Talk to the money: Why finance and HR must collaborate more

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Analysts have discovered “a powerful link between a business’s performance and the extent to which its HR and finance leaders collaborate”. This HR-finance partnership is hugely valuable to organisations if only they can get it right. But new research has revealed that collaboration is proving difficult to instigate and challenging to navigate, writes Concentra Analytics’ Rupert Morrison.

It’s hardly surprising that HR and finance aren’t exactly clicking. These departments have never been closely aligned, so why the necessity for collaboration now? In short, so what?

There’s one crucial reason: business performance.

HR is beginning to realise the potential of people data and workforce analytics. And as it becomes even more mainstream a healthy relationship with finance will mean both teams can be more effective and deliver true organisational value.

So, what are the challenges holding back better cooperation? And what can be done about it? We commissioned research with over 400 HR and finance decision-makers to find out.

Where are we now?

For HR and finance to collaborate effectively there needs to be recognition of the issue, a willingness to change, and effective processes in place to support it. So how close are we to achieving that?

The research shows that less than half (40%) of HR and finance decision-makers in the UK and US believe they have a collaborative relationship. The results also revealed a difference in how each side views the relationship. Of HR respondents, 45% believe there’s good collaboration between departments, but only one in four (25%) finance decision-makers agreed with them.

With low collaboration scores from both sides, we asked about the barriers to success and the challenges were clear.

HR reported a lack of confidence when it comes to working with people data. In fact, 62% admitted that acquiring the right skills was the single biggest barrier to better people analytics and the most difficult to overcome. And the data showed that there was not enough insight into people data and that shared reporting structures were virtually non-existent; only 28% of respondents said they had common reporting systems.

So, what are the few problems standing in the way of collaboration around people planning and analytics?

Firstly, and somewhat ironically for HR, there’s clear confusion around roles and responsibilities.

Our survey found that HR and finance are split on who should take the lead on strategic workforce planning. HR decision-makers feel strongly they should own it (76%), while more than half of finance respondents (55%) say they should be in charge. Meanwhile, 88% of finance leaders believe they should control workforce costs, while 63% of HR respondents say their department should take the lead.

Secondly, technology is holding back progress with the majority (55%) of respondents believing that their current technology stands in the way.

Just 10% have extensively adopted specialised workforce analytics software. While others are testing or piloting such solutions, or using them just in some areas, many continue to rely on spreadsheets (48%) or PowerPoint (41%) for activity analysis and organisation planning. And only 21% of HR professionals report being comfortable with data-modelling tools.

Lastly, there’s a distinct lack of insight and forward-planning capabilities; something recognised as important by both finance and HR. Predictive analytics is starting to become central to discussions about people, but more work needs to be done to improve data literacy so that it is interpreted accurately and used to support strategic workforce planning. The vast majority (92%) of those surveyed agreed that HR should have a forward-looking capability for organisational planning.

Creating a shared mindset

A 2018 CIPD study noted that updating technology alone is not enough: “While technology suites offer the opportunity to bring people analytics (and evidence) to more HR professionals, in reality the receiving system (the organisation, the function and the team) for the technology must be both prepared and willing to adopt new practice.” For this to happen, HR needs to embrace a more analytical mindset.

Our survey highlights the need for HR to add planning capabilities that are more data-driven and forward-thinking. Here, HR directors can take inspiration from finance. While much of finance’s responsibility, like HR’s, lies with day-to-day matters, the finance department also has specialists who focus on longer-term financial planning and analysis (FP&A). It’s in their DNA.

As analyst Conner Forrest, who works for US-based 451 Research, notes: “Executives and managers must think more strategically about their workforce as a framework for driving innovation and improving the bottom line.”

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What’s needed is to elevate organisational planning and analysis (OP&A) to the same level as FP&A in the organisational lexicon. With its own title and working group that includes HR and finance, both can build a better relationship around shared goals.

Breaking barriers and building bridges

Planning for an organisation’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 in order to meet our goals?

To answer those questions, HR and finance need to break out of their individual silos. And it’s not just about getting them to talk more, it’s a wholesale change in the way the two functions communicate, collaborate and plan.

If an engaged, agile and productive workforce is the goal, then OP&A is the playbook. OP&A is a natural partner for established FP&A functions. It creates a common language and clear data points enabling finance and HR to have a meaningful, fact-based, dialogue about how they can meet collective objectives.

But someone needs to take the first step.

Rupert Morrison

About Rupert Morrison

Rupert is the CEO and co-founder of Concentra, one of the fastest growing analytics firms in the UK.
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