Many
CFOs have built their careers on technical skills and financial smarts, but
performance today is no longer solely measured on those abilities. For the
modern CFO, a new set of soft skills built around emotional intelligence have
become increasingly important in recent years for their ability to help
business leaders build relationships, resolve conflicts, and motivate
high-performing teams.
From understanding and managing emotions to
aligning talent with business needs, the CFO as coach, collaborator and
motivator is a growing trend. In this post, we’ll look at how emotional
intelligence has become a critical skill set for today’s CFO and examine the
five core components of emotional intelligence and the role they play in
helping to bolster leadership performance.
These key components include:
Self-awareness
Self-regulation
Internal motivation
Empathy
Social skills
Changing
the CFO skill set equation
The skill of emotional
intelligence refers to the ability to identify, use, understand and manage the
emotions of themselves and others in a positive way. For some individuals, the
ability to understand and assess emotions may come effortlessly, but for
others, not so much.
Since CFOs need to be
able to induce change through others, this ability to inspire and influence has
become a valuable skill in today’s collaboration-centered workplace. CFOs need to
be able to respond to divergent points of view and differences in the way
people think. By extension, they need to harness their emotional intelligence
to get through difficult situations.
With fewer layers of management in today’s organizations, leadership styles lean toward less authoritative. Moreover, the shift towards more knowledge-focused, team-based roles means that workers tend to have more independence and self-governance, even with lower levels of an organization. As a result, CFOs are finding themselves connecting and collaborating with people they would not likely have interacted with in the past.
Previously, the
finance function required a number of core skills, including technical
expertise, analytical thinking, comprehension, and assertiveness. While these
attributes may not have changed, today’s CFO also needs to exhibit a wide range
of soft skills, including an ability to collaborate effectively, build
relationships and perceive, evaluate and manage emotions.
Clearly
emotional intelligence is important to everyday social interactions, but how
does it relate to CFO performance? When you make tough decisions based on hard
data that can have an impact on non-finance departments, you could come across
as tough or inflexible. Not a good reputation for a leader. That’s where
emotional intelligence comes into play.
Growing
need drives resurgence
Emotional intelligence first gained
widespread attention back in mid 90s with the release of a book by Daniel
Goleman simply titled, “Emotional Intelligence”. The subject has since been the
focus of numerous studies, many of which point to it being a better predictor
of leadership success than a person’s general cognitive ability. The
reasoning? An executive skilled at understanding what makes people tick can better
motivate teams and drive more effective interactions.
Several factors are contributing
to a renewed interest and growing need for leaders with strong emotional
intelligence skills:
Market disruption. New and emerging technologies are creating substantial market disruption and business transformation across industry sectors, resulting in corporate restructuring, flatter hierarchies and greater cultural diversity.
New workplace demands. The digital
age and broader enterprise connectivity is intensifying workplace pressures,
creating the need for leaders with greater self-awareness, better emotional
understanding and superb social skills.
The
need to innovate. Rapid technology acceleration and the
speed of new service deployments requires better collaboration, agile teams and
a culture that allows for continuous feedback, honest communication and individual
empowerment, which are core emotional intelligence-based attributes.
Service-oriented economy. As we move to a more service-based economy and a more customer-centric focus, relationship building, superior communication skills and better self-management abilities become more important than ever.
Globalization. The ability to empathize and relate to different attitudes, perspectives and cultures is essential in today’s global environment. When managed properly, this diversity can lead to higher performance and better outcomes.
A recent report
from World Economic Forum ranked emotional intelligence as the sixth most
important skill needed in 2020 in order to manage the coming fourth industrial
revolution. Emotional Intelligence wasn’t even on the list for 2015. This
may explain why many organizations have begun offering employees more opportunities
to improve their emotional intelligence.
Gaining a performance
advantage
According to the model developed by Goleman,
emotional intelligence consists of five core components.
Self-awareness. Self-awareness is knowing your own feelings and understanding your strengths and weaknesses in relation to how they affect behavior. Leaders who are in tune with their own emotions are better able to control their own impulses and tend to enjoy better relationships. To improve self-awareness, take time to better know and evaluate yourself. Then understand how you relate to others.
Self-regulation. CFOs need the emotional flexibility to collaborate effectively without letting egos interfere. Self-regulation is the ability to control outbursts, disruptive impulses, and moods. It also encourages a “think before acting” attitude. Instead of being held hostage by your emotions, learn to use them strategically as a performance improvement tool.
Internal motivation. Internal motivation is the passion to work for internal reasons such as personal joy, curiosity or mental satisfaction. CFOs need to be continuously monitoring their performance, making sure they’re hitting their targets and dealing with issues when they arise. Internal motivation provides the clarity of focus and the drive needed to initiate change and take action while opening the door to positive feedback and learning.
Empathy. Most of us are not taught how to deal with our emotions or the emotions of others. Empathy requires reading feelings and understanding the needs of others. Learning to control your own emotions will enable you to help others manage theirs. By becoming more aware and understanding how others feel in various situations, you’ll be better equipped to inspire, motivate, and connect with others across the organization.
Social skills. Having good social skills and sound situational awareness can be a powerful tool for leading a team. While a clash of opinions is sometimes inevitable in a cross-functional team, the ability to negotiate the needs and viewpoints of others and find common ground is vital for a CFO. Creating the harmony and agreement needed to move initiatives forward hinges largely on the ability to managing relationships.
Key
takeaways
It turns out cognitive intelligence and
technical skills are an incomplete predictor of performance. The ability to
influence, collaborate, and communicate effectively across departments,
cultures and generations is a key component of effective leadership.
The
reality is there is a strong link between the emotional intelligence of its leaders
and the financial performance of an organization. Today’s CFO needs to
be both a strategic and tactical thinker. Not surprisingly, hiring
managers are increasingly placing higher value on emotional intelligence and
are incorporating these characteristics in their leadership search criteria.
While technical and financial expertise is important, CFOs can take their performance to the next level by combining financial know-how with emotional intelligence. Like any form of self-improvement, building and strengthening your emotional intelligence will stretch your comfort zone and challenge some long-held notions about effective leadership styles. The good news is the effort you make to improve your emotional intelligence will pay dividends far beyond the initial investment.
Why is it important for you to learn how to craft a powerful
business case for your HR initiatives? Well, like any other major business
undertaking, HR initiatives require time and resources in order to be effective
and result in real change. Unfortunately, the people who hold the company
purse-strings, namely the CEO, CFO, and other senior leadership, tend to
undervalue HR transformation. They frequently think that HR is around to make
sure nothing goes too wrong, but that it cannot deliver real business results.
As an HR professional, you know this mindset isn’t correct. People
are what drive a business’ success, and you make sure that the company’s people
power is being cultivated and leveraged as effectively as possible. If HR isn’t
doing an effective job, then none of the company’s goals will be achievable.
The challenge, then, is making senior leadership understand
what you already know. If you are planning and pitching an HR initiative, then
you have a good reason to believe that it will transform how the company
operates and performs. Articulating that potential in a powerful business case
allows you to speak the leadership’s language and get the resources you need to
implement your initiatives.
So, how do you go about putting together a business case
that will win over senior leadership? Let’s examine the key components of an
effective HR business case, using an employee engagement campaign as an
example:
Craft your messaging to leadership pain points and priorities
Diagnose business challenges and opportunities
Develop your solution
Outline desired results for both HR and the company as a whole
General Approach
Before we get into the specific steps for crafting your
business case, let’s consider how you should frame your messaging throughout
each step. While following the advice laid out in this article, always keep
your audience in mind.
You know why you want to implement this initiative from an
HR perspective, but leadership will not come at the issue from that same
perspective. For instance, you may see more efficient processes or happier
employees as an end to themselves, but your leadership team might not – at
least not enough to justify a significant investment. That is why it’s a good
idea to try whenever possible to break out of an HR mindset, or at least link
the issues you identify as an HR expert to issues and perspectives that senior
leadership will prioritize.
One great way to appeal to a broader audience and make a
compelling business case is to be as objective as possible, and to quantify
whenever possible. Complex human issues cannot just be broken down into numbers
and dollar signs, and it can be frustrating when the CFO or CEO wants you to do
just that. At the same time, though, linking your initiative and the issues it
is meant to solve to concrete business results can make or break your bid to
get the resources you need.
Speaking of business results, another great approach is to
frame the initiative within the context of the company’s bigger picture. That
means that you should try to link the issues, solutions, and results that you
outline in the business case to the company’s business strategies, goals, and
bottom-line whenever possible. This will help you show key stakeholders how your
initiative will make their jobs easier and help them to accomplish their goals.
Finally, don’t be afraid to enlist outside help when
crafting your business case. Think of your counterparts in other departments as
your allies in building the case, even and especially if they are also part of
the case’s audience. Seeking outside input will help you identify stakeholder
pain points and get a better sense of the initiative’s effects throughout the
company. Similarly, reaching out can give you access to vital data that will
help you prove your case and track your success. For instance, the CFO could
provide you with financial information that helps you connect the dots and show
the true cost of low employee engagement. As a bonus, getting leadership input
while creating the business case will also increase your odds of success. They
will feel as though they had a hand in crafting the business case and so will
be invested in the project, giving you a leg up in getting the resources you
need.
Now that we’ve covered the general best-practices for
approaching an HR business case, let’s take a look at each major step in
building the case.
Step One: Diagnosis
In order to make the case for why leadership should invest
in your initiative, you first have to establish the need for the initiative.
This involves identifying business challenges, processes that could be
optimized, and opportunities for change. This step will help build the value
proposition for the initiative and provide valuable context to help your audience
understand the reasons behind the initiative.
First, identify the business challenges that you are trying
to address. In our case, this would be low employee engagement. This might be
signaled by low productivity, high absenteeism, and high turnover. Next, link
this challenge to the company’s performance and financial health. Continuing
with our example, it might be a good idea to calculate the cost of replacing
employees, among other things.
Once you have established the problem, it’s time to look for
causes. Try to find the gaps in how things work now that are contributing to
the business challenges. These could be ineffective processes or missing
processes. In our case, some issues you might discover are poor communication
of company direction and employee contribution to it, inaccessible leadership,
too few or too many meetings, and unclear advancement procedures. As always,
try to pin down as many details and data as possible when identifying the
causes. For instance, quantify the extent to which each issue contributes to
the lack of engagement. You can use that data later to justify the expense for
each part of the solution.
After you have identified the challenges and causes, look
for opportunities for solutions. You will create the detailed solution in the
next step, so for now keep it general. What broad-strokes plan or plans could
solve the causes and address the challenges?
Now the good news is that you have probably given the
challenges, causes, and opportunities a significant amount of thought while you
developed the initiative. That means that you will have a good idea of where to
start and what to look for in this step. Much of the work will have to do with
framing what you have already considered in terms that will resonate with senior
leadership.
Step Two: Solution
Now that you have communicated the need for your initiative,
it is time to explain the initiative and why what you are suggesting is the
right solution for the problems that you identified.
Be as specific and concrete as possible about what new
policies and procedures you want to establish. Outline what will be changed,
added, and removed and how that will be accomplished. For each step, describe
what resources you will need and how they will be allocated, along with how the
step will contribute to the solution. This will help you present a clear
cost/benefit analysis and justify each expense.
It is also a good idea to provide a timeline for project
execution and completion. Describe when you will implement each component of
the initiative and when the complete solution will be in place. Then establish
follow-up procedures and key metrics to measure project success. Leadership
will feel more at ease investing in a project when you give them a way to tell
whether or not the initiative worked and what return they got on that
investment.
Let’s move on to the last step, in which you will show what
the initiative will achieve for the company.
Step Three: Desired Results
In step one you identified challenges that you wanted to
address. In this step you outline what effect your initiatives will have on
those challenges, and what that will do for the company’s performance and
financial health. This section is divided into two sub-sections: internal
effects and ultimate project impact.
The internal effects are the intermediate steps that drive
the ROI. Fundamentally, they are improvements in the way that the company
operates. Describe how your initiative will make the company more effective. In
our example, you might outline the benefits to employee performance, individual
and team productivity, collaboration, turnover, and reported sense of
engagement.
The project impacts affect the company’s bottom-line. If you
are unclear whether a result would fall under the first or second category,
consider whether or not it has a dollar-value attached to it. If it does, it’s
in this second category. Returning to the example of the employee engagement
campaign, impacts might include the revenue generated by increased productivity
or savings from decreased turnover.
Round this step off with clear takeaways that will resonate
with senior leadership. These combine the effects and impacts that you
identified above into bigger-picture ROI and cost/benefit analyses. Paint a
picture of what the company will look like after the initiative. You gave your
audience the stick in the first step by showing what challenges the company
will continue to face without the initiative, now present them with the carrot
of what they will gain by giving you the resources you need. If you’ve done a
thorough job on the previous steps, you should leave your audience with a clear
narrative for why your initiative is not only beneficial, but necessary.
Key Takeaways
It’s important to make sure that you build a compelling
case. And in order to do that you should:
Speak to leadership pain points and priorities
Be as specific and quantitative as you can
Identify key business challenges that your initiative will address
Outline the initiative, complete with the cost and time required for each step
Show why the proposed initiative is the most effective solution for the challenges
Present the results you expect to see from the initiative, both in terms of internal processes and business success
HR leaders and CFOs often see their roles as diametrically
opposed and even in conflict with each other. Finance professionals can be
frustrated by a perceived lack of ROI and measurability in HR, while HR leaders
sometimes see their finance counterparts as narrow-minded and too focused on
details. But the truth of the matter is that CHROs and CFOs need each other,
and both can do their job better when they work with the other.
HR manages the people side of business success, and people
power is ultimately responsible for a company’s performance and its
bottom-line. The finance department manages the company’s resources to avoid
waste and maximize return on investment, and the CFO is responsible for the
financial side of business success. Since these two departments are responsible
for the two sides of the same coin, business success, it only makes sense for
them to work together whenever possible.
That being said, the relationship is not without its
difficulties. That is why it is important for HR leaders to learn how to speak
the CFO’s language and help the CFO understand their language in turn. Let’s
take a look at how you can have a more productive relationship with the CFO as
an HR leader, including:
Why you should foster better communication
between your departments
How to build an effective business case for HR
initiatives
How to prove ROI to the CFO
How to measure the success and impact of HR
activities
Why Communicating with the CFO Matters
CFOs hold the company’s purse-strings, and nowadays they are
holding them tighter than ever. That means that if you want to get the
financing you need to lead effective HR initiatives, you’re going to have to
learn how to understand the CFO’s language and how to speak to their pain
points. The good news is that you actually are working towards a common goal,
you just need to put in the work to help each other see it. On your end that
means developing effective business cases, displaying ROI, and measuring
objective HR metrics.
Do you need more convincing? Companies with a high level of
collaboration between HR and finance see an increase in top-line revenue, an
increase of 10% or more in operational cash flow, and an increase in employee
performance and engagement.
Perhaps most importantly, learning how to track key metrics,
build business cases, and discuss budgets, investments, and ROI are all
necessary skills for you to be taken seriously by your company’s entire
leadership team, not just the CFO, and for you to become a credible
decision-maker on the C-suite.
Build Business Cases for HR initiatives
One of the most important steps to creating productive
communication with your finance team and obtaining the financing you need to
achieve your HR goals is to build an effective business case for each HR
initiative and requisition request.
A business case is an outline of the proposed initiative,
including its goals and the reasons why it is good for the company as a whole.
Creating compelling business cases will not only streamline your interactions
with the CFO, it will help you communicate better with the CEO and other
internal stakeholders as well.
So how do you create a business case? There are many
in-depth guides
that you should draw upon, but let’s take a quick look at some of the key
components of an effective business case.
The first step is to set the stage for your initiative by
presenting the business trends and challenges that provide the context of the
initiative. This will help you frame the initiative as well as its goals and
impact on the company. Essentially, this is the “why” for your initiative.
The next step is to identify the key goals of the
initiative. This part outlines what you hope to accomplish as a result of the
project. Try to limit the number of goals to a handful so that your messaging
stays clear. You do not have to list every benefit you think the initiative
will bring to the company, just outline the specific personnel-related results
you wish to achieve through the initiative.
Then lay out how you plan to achieve the goals. Keep it
simple and big-picture but provide a concrete plan to reach each of the goals
you outlined in the step above. This includes each major component of the
initiative and how it contributes to a specific goal or goals. When possible,
you should include time-frames and cost breakdowns to appeal to the CFO and CEO
alike.
Finally, and perhaps most importantly, you should
communicate the impact of the initiative on the company’s bottom-line and
overall success. Think about what matters most to the stakeholders who will
review the business case, particularly the CEO and CFO. Show them which of
their pain-points the initiative will address. And if you can frame the impact
in terms of revenue generated or costs cut, all the better.
This last part will be much easier and more effective if you
develop a consistent strategy for proving ROI on HR investments, so let’s take
a look at that next.
Showing ROI for Investments in HR Initiatives
When it comes to developing effective communication with the
company’s CFO, the single most important thing you can do is to start thinking
in terms of return on investment, or ROI. CFOs operate almost entirely in terms
of ROI – they need to in order to effectively manage the company’s finances.
Presenting your initiatives and justifying your activities
becomes a whole lot easier when you frame it in terms of ROI, and you make the
CFO’s job easier at the same time. That being said, this isn’t always an easy
task.
One reason is that you may have to fight an uphill battle.
The unfortunate truth is that almost
two-thirds of CFOs do not believe that HR affects the company’s
bottom-line! The good news is that they couldn’t be more wrong, the trick is proving
this to them in a way that they will understand.
Because the truth is that HR is responsible for an enormous
portion of a company’s success or failure. The challenges of attracting,
retaining, and engaging top talent are some of the main drivers of business
performance and how HR handles these challenges has a measurable impact on a
company’s financial well-being.
This means there can be significant ROI for investments in
HR initiatives, you just need to think about what objective metrics you can
measure and use to prove ROI. To better communicate ROI to the CFO, try to
attach a dollar-value to each metric whenever possible. For instance, do not
just show how an initiative will increase productivity. Instead, show how much
revenue that productivity will generate.
Once you start tracking key HR metrics and framing them in
terms of financial impact, it will become easier to show how your activities
solve financial issues that the CFO may be struggling with.
Measuring HR Impact and Performance
Measuring and tracking metrics is the key to fostering
productive communication with the CFO, and not just when it comes to justifying
HR expenses. Collecting and sharing the right data can make it easier for the
CFO to do their jobs, and the CFO may be tracking metrics that can shed light
on the performance of your HR initiatives in turn. Think of metrics as the
common language that you need to master in order to communicate with the CFO.
Communication isn’t a one-way street, there’s plenty that you can learn from
the CFO once you speak the same language.
In order to develop metrics to measure HR impact and
performance, you should start collecting and analyzing data. Think about what
you can track, and start recording it methodically. Some information, such as
turnover data, is easily tracked in an objective and measurable manner. Other
data is trickier, but not impossible to record. Employee engagement is a
perfect example, since it can seem entirely subjective. However, anonymous
surveys asking employees to rank key metrics on a numerical scale can easily
generate measurable data that can be tracked and can produce trends over time.
Some examples of useful metrics to track to measure your
performance, as well as the impact of HR initiatives, include:
Revenue per employee
Revenue lost due to position vacancy
New hire failure rate
Applications per employee
Spend on HR costs vs HR revenue production
Financial impact of preventable turnover as
identified in exit interviews
Dollar impact of turnover in specific positions
When it comes to tracking HR impact and performance, you
don’t have to do it alone. You can enlist the CFO as an ally in your efforts.
You may complain that CFOs live and breathe metrics and data, but that is
exactly why they can be so useful. Instead of seeing their obsession with
numbers as a challenge to your authority, enlist that expertise to help you
craft meaningful metrics.
Key Takeaways
Learning how to communicate effectively with your CFO can
not only help you convince them to give you the funding you need to achieve
your HR goals, it can also help you do your job more effectively. Creating a
clear and compelling business case and measuring ROI allows you to form better
strategies based on real-world impacts and proven trends and performance. That
means that you can be more strategic in your own decisions. It also can help
you earn your rightful place in key strategy discussions. Just remember to:
Create an effective business case for any major initiatives
Think in terms of CFO pain-points
Show ROI by framing results in terms of key metrics, particularly financial metrics
Track the performance and impact of HR initiatives through objective metrics, perhaps even enlisting the CFO to help
If you’re like many CFOs, your role includes overseeing many
human resources functions beyond management of your finance and accounting
team. Human capital, talent, workforce, personnel, human resources, or just HR
– no matter which term your organizations uses it comes down to the same
issues: recruiting, training, and managing everyone who works for your
organization and the associated short- and long-term costs.
However, there’s more to HR than managing costs. CFOs are
strategists, and in today’s competitive labor market, your company’s growth is
tied to retaining and recruiting top talent. That means putting together a
competitive compensation and benefits package while creating long-term
strategies to develop essential leadership positions.
In this post, we’ll explore why CFOs may take on HR duties as well as four reasons why it makes sense for a modern CFO to oversee HR – and a couple of situations in which CFOs may need to take a step back from HR.
CFOs and HR: Four Reasons it Makes Sense
The typical CFO job description may not include the
management of human resources. However, that’s precisely what many CFOs are
doing.
As a CFO during the Recession, cost-cutting was paramount to
your company’s survival. Eliminating an executive position often meant yours
remained while HR was cut. Your traditional role was altered as you took on HR
responsibilities; there was just no one else left to do the work.
You were in good company: about one-fifth of CFOs surveyed
in 2011 had taken on more HR duties during the previous three years, according
to a survey by Robert Half Management Resources.
Working for an early-stage company is another route CFOs
take to HR. Newer companies often lack the financial resources to add an HR
executive and with few employees to manage, there really isn’t a need.
Regardless of how you got here, as CFO you are now managing
HR. While lower-level HR staff handle job postings, onboarding, payroll, and
forms needed to maintain compliance, you handle more strategic HR duties:
• Putting together
a competitive but cost-effective benefits package
• Developing
employee performance evaluations process
• Strategizing and
building an executive team
• Keeping the
organization in compliance with employment law requirements
A CFOs skillset is a good fit for these and other aspects of
HR. We’ll discuss a few.
1. Employee compensation and benefits costs are going up.
With labor and benefits costs comprising an ever-growing
slice of your budget, as the person charged with financial forecasting and
budgets, a CFO’s management of HR can make a lot of sense.
As CFO, your job is to manage the finances and watch the
bottom line. Rising healthcare costs, as well as increased wages in a
competitive job market, will continue to impact that bottom line. As CFO you’re
likely spending more time analyzing expenditures and devising ways to cut those
costs.
That’s not an easy task: health benefits costs increased by
3.6% in 2018, according to Mercer’s “National Survey of Employer-Sponsored
Health Plans.” Smaller employers – those with 10 to 499 employees – took an
even harder hit with an average increase of 5.4%. The 2019 increase is expected
to rise by 4% this year, continuing to outpace both workers’ earnings growth
and inflation.
Moreover, reducing costs isn’t going to get any easier: data
from HealthAffairs indicates the cost of healthcare goods and services will
continue to rise through 2027 and at a faster growth than we’ve experienced
over the last ten years.
It’s no wonder that the Mercer report also noted midsized
and large employers ranked “managing high-cost claimants and “creating a
culture of health” as top strategies for the next five years. Considering the
per-employee average healthcare cost is nearing $13,000, keeping that number
from increasing is critical.
Other benefits that need financial management include those
not traditionally under a CFO’s administration, such as employee training
expenses, and those that are, such as retirement plans and employment claims
legal expenses.
2. Financial know-how is necessary during negotiation with benefits vendors.
A CFO’s understanding of financial lingo mean involvement during
negotiations with benefits vendors is critical to getting the most bang for
your buck. CFOs may also better understand modeling tools offered by benefits
vendors because financial modeling is a strength for financial executives.
Using a combined finance and HR team approach to negotiating
benefits packages and costs will result in the best options for the budget and
employee needs.
3. CFOs are data-driven and compliance- and process-oriented.
A CFO’s strengths include being process-oriented and making
decisions based on collected data. Those qualities are needed in HR but are
often overlooked by busy HR professionals preoccupied with day-to-day tasks.
A survey by Launchways vendor partner Paycor noted 43% of
small and medium-sized organization (SMBs) don’t track costs associated with
recruiting, hiring, and onboarding new employees.
Creating a consistent process for reviewing, rewarding, or
removing employees is essential no matter your company size. Then, your data
analysis skills can make sense of data collected to find opportunities for
efficiencies.
Even when processes are effective, without the data to back
up their claims, HR may have a difficult time convincing their executives that
employee engagement dollars are money well spent. That’s particularly true if
HR hasn’t made developing C-suite relationships a priority.
Process-driven and already in the C-suite, a CFO is often an
organization’s best option for this combined role of tracking and analyzing HR
spending and communicating the value to executives.
4. CFOs develop long-term strategic plans which include talent and leadership.
When you took on HR duties during the Recession, it’s likely
you focused on obtaining the best results with the fewest number of employees.
You made strategic talent decisions based not just on the cost of talent and
benefits, but also on getting the most productivity for your money.
Talent issues have changed dramatically since then. Now,
retaining employees is crucial to the bottom line as companies compete for a
shrinking pool of available, qualified candidates. In fact, a 2019 Deloitte
survey of CFOs found that 80% rated leadership as a high priority for their
organizations.
However, you know it’s not all about the money: low
unemployment and an aging population mean fewer qualified workers available to
help your company grow. Compensation, benefits and perks, opportunities, and
culture are all part of the mix.
As a CFO, you likely either manage or work with the CEO to
manage the creation of essential strategic responsibilities such as developing
a leadership team and defining employee roles and objectives as well as
managing the entire team’s performance.
Cases Where a CFO May Need to Step Away from HR
As your company grows and becomes more complex, there are
good reasons to hand over some of the HR duties you’ve assumed.
1. HR is taking up too much CFO time.
If non-urgent and non-strategic issues such as employee
discipline or hiring are taking up too much of your time, it might be time to
hand over some of your HR duties to a strategic HR partner.
Even if you offload some HR responsibilities, you can continue
to maintain oversight of benefits and insurance and lead your organization’s
long-term strategic talent retention and recruitment efforts. With the insight
you gained tackling less strategic HR duties, you can continue to advocate for more
tools to capture and analyze HR data as well as training, benefits, and perks
that result in improved employee satisfaction, engagement, and productivity.
2. It’s time to hire someone with different people skills.
Another reason for stepping away from HR can be admitting
that you may not have the necessary people and communication skills needed to
handle employee issues one-on-one. It’s not that you’re a lousy communicator,
it’s just that employees may assume as CFO you’re only interested in finances,
not people.
Alternatively, as finance chief, you may be excellent at
presenting high-level financial information to executives and your board but
struggle to explain personnel issues in terms other than dollars and cents. If
your organization can hire an HR professional whose people-focused skillset
complements your more analytical side, it could be a sound business decision.
Key Takeaways
Increasing compensation and benefits costs continue to
affect the bottom line. However, with a shrinking pool of qualified candidates,
retaining and recruiting employees is a top priority. A CFOs financial
expertise and ability to model different scenarios are critical to creating effective
HR processes at any business.
Because CFOs often work with the CEO to strategize for
growth, in today’s talent shortage, understanding and planning for talent
retention and recruitment is a top priority. An informed and involved CFO can
also advocate for employees when there is no HR executive to do so.
As companies grow in size and complexity, CFOs who are too involved in HR should advocate the hiring of an HR executive or outsourcing more HR duties. That goes double if a CFO’s communication skills are better adapted to the board room than conversations with employees.
Historically, the roles of CFO and CHRO have been considered
entirely separate, perhaps even with competing priorities. However, companies
are increasingly seeing these roles as being deeply connected and working
towards a common goal. As a result, finance and HR teams are starting to work
together more and more. According to an Ernst & Young survey, 80% of HR and
financial professionals interviewed said that their roles had become
increasingly collaborative over the previous three years. And effective
collaboration starts at the top, so CFOs should learn how to effectively
collaborate with their HR counterparts.
When you think about it this makes complete sense. Financial
assets and people are the main drivers of business outcomes, so the executives
responsible for handling them should not only be communicating with each other
but actually working closely together to coordinate initiatives, track key
metrics, and measure performance. Both the finance and HR teams will benefit
from adopting practices and metrics used by the other, and from sharing data to
identify challenges and opportunities.
In this article we will explore how CFOs can effectively
collaborate with their HR counterparts, CHROs for our purposes, to achieve
business success. Let’s take a look at:
The benefits of collaboration
Why you need CHROs as a CFO
How you can help the CHRO
How you can break down barriers for true collaboration and a shared source of truth
The Benefits of Collaboration
Modern business challenges require modern and innovative
solutions. Getting the people responsible for the company’s finances and
workforce working together is one of the best ways to quickly identify business
challenges and create effective and non-traditional solutions
Working together directly connects human performance with
business success, adding objectivity to the analysis of human resource
initiatives and its impact on company financials.
Collaboration between CFOs and CHROs is especially important
right now, with a changing market and workforce. The business world is still
adapting to the lingering effects of the recession as well as the stimulating
and disruptive influence of startups and tech giants alike. At the same time,
Millennials are poised to make up 75% of the workforce by 2025, which means
that companies are having to adapt to engage and retain Millennial talent.
Linking the management of people and finances allows companies to be more agile
and responsive to these challenges.
Across the board many of the main challenges that businesses
have faced in recent years have been related to talent. Acquisition and
retention of all talent, but especially Gen Y and Gen X talent, has become a
major focus for not only HR professionals but companies as a whole. It seems
natural, therefore, for modern CFOs to build a strong relationship with their
HR counterparts in order to tackle this major financial hurdle.
A closer relationship between CFO and CHRO can boost
virtually every part of their respective responsibilities, as well as the
organization as a whole. That adds up to a real impact for a business’
bottom-line. So much so that companies with a high level of collaboration
between HR and Finance see an increase in top-line revenue, an increase of 10%
or more in operational cash flow, and an increase in employee performance and
engagement. That’s great news for CFOs and CHROs alike!
Why You Need Your CHRO
Contrary to what many CFOs believe, you really do rely upon
your CHRO. Every strategy and initiative that you craft with the CEO depends on
the company’s staff to succeed. The HR department is responsible for managing
that staff, making sure that they are working effectively as individuals and as
a team. The best way to do that is to get employees to understand the
importance of the company’s goals and their contributions to the achievement of
those goals. As a CFO, you need the CHRO to be the ambassador between you and
the people who make your strategies into realities.
That means not only appreciating and coordinating with the
CHRO or HR department but also making sure that they truly understand what you
are trying to do with the company. That way they will be able to help the
company’s employees understand, and help focus and coordinate each team’s
efforts.
The CHRO’s role doesn’t stop at evangelizing and managing
either. As a CFO, you know how important metrics are to measuring performance,
identifying issues, and creating solutions. Since CHROs are essentially your
go-between for the teams implementing your solutions, making sure they know
what metrics to collect and share can also make your life a whole lot easier.
At the same time, they can offer “softer” insights into potential causes of
successes or challenges.
The fact of the matter is that not everything can be
explained with numbers, or at least ones with dollar signs attached. Human
performance is extremely complicated and can often be hard to measure. Your
CHRO knows people and what factors might indicate or contribute to their
performance as individuals and productivity as a team. If you notice that an
initiative isn’t paying off like it was expected to, HR may be able to suggest
causes of the reduced performance.
By working directly with the CHRO and their team, you can
help them shape HR concepts into objective metrics that you can use to better
manage existing strategies and to plan more effective new ones. You may think
that you speak an entirely different language than the HR department, and that
may more or less be true in your current processes. But bridging that gap can
lead to invaluable insights.
Not convinced? Have you ever butted heads with the HR
department over proposed training or talent acquisition expenses because they
just couldn’t show you the numbers to justify the investment? Building a common
language, and helping the CHRO start tracking objective metrics, can ease these
tensions by equipping the HR team to adequately justify potential investments
in human capital. That makes your job easier, and makes it easier for the CHRO
to build the workforce that your company needs.
Why Your CHRO Needs You
Just as you need the CHRO to coordinate the implementation
of your strategies and offer human explanations behind your financial metrics,
the HR team needs your expertise to help them understand the consequences of
their activities, both positive and negative. Businesses are becoming more
numbers-driven in every single department. Marketing teams rely on key metrics
to gauge performance and plan strategies, particularly in the realms of SEO and
digital marketing. CHROs are feeling the pressure to meet the demands for
objective measures of the performance of their initiatives and of the company’s
workforce as a whole.
You probably live and breathe data and metrics, and likely
have for years. Your expertise can be invaluable to your CHRO as they try to
form strategies and develop reporting processes. We touched on how helping HR
teams track objective metrics can help your own planning and reporting, but the
benefits to the HR team itself are no less significant. That also means that
you shouldn’t stop at the metrics that you want to have access to, and that you
should help the CHRO create a performance management system that meets their
specific needs, with the proper metrics and KPIs. Again, your strategies
ultimately rely on the HR team for success, so make sure they have the tools
they need to do their jobs effectively.
What kind of metrics should you help the CHRO track? Here are
a few common examples:
Talent acquisition: Recruiting and hiring
Talent retention
Employee satisfaction & engagement
Sales volume
Absenteeism
What you can do to help your CHRO succeed isn’t limited to
helping them track their own data, either. Just as you can benefit from HR’s
insights into employee performance when figuring out the causes for a
strategy’s success or failure – or trends in the company’s financial health as
a whole – HR can learn a lot about the success of their own activities by
looking at their impact on your metrics.
Eliminating Barriers to Create a Common Source of Truth
That brings us to the ultimate goal in an effective CFO and
CHRO relationship. Both you and your HR counterpart are hurt when data, processes,
and personnel are siloed in specific departments. It makes it hard to find and
analyze the data you need to do your respective jobs, and harder still to see
the big picture and build strategies based on that picture.
Your team and the HR team are responsible for the two sides
of business success – its financial success and its people power. It only makes
sense for those two sides to work together towards the greater success of the
company, rather than serving as separate support departments. Creating shared
databases, processes, and even teams allows for greater collaboration as well
as higher performance by each department.
The goal is to create shared sources of truth for your
departments and for the company as whole. Not only does this enable you to see
all important metrics and communicate more effectively, it also helps you avoid
the duplication of effort. You won’t be tracking the same metrics multiple
times in separate databases or spreadsheets, unbeknownst to the other
department. You won’t have to wrangle key information from your counterpart or
be pestered for your data in return. Everything will run more smoothly, and
more effectively.
Key Takeaways
In this article we have explored many of the ways that CFOs
and CHROs can work together to make each other’s jobs easier and more
effective. Now, there’s a lot of ground to cover and we’re sure that your HR
counterpart will have plenty to say about the matter (and if, on the other
hand, you happen to be an HR professional reading this article, don’t be afraid
to share the article with your CFO). But hopefully we’ve given you a good idea
of where to get started building an effective collaboration with your human
resources team. Just remember to:
Make sure that HR understands your strategies and initiatives so that they can communicate them to the company’s staff
Get HR input on human explanations behind your data
Help HR track key metrics relevant to your initiatives as well as their own
Share your data with HR to help them understand the impact of their activities
Above all, create common databases and processes to foster easy, effective collaboration
This blog post is part of a series of articles on the role that CFOs play in their company’s HR success. If you work at a startup or other company that may not have a CHRO, then you may well be finding yourself handling more HR responsibilities than you expected. In our upcoming articles we will explore how you can handle your HR tasks effectively and leverage human resources to achieve business success. And since we can only cover so much in an article, we’re holding a webinar on the topic: Are you a CFO in charge of HR? What You Need to Know. So don’t forget to SAVE YOUR SEAT AT OUR UPCOMING WEBINAR.
