HR-Finance collaboration adds value, delivers results
Call it the evolution of HR. Long stigmatized as a cost center preoccupied with the “warm and fuzzies,” the HR department has gained status in organizations, earning a place alongside – rather than subordinate to – the finance department.
Traditionally, the HR department reported to finance – a position that often suggested HR was not business-minded enough to play at the same level. Unfortunately, many HR professionals unwittingly reinforced this position by failing to learn and understand the language of business.
In recent years, however, HR professionals are realizing that their success depends not only on their HR knowledge but also on their understanding of the business’ operations, sales and finances. Many are moving beyond the roles of “policy police” to become business partners with finance and the entire management team. They are creating value that can be clearly linked to improved organizational competitiveness.
HR professionals must continuously focus more on the deliverables of their work, writes Dave Ulrich, author of “Human Resource Champions.” They must find ways to deliver HR so that business results follow quickly. They must understand how to measure their results in terms of business competitiveness rather than employee comfort, and to lead cultural transformations rather than re-engineer or downsize when a company needs to turn around.
At Canandaigua National Bank, HR is demonstrating its value in shaping the organization.
“The only way to be effective in human resources is to be a business partner who understands the organization’s initiatives as well as the expectations and needs of the line managers,” says Mary Ann Ridley, vice president of HR at CNB. “An effective HR department understands other divisions’ accountabilities, and develops plans to support those needs regarding staffing, training and performance management.”
Ridley -- a 16-year employee of CNB who calls herself “an internal consultant” -- strives to broaden and deepen her knowledge of general business information and the competitive marketplace in which the bank operates. Those attributes complement her expertise in employment law; best practices in recruitment, training and coaching; and awareness of HR trends in other companies and industries.
An active participant in CNB’s strategic planning process, Ridley advises the organization’s management group. Three times yearly, representatives of HR, finance, operations and other key areas at CNB report on and assess the organization’s progress toward meeting its overall goals. Guided by a series of metrics developed as part of an efficiency study in 2000, they continually examine and realign processes and staffing in support of CNB’s overarching objectives.
Managing change through collaboration
The increased influence of Ridley’s role – “this job is a moving target,” she says – coincides with a period of rapid growth for CNB. First moving into Monroe County in 1995, the bank has nearly doubled the number of branches it operates, to 20, and has opened a commercial lending and wealth strategies center.
Managing that growth while maintaining the bank’s focus on serving customers has been a central challenge for CNB, Ridley says. Despite its broader reach, the bank still employs roughly 360 people, about the same as it did in the late 1990s. In order to achieve the staffing goals outlined by the efficiency study, CNB had to reduce its workforce -- largely through attrition and shifting of staffing.
Still focused on ideal ratios, Ridley says, “HR, finance and the line managers continually work together to watch our staffing numbers closely.” Such attention to strategic imperatives would not be possible without the parties’ commitment to collaboration.
Executing an ambitious growth plan like CNB’s is only one of the imperatives that may drive a company to increase the coordination and accountability between departments. In other organizations, HR’s movement to the strategic-planning table alongside finance has been hastened by a tough economy and greater scrutiny of corporate governance.
More HR professionals – supported by the belief that creating an efficient environment for people’s success is fundamental and consistent with building financial soundness -- are increasingly viewed as Ridley is at CNB: a strategic partner and valued member of the senior management team. In fact, CEOs, CFOs and boards of directors are finding that human resources can be one of a company’s biggest game-changers, developing and executing strategies that directly impact the bottom line.
Strengthening HR as a player
In many organizations, HR professionals have to make up a lot of ground to earn the respect of finance and top management – and not all will rise to the task.
John Sullivan, head of the Human Resource Program at San Francisco State University suggests some steps that motivated, talented HR professionals can take to elevate their roles:
- Measure success in the ways that business does- in terms of margins, profit, ROI, productivity and other tangible metrics. Continuing to use traditional, “soft” HR terminology such as effort and satisfaction won’t earn HR a reputation as a serious player. Instead, HR must demonstrate the financial impact of its hiring, retention, compensation and learning programs on productivity, customer value and stockholder value. A company’s HR department will generate even more high-level interest if it can supply numbers comparing its superiority in these areas to that of competitors.
- Anticipate and forecast.Traditionally, HR professionals produced no forecasts about upcoming people problems. Yet that information is vital to the organization's decision-making. Savvy HR professionals will monitor and forecast the external business environment so that they can prepare managers for such events as labor shortages, changes in worker expectations, future turnover and labor strife – and to advocate for preventive action.
Ridley also points out HR’s opportunity to distinguish itself by exploiting technology. Impacting the firm’s bottom line by integrating on-line training and electronic recordkeeping, such as the online time-card system that CNB uses, will capture the attention of finance and company leaders.
HR professionals also should be:
- Working with finance to forecast how changes in benefits and other HR initiatives impact the bottom line.
- Identifying and eliminating programs or functions that do not add value.
- Taking responsibility for finding, developing and retaining the talent best able to meet the company’s needs.
- Managing vendor relationships in terms of cost and quality.
- Monitoring trends to identify functions that could be handled more effectively if outsourced.
- Reading a wide range of business publications and books to gain the “big picture” perspective.
Conclusion
For HR professionals motivated to contribute to their organizations in bigger, more meaningful ways, the opportunities abound. But this influential role must be earned.
For Ridley, the rapid pace of change in business is opening the door wide to forward-thinking HR professionals.
“As business parameters change,” she says, “HR must help the organization decide what to do differently and how to manage those changes. A well-rounded HR professional brings to the table an understanding of what skills the business needs, and how to find, train and retain the people who will help it achieve its goals.”
