Last month, I delivered a presentation at the 2006 Financial Directors’ Conference. No, I haven’t moved to ‘the dark side’ I was there to advise finance directors on how to evaluate return on investment in HR, and how to comply with the people reporting requirements outlined in the Companies Bill.
The Companies Bill will require organisations with more than 250 staff to report on people metrics in their annual company report, and to a level of detail they have never been obliged to before.
There are two challenges for HR: first, to actually record quantifiable people metrics in a consistent manner and second, to benchmark those people metrics against meaningful comparators (ie, other organisations in their industry or location or of a similar size) to evaluate how efficiently and effectively an organisation is achieving results through its human capital.
In speaking to different HR directors around the UK, there seems to be a mixed reaction to the Companies Bill. Some have embraced the change, viewing it as an opportunity to put people management firmly on the boardroom agenda. Others feel anxious that it will only increase the already evident tension in most organisations between HR and finance.
Whatever your feelings about it at the moment, at a macro level, the Bill’s requirements are likely to create greater transparency about people management within organisations. In turn, this is likely to provide the impetus for people management to improve, which can only be a good thing for HR, senior managers, employees and investors/stakeholders.
I must confess to having felt a degree of trepidation on my way to the conference. There is a common perception that finance directors aren’t interested in HR. However, I’m a firm believer in Stephen Covey’s ‘Fifth Habit’: ‘Seek first to understand, then to be understood.’ So, putting aside all the views I’ve heard expressed, I went in to the conference with an open mind.
Finance directors, it turns out, are interested in people. But they are more interested in results – and anything, including people expertise, that helps them achieve those results. They don’t want to get bogged down in the process by which the objectives are achieved, and they’re not interested in anything peripheral that might suck energy away from achieving their objectives.
If we want to be taken more seriously by other board members, we need to stop talking about recruitment or training, and start talking about how we are boosting the company’s performance in areas such as income generation, target and productivity improvements, and greater efficiency. We need to show how our HR initiatives are helping the finance director to get income up or costs down.
Cynics may say that it’s not that simple, and we can’t influence all the variables that affect the outcome. But why not? When finance directors want to make a cut in costs, they drive that through operations until they get their outcome. We need to be confident that our expertise is strong and that our approach will tangibly improve the business’s performance and deliver those results. It’s about putting our head above the parapet and not being afraid to put ourselves on the battlefield.
We have a tremendous opportunity right in front of us. Most organisations in the UK spend more than 50% of their overall costs on staff, and HR directors can partner with finance directors to lead the way in demonstrating how investments in people deliver tangible returns to the bottom line.
It’s about aligning our goals, understanding and respecting what’s important to the other board members, using a language that shows we understand and respect their perspective and, perhaps most importantly, it’s about stepping up to the mark.
We’ve got to be willing to punch our weight in a competitive commercial and employment marketplace. If we don’t step up, we’ve got to accept our own role in putting ourselves outside the boardroom.
By Laura Frith, managing director, Reed Consulting