It’s safe to say that the past year has thrown up more than its fair share of challenges for businesses – from ongoing uncertainty around Brexit, to the trade war between the US and China, and regulations such as gender pay gap reporting, and soon to follow for BAME groups. Add to this the ever-evolving technology landscape, and you get constant disruption in which businesses must operate today. Contributor Rupert Morrison, CEO – Concentra Analytics
Look at any news site and you can see these issues outlined and debated, in great detail. But what doesn’t make the headlines is the impact of this tumultuous environment on the workforce and how it must adapt. To find out what the biggest people challenges facing organisations in this context are, we spoke to over 200 UK HR and finance decision makers. The top three business challenges were found to be: governance, risk and compliance (58 percent), digital transformation (52 percent) and cost cutting (48 percent).
As all of these challenges affect the workforce and the work they do in one way or another, the key to tackling them comes down to an ability to strategically answer one question: who should be doing what work and at what cost? Something HR can’t adequately answer without true integration with finance.
HR & Finance – a match made in heaven?
Of course, HR and finance have their separate focuses, but there’s a huge amount of overlap between the two. There is an undeniable link between people (HR’s domain) and financial performance (finance’s domain); people perform work and work creates the services or products that drive an organisation’s financial results. Unsurprisingly then, EY found that collaboration between finance and HR drives profitability. In order to determine who should be doing what work, HR needs to connect how much it costs to do the work, and their organisation’s financial projections and objectives.
Yet, too often, the collaboration required between the two functions is not taking place – especially when it comes to workforce planning and analysis (WP&A). Our research found that just 25 percent of financial decision makers see their relationship with HR in WP&A as very collaborative, compared to 45 percent of HR decision makers who see the relationship more positively. Worryingly, only 28 percent of the HR and finance decision makers we spoke to have joined up reporting tools and processes. With our research revealing that less than half (48 percent) of respondents can confidently answer questions about whether the right employees are doing the right work to deliver strategy – this disjoint clearly has significant consequences. So where is it all going wrong?
In today’s technology driven world, data is the key to informed WP&A. But when it comes to working with data, HR and finance often do so in siloes. When HR works with one data set and finance with another, it creates separate data islands resulting in both sides spending more time debating data validity, which leads to distrust and, in turn, inaction. Without an integrated approach to data, both functions not only risk being inefficient, but also losing credibility with the rest of the business.
Another barrier to closer collaboration between finance and HR is the cultural difference between the functions. While finance traditionally sees people as costs, HR typically views people through the lens of value and skills. HR has also tended to be more focused on the now, while finance is more future-oriented. HR is also lagging behind finance when it comes to developing the capabilities needed to be more analytically minded. But, as disruption continues to shake businesses’ foundations, it’s key that both functions play to each other’s core strengths in order to effectively plan and manage the future workforce.
Bridging the gap
So how can these differences and disjointed approaches be reconciled?
Without data integration, HR and finance are essentially dead on arrival. Nothing else will have a more material impact on their ability to plan the workforce for the future to meet business objectives. So, using a purpose-built platform for the analysis and modelling of data from any sources, has to be the foundation of true strategic collaboration between HR and finance.
By working with us to bring finance and HR’s disparate data together, one major retailer was able to understand exactly how people spend their time, how much activities cost and align the workforce accordingly. Through richer data, they were able to drive profitable market expansion into Asia with less investment by redeploying existing resources.
Become more future oriented
Once the foundation of data integration has been laid, looking to their finance colleagues is a good place to start for HR to become more future-oriented when it comes to planning, budgeting and forecasting.
Just as finance has Financial Planning and Analysis (FP&A), HR should have an Organisational Planning and Analysis (OP&A) function which tackles issues such as those identified in our research, and prepares the business for the future. This team should aim to be highly analytical, capable of planning, budgeting and scenario analysis of new opportunities, and work closely with the FP&A team.
As HR traditionally doesn’t have this analytical planning mindset, it’s helpful to start out with a small, multi-skilled team; addressing skills gaps with support from finance, other areas of the business or external experts. Bringing members of the finance team into the process from the start will not only achieve this, but will also help get them bought into the OP&A function as a partner to their own FP&A team.
Today’s highly disruptive business environment requires HR to become more forward-looking to tackle any people issues head on, and prepare the workforce for the future. Championing true collaboration with finance is key to this, and provides a great opportunity for HR to shape critical decisions and establish itself as a true strategic partner to the business.