The pandemic has exposed the need for CFOs and their partners in Human Resources to work together much more closely as their organizations assess their people's health, workplace, and bottom line. This mandate has become increasingly critical this year as businesses work to close out Q4 while juggling adjusted global restrictions, the vaccine rollout, and the likelihood of extended remote work policies.
The good news is that many CFOs and HR leaders have already started to break down silos between them. Increased communication between the two functions allows CFOs to better understand labor and operating costs and the potential financial impacts of varying health and safety measures and return-to-work plans. At the same time, HR leaders can gain greater insight into revenue forecasts, cash flow, and the impact on business priorities to inform their workforce plans.
As one HR executive noted during a recent roundtable discussion, “I've been spending time thinking about how the “people” business connects with the “financial” business to help drive our organization post-COVID. And I think one of the realizations that came from here is, if before we thought the financial health and the human capital health of a business wasn't the primary driver of the business, I think we all know now that it is.”
Here are two simple steps you can take now to tie Finance and HR functions at the hip, drive stronger collaboration and communication, and position your organization for both short-term readiness and long-term innovation and growth.
Create a New, Collaborative Culture between Finance and HR
Traditionally, the Finance-HR relationship was fundamentally a transactional headcount conversation. More recently, some Finance-HR relationships have evolved to include a broader alignment on whether the organization has the right people to drive the right initiatives. With the pandemic, that relationship needs to evolve even further.
In times of crisis, when liquidity is top of mind, CFOs can sometimes act too quickly to reduce impact without considering a more holistic view of their organization's future. Be it workforce cuts, operational changes, or even real-estate adjustments, acting fast to pre-emptively drive down costs without consulting HR could have a ripple effect on the organization’s long-term growth potential.
Understanding this dynamic, CFOs and HR leaders should be collaborating early and often on decisions related to business costs—and not just in times of crisis. For Finance, considering and evaluating workforce data from across the organization is critical to making informed and sustainable business decisions. By collaborating with HR, Finance can gain a clear picture of the essential roles in today’s operations, avoiding any cuts that will hinder operations in the short-term. At the same time, HR can help Finance understand the essential skills and capabilities critical to driving future R&D and innovation as the company scales, avoiding any cuts that could hurt growth in the long-term.
I know that during a “black swan” event such as the one we’re currently in, the temptation to make rash decisions in the interest of reducing costs is significant. Avoid that temptation. Workforce data is nuanced, and maintaining a forward-looking approach, even in times of crisis, is necessary to ensure your organization can accelerate out of the curve quickly, and effectively.
Model Scenarios Together for More Confident Decision Making
“So, what’s next?” Once the foundation for collaboration is set, Finance and HR can work to answer that question by creating and sharing frameworks that allow them to review company-wide data, rapidly reflect change, and consider the impact of some evolving external factors, from new government regulations to local infection rates. Modeling more scenarios with external signals and internal data will help HR and Finance make more confident decisions about what’s next, whether that includes office re-openings, real-estate investments, or budget and compensation adjustments.
Take, for example, a medical device company that is using epidemiological models that incorporate external and internal data to forecast where – and even which – employees may be affected by COVID-19. Not only can HR make better staffing decisions to help their workers stay safe, but Finance can pinpoint potential cost discrepancies from supply chain disruption or inventory availability and adjust forecasts accordingly to help the business stay on track.
For Finance and HR leaders, sharing a view of models that reflect the changing environment should be a top priority. Start by adjusting your reports, models, and scorecards to incorporate a side-by-side view of your people analytics, financials, and external drivers. This collaborative and comprehensive approach to modeling will help both teams forecast resources more accurately, adjust revenue models in real-time and anticipate opportunities for cost savings, which in turn, will help ensure the organization has the right resources at the right time at the right costs to drive the business forward safely and strategically.
Change Is Constant
While crises can often push finance and HR to work more closely together, there are myriad other reasons to continually communicate. For instance, only by partnering more closely with HR will CFOs address the challenges associated with systemic pay inequality and lack of diversity within the workplace.
And, then there’s “digitization.” According to IDC, "direct digital transformation investment is growing at 17.5% CAGR and expected to approach $7.4 trillion over the years 2020 to 2023 as companies build on existing strategies and investments." As digitization accelerates, the skills required to deliver innovation will continue to change, and HR and Finance will once again need to collaborate closely on forward-looking plans that budget for the right skills on the right projects at the right time to deliver innovation and drive growth.
The bottom line is that there’s a constant tsunami of change that CFOs have to navigate in their careers, a wave that is unlikely to ever dissipate. It’s through close communication and collaboration with their partners in HR that CFOs can hopefully, shall we say, “ride this wave” rather than get caught in the undertow.
Sara Baxter Orr is the Global Head of the CFO Practice at Anaplan.