HR and Finance should coexist

Recently, CIMA and the Chartered Institute of Personnel and Development (CIPD) entered into a major new strategic collaboration to foster closer working links between the Finance and HR professions. This is a timely move to bring about the synergistic results between the financial and HR experts, in an era where many organisations face a dilemma on striking the right balance between financial and human resources.

In this backdrop, it is worth highlighting the stance of the two professional bodies on the importance of finance and HR aspects of business.

Chief Executive, CIMA, Charles Tilley said, "CIMA has long advocated that more emphasis should be placed on measuring the value of non-financial assets. We are delighted to join CIPD to meet what we see as a critical issue for business. By working together, we hope to show that accurate and relevant reporting on an organisation's people, and on its financials, provides real insight into the true health of the business, on which sound investment decisions can be made."

Chief Executive, CIPD, Peter Cheese said, "We know that people are critical of business success. But you get what you measure, and many of the recent crises affecting business can be traced back to failures of culture that could have been picked up if longer-term people-related metrics had been given more weight instead of a myopic focus on short-term financial results. Our collaboration with CIMA will help us build hard metrics for what is often seen as the 'soft' contribution of people and culture, to organisational value."

Important function

For many years finance and HR professions have strived to make its mark in the business pinnacle. Gone are the days where HR was considered as a back office and mundane task which was confined to staff administration and welfare activities. There is ample research which reveals that HR is considered one of the important functions similar to finance, marketing, and IT. Moreover, many business professionals recognise HR professionals as CEOs consultant as they have the innate skills and knowledge to manage an organisation's most valuable asset, people.

However, in the light of the above paradigm shift of the HR profession, it is important to address the tension that exists between the Finance and HR functions within an organisation.

This may be due to the fact that the finance departments usually focus on managing cost to increase profitability and consider HR as a cost factor, as majority of an organisation's cost is on payroll and staff related expenses.

However, HR regards people as the most valuable asset for an organisation and would propagate staff related costs as an investment (training and development, improving staff welfare and benefits). Inevitably, staff related costs are often considered an unwanted expense by CFOs. Hence, it is not surprising to find CFOs who reject HR proposals for staff training and welfare, having nightmares trying to control cost and maintain profitability.

In many organisations, there is silent friction between the HR and Finance but, if both professions could look at the synergistic result as how CIMA and CIPD has strategically collaborated, leverage on each other's strength and compensate for their weaknesses, the organisation as a whole could benefit to a larger extent when compared to organisations where the HR and Finance work in silos and fight with each other to meet their own functional targets, which is because both professions tend to manage the organisations 'core areas' - profitability and people.

An organisation's people are the backbone to ensure profitability for its survival.

For instance, a company may have the best processes and cost control techniques to increase profitability. However, if employees are frustrated, dislocated, and lethargic then it is highly unlikely that an organisation can sustain its profitability and growth momentum.

Thus, CFOs could benefit immensely from their HR counterparts. HR professionals are experts in identifying the right person at the right time for the right job. The HR function is also adept in ensuring the organisation's HR processes and brands the organisation as an 'employer of choice'.

EVP

Moreover, in a competitive era where a 'war for talent' exists like never before, HR professionals also strive to build a strong Employee Value Propositions (EVP) which refers to the total employment experience offered by the organisation in exchange for the productivity and performance of an employee (from the organisation's mission, purpose, values, reputation, culture, people, training and development, relationships with superiors and team and total rewards strategy). HR believes that an effective EVP would attract the right talent and drive robust performance despite stiff competition.

Considering the above core strengths of the HR function, CFOs should work in line with HR on how to equip the organisation with the right EVP and talent to reach its goals.

As finance professionals are experts on cost control, they should give their input on how the right ingredients are mixed at minimum cost while ensuring quality, to build a strong EVP for the organisation.

Most HR professionals are criticised for their lack of financial expertise in understanding the 'numbers' of business and not being able to reflect HR's value in metrics. Finance professionals could also train their HR counterparts on basic financial metrics to enable them to add more value to every penny which the organisation invests on people.

Therefore, HR could be useful to build a robust EVP that would attract, retain and motivate the right talent at the right time for the right job to ensure profitability of the organisation and meet the objectives of the CFOs and finally, achieve the overall objective of the organisation.

Hence, more avenues should be identified on how HR and Finance can be linked to improve an organisation's true health and value. The strategic collaboration between CIMA and CIPD is a major stepping stone for HR and Finance to coexist.

(The writer is an Associate HR Consultant at HR Cornucopia, the local arm of HR Cornucopia, India. She can be reached at [email protected])