Why Finance?
Why financial professionals are reportedly ahead of
human resources pros in understanding the connection between people and
business performance could be an interesting analysis in itself. I can see a
number of good reasons why finance "gets" strategic human capital
management and I think there are some important implications:
- Shifting Business Basics.
Financial training and practice
creates an acute sensitivity to business inputs and outputs, yet historically
those inputs and outputs were "things." Inventory was the key
input/output and, to be honest, finance did not give HR much attention. Direct
labor on the automated shop floor was at best a relatively undifferentiated
commodity and at worst, a drag on margins to be minimized. However, as the
value drivers of business have shifted from things to people, finance has
naturally shifted its gaze to understanding the new inputs, which are people,
and their outputs. "Employment matters" are now business matters, and
have come under more financial scrutiny.
- Increasing Labor Costs.
Finance by nature and training tends
to be very cost-aware, if not hypersensitive, to the cost drivers of a
business. As labor costs increase in both absolute and relative terms,
finance's attention is naturally drawn to that area and analysts start to dig
in to understand the source, nature, and purpose of those costs. Where there is
cost, there is finance.
- Changing Role of Finance.
Finance as a discipline has spent
the last 20-plus years shifting its own role in the enterprise from "bean
counter" to business leader. This journey has led finance to grow beyond
its traditional core competencies of accounting and financial reporting to
create models, tools, and metrics to enhance its ability to understand and
provide insight into the whole business.
- It's Personal.
As noted above, finance has been keen to move
beyond its accounting and administration heritage to become a valued business
partner. This, in turn, has caused a large and fundamental shift in the talent
and skills needed to be an effective finance organization. At every single
financial executive conference I have attended over the last decade, a good
amount of agenda time was dedicated to the talent acquisition, development, and
retention requirements for building and running a highly performing finance
shop. Finance has a very selfish reason for focusing on "people
issues."
The leading implication of all this is that strategic
HR concepts and ideas are crucial to business success today. The finance
departments that are aligned with the above reasons have undertaken the
transformation necessary to become strategic business partners. We see it with
our own customers: As Workday announced today, Sallie Mae
selected Workday Financial Management and HCM because it understands the
correlation between HR and finance and the value of a unified platform, and it
required tools that will allow it to get real-time information about its workforce that
impacts critical management decisions.
Many, many more finance departments are either in
process of or have yet to begin the transformation journey. So we, as a finance
profession and discipline, need to continue to invest in talent and systems
capable of improving our ability to understand and measure the investment in
and contributions of human capital.
For HR, there is an incredible opportunity to deliver
business value (who better to drive strategic HR initiatives?), but to do this
HR must continue to evolve, as has finance, from an administrative focus to a
business focus. In short, successful HR people of the future will be business
people, and effective HR systems will be business systems.
Opinion :
Why financial professionals are reportedly ahead of
human resources pros in understanding the connection between people and
business performance could be an interesting analysis in itself.
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