Closer collaboration between HR and finance gets results

HR and finance can both be part of the decision-making process
HR and finance can both be part of the decision-making process

The relationship between HR and finance has become a lot closer and more collaborative over the past three years, according to a global survey by professional services group EY.

The research found that 80% of chief finance officers (CFO) and HR leaders believe that they work together better and that high-performing companies tend to spend 50% more time on this relationship, and report better overall integration between finance and HR.

The drivers behind this closer collaboration include the chance to work together on changes to corporate strategy, such as planning for new products, changes to business models and strategic workforce planning. HR has also gained importance in the corporate hierarchy, the survey found.

Where there is close collaboration, this is reflected in the bottom line: 41% of respondents saw more than 10% growth in earnings before interest, taxes, depreciation and amortisation (EBITDA), and 43% reported a “significant improvement” in workforce productivity over the past year.

Dina Pyron, global human capital leader at EY, said: “A company’s workforce inevitably drives growth and performance and, in most companies, people are also the single largest expense. Typically, CFOs have tended to view human capital primarily as a cost, while CHROs have viewed it primarily as an asset that requires investment.”

But, with talent shortages in some areas “employers need a better understanding of the relationship between cost and performance” if they are going to retain and engage a skilled workforce, the report added. This is an area where HR and finance can both be part of the decision-making process.

High-performing companies (those with more than 10% EBITDA growth, according to EY), tended to use analytics more to support decision making. Almost half (49%) of high performers consider their company to be excellent at using data analytics to improve HR performance.

Likewise, high-performing companies reported a more rigorous approach to identifying and tracking key HR metrics. Just over 50% said the CFO in their organisation is heavily involved in identifying and tracking HR metrics, versus 10% of non-high-performers.

Rich Polster, HR VP of global business services at P&G and one of the senior HR professionals interviewed for the report, said: “When we have a strategy, as a business, it has both human capital and financial implications that must be in sync. When they’re not, we make bad decisions and we confuse people.”

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