. However, with a shrinking pool of qualified candidates, retaining and recruiting employees is a top priority. A CFOs financial expertise and ability to model different scenarios are critical to creating effective HR processes at any business.

Because CFOs often work with the CEO to strategize for growth, in today’s talent shortage, understanding and planning for talent retention and recruitment is a top priority. An informed and involved CFO can also advocate for employees when there is no HR executive to do so.

As companies grow in size and complexity, CFOs who are too involved in HR should advocate the hiring of an HR executive or outsourcing more HR duties. That goes double if a CFO’s communication skills are better adapted to the board room than conversations with employees.

How CFOs and HR Leaders Can Effectively Collaborate For Success

How CFOs and HR Leaders Can Effectively Collaborate For Success

Historically, the roles of CFO and CHRO have been considered entirely separate, perhaps even with competing priorities. However, companies are increasingly seeing these roles as being deeply connected and working towards a common goal. As a result, finance and HR teams are starting to work together more and more. According to an Ernst & Young survey, 80% of HR and financial professionals interviewed said that their roles had become increasingly collaborative over the previous three years. And effective collaboration starts at the top, so CFOs should learn how to effectively collaborate with their HR counterparts.

When you think about it this makes complete sense. Financial assets and people are the main drivers of business outcomes, so the executives responsible for handling them should not only be communicating with each other but actually working closely together to coordinate initiatives, track key metrics, and measure performance. Both the finance and HR teams will benefit from adopting practices and metrics used by the other, and from sharing data to identify challenges and opportunities.

In this article we will explore how CFOs can effectively collaborate with their HR counterparts, CHROs for our purposes, to achieve business success. Let’s take a look at:

  • The benefits of collaboration
  • Why you need CHROs as a CFO
  • How you can help the CHRO
  • How you can break down barriers for true collaboration and a shared source of truth

The Benefits of Collaboration

Modern business challenges require modern and innovative solutions. Getting the people responsible for the company’s finances and workforce working together is one of the best ways to quickly identify business challenges and create effective and non-traditional solutions

Working together directly connects human performance with business success, adding objectivity to the analysis of human resource initiatives and its impact on company financials.

Collaboration between CFOs and CHROs is especially important right now, with a changing market and workforce. The business world is still adapting to the lingering effects of the recession as well as the stimulating and disruptive influence of startups and tech giants alike. At the same time, Millennials are poised to make up 75% of the workforce by 2025, which means that companies are having to adapt to engage and retain Millennial talent. Linking the management of people and finances allows companies to be more agile and responsive to these challenges.

Across the board many of the main challenges that businesses have faced in recent years have been related to talent. Acquisition and retention of all talent, but especially Gen Y and Gen X talent, has become a major focus for not only HR professionals but companies as a whole. It seems natural, therefore, for modern CFOs to build a strong relationship with their HR counterparts in order to tackle this major financial hurdle.

A closer relationship between CFO and CHRO can boost virtually every part of their respective responsibilities, as well as the organization as a whole. That adds up to a real impact for a business’ bottom-line. So much so that companies with a high level of collaboration between HR and Finance see an increase in top-line revenue, an increase of 10% or more in operational cash flow, and an increase in employee performance and engagement. That’s great news for CFOs and CHROs alike!

Why You Need Your CHRO

Contrary to what many CFOs believe, you really do rely upon your CHRO. Every strategy and initiative that you craft with the CEO depends on the company’s staff to succeed. The HR department is responsible for managing that staff, making sure that they are working effectively as individuals and as a team. The best way to do that is to get employees to understand the importance of the company’s goals and their contributions to the achievement of those goals. As a CFO, you need the CHRO to be the ambassador between you and the people who make your strategies into realities.

That means not only appreciating and coordinating with the CHRO or HR department but also making sure that they truly understand what you are trying to do with the company. That way they will be able to help the company’s employees understand, and help focus and coordinate each team’s efforts.

The CHRO’s role doesn’t stop at evangelizing and managing either. As a CFO, you know how important metrics are to measuring performance, identifying issues, and creating solutions. Since CHROs are essentially your go-between for the teams implementing your solutions, making sure they know what metrics to collect and share can also make your life a whole lot easier. At the same time, they can offer “softer” insights into potential causes of successes or challenges.

The fact of the matter is that not everything can be explained with numbers, or at least ones with dollar signs attached. Human performance is extremely complicated and can often be hard to measure. Your CHRO knows people and what factors might indicate or contribute to their performance as individuals and productivity as a team. If you notice that an initiative isn’t paying off like it was expected to, HR may be able to suggest causes of the reduced performance.

By working directly with the CHRO and their team, you can help them shape HR concepts into objective metrics that you can use to better manage existing strategies and to plan more effective new ones. You may think that you speak an entirely different language than the HR department, and that may more or less be true in your current processes. But bridging that gap can lead to invaluable insights.

Not convinced? Have you ever butted heads with the HR department over proposed training or talent acquisition expenses because they just couldn’t show you the numbers to justify the investment? Building a common language, and helping the CHRO start tracking objective metrics, can ease these tensions by equipping the HR team to adequately justify potential investments in human capital. That makes your job easier, and makes it easier for the CHRO to build the workforce that your company needs.

Why Your CHRO Needs You

Just as you need the CHRO to coordinate the implementation of your strategies and offer human explanations behind your financial metrics, the HR team needs your expertise to help them understand the consequences of their activities, both positive and negative. Businesses are becoming more numbers-driven in every single department. Marketing teams rely on key metrics to gauge performance and plan strategies, particularly in the realms of SEO and digital marketing. CHROs are feeling the pressure to meet the demands for objective measures of the performance of their initiatives and of the company’s workforce as a whole.

You probably live and breathe data and metrics, and likely have for years. Your expertise can be invaluable to your CHRO as they try to form strategies and develop reporting processes. We touched on how helping HR teams track objective metrics can help your own planning and reporting, but the benefits to the HR team itself are no less significant. That also means that you shouldn’t stop at the metrics that you want to have access to, and that you should help the CHRO create a performance management system that meets their specific needs, with the proper metrics and KPIs. Again, your strategies ultimately rely on the HR team for success, so make sure they have the tools they need to do their jobs effectively.

What kind of metrics should you help the CHRO track? Here are a few common examples:

  • Talent acquisition: Recruiting and hiring
  • Talent retention
  • Employee satisfaction & engagement
  • Sales volume
  • Absenteeism

What you can do to help your CHRO succeed isn’t limited to helping them track their own data, either. Just as you can benefit from HR’s insights into employee performance when figuring out the causes for a strategy’s success or failure – or trends in the company’s financial health as a whole – HR can learn a lot about the success of their own activities by looking at their impact on your metrics.

Eliminating Barriers to Create a Common Source of Truth

That brings us to the ultimate goal in an effective CFO and CHRO relationship. Both you and your HR counterpart are hurt when data, processes, and personnel are siloed in specific departments. It makes it hard to find and analyze the data you need to do your respective jobs, and harder still to see the big picture and build strategies based on that picture.

Your team and the HR team are responsible for the two sides of business success – its financial success and its people power. It only makes sense for those two sides to work together towards the greater success of the company, rather than serving as separate support departments. Creating shared databases, processes, and even teams allows for greater collaboration as well as higher performance by each department.

The goal is to create shared sources of truth for your departments and for the company as whole. Not only does this enable you to see all important metrics and communicate more effectively, it also helps you avoid the duplication of effort. You won’t be tracking the same metrics multiple times in separate databases or spreadsheets, unbeknownst to the other department. You won’t have to wrangle key information from your counterpart or be pestered for your data in return. Everything will run more smoothly, and more effectively.

Key Takeaways

In this article we have explored many of the ways that CFOs and CHROs can work together to make each other’s jobs easier and more effective. Now, there’s a lot of ground to cover and we’re sure that your HR counterpart will have plenty to say about the matter (and if, on the other hand, you happen to be an HR professional reading this article, don’t be afraid to share the article with your CFO). But hopefully we’ve given you a good idea of where to get started building an effective collaboration with your human resources team. Just remember to:

  • Make sure that HR understands your strategies and initiatives so that they can communicate them to the company’s staff
  • Get HR input on human explanations behind your data
  • Help HR track key metrics relevant to your initiatives as well as their own
  • Share your data with HR to help them understand the impact of their activities
  • Above all, create common databases and processes to foster easy, effective collaboration

This blog post is part of a series of articles on the role that CFOs play in their company’s HR success. If you work at a startup or other company that may not have a CHRO, then you may well be finding yourself handling more HR responsibilities than you expected. In our upcoming articles we will explore how you can handle your HR tasks effectively and leverage human resources to achieve business success. And since we can only cover so much in an article, we’re holding a webinar on the topic: Are you a CFO in charge of HR? What You Need to Know. So don’t forget to SAVE YOUR SEAT AT OUR UPCOMING WEBINAR.