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
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.
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.