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Finance: the new "Champion" for applied analytics
In these unpredictable times, CEOs are increasingly leaning on the CFO to help with business planning and strategy. Organizations must continue to grow and evolve to remain successful, and with their unique understanding of performance across departments there is nobody better placed to transform the company’s operating model than finance leaders.
That said, an operating model involves much more than processes and outputs. The company’s ability to meet its goals ultimately comes down to its people, to the skills they contribute and to how efficiently they use their time. This is the domain of the CHRO.
By nature of the data and systems they have traditionally worked with, finance leaders tend to classify employees based on their role, salary, and availability when allocating resource. This approach is rational, but it falls short because it does not factor people’s preferences into the decision.
The CFO is the business’ numbers guru, and as such they are acutely aware that employee salaries and costs account for a majority of the organization’s operating cost. Making the most of skilled workers is therefore a no brainer, and a closer relationship with the CHRO is the key to achieving this. Research from EY reveals the trend has already begun, with 80% of finance and HR leaders saying their relationship has become more collaborative.
CFOs also need a combined view of people, projects, and resources to make sound strategic decisions. This is particularly important at a time when capital is limited and there aren’t enough skilled people in the job market to meet the company’s needs.
Building Finance's bench strength" should be Co-Pilot of the business: Finance is the new guidance system
To determine which skills the finance team or any department needs to manage their workloads, team leaders like CFOs need a current view of how resources and people are distributed and used across the organization.
They also need to look ahead to which projects are in the pipeline and what these will require in terms of manpower. This extends to succession planning as well, a critical issue for finance teams and of course CFOs themselves.
By nature of the data and systems they have traditionally worked with, finance leaders tend to classify employees based on their role, salary, and availability when allocating resource. This approach is rational, but it falls short because it does not factor people’s preferences into the decision. A person’s aptitude for the role is equally reliant on their enthusiasm for the work, their experience in previous roles and, in the case of managers, on their natural aptitude for leadership.
It is the CHRO and their team who have insight into these less tangible variables and who are in position to keep track of them. The finance and HR departments therefore need to align themselves and their systems more closely to ensure all relevant information is factored into workforce planning decisions.
Looking at the finance department specifically, the skillset of the modern finance employee looks very different to that of their predecessors. Where it was once enough to compile, analyse and share numerical reports, the finance team must now add a great deal more context to their findings. They need to distil information from inside and outside the business into meaningful insights that can inform wider business strategies.
Ivgen Guner, Senior Vice President at Oracle, underlined this reality in a recent Wall Street Journal whitepaper: "Problem-solvers in the upper echelons of financial management grasp the difference between reporting numbers and conveying their meaning. Emotional maturity, sufficient self-confidence to say no at times and, not least, evidence of the capacity to work in partnerships beyond the finance department all signal problem-solving talent."
The difficult part is finding people that can deliver on all these fronts. The professional skills gap in EMEA has never been more pronounced, especially in analytical fields. Meanwhile, many established finance workers haven’t developed the technology skills or managerial experience necessary to lead in today’s business environment.
Sandy Cockrell of Deloitte’s Global CFO Program understands the difficulty faced by finance departments: “Whether it’s taking political science and communications courses in school or volunteering for an overseas post in sales, [CFOs] need the capability to connect financial acumen to a broader understanding of the business world… Many new CFOs who have come from finance have a tough time letting go of their old jobs. But in order to focus on their roles as strategist and catalyst, they need a bench who can handle the roles of operator and steward."
Looking at the finance department specifically, the skillset of the modern finance employee looks very different to that of their predecessors.
To branch out their team’s skillset, CFOs are looking for talented people whose background lies outside the finance function. This extends to recruiting employees from other departments who want to test their skills in a new, challenging environment. How can they find these people? Enter the CHRO and HR team, who have their pulse on exactly which individuals would be the best candidates for a finance role based on their skills, aptitude, and direct feedback from their line managers.
The battle for top talent is heating up, and as a result means CHROs are having less difficulty securing IT budget to enhance their recruitment efforts. Cloud-based talent analytics has emerged as a means to better engage employees and improve productivity, as are cloud-based applications for attracting, managing and retaining the best people.
However, in many cases these systems are still implemented in isolation rather than in an integrated way with financial planning applications. Better communication between HR and finance lies at the core of a modern approach to talent and resource management, and this includes closer alignment between both departments’ systems.
Below are just a few examples of how this integrated approach adds value. For an even longer list check out Jim Lein’s blog on best practice for CFO and CHRO collaboration.
Better communication between HR and finance lies at the core of a modern approach to talent and resource management, and this includes closer alignment between both departments’ systems.
Virtually any major organizational change will impact payroll. Take the case of a company that has decided to set up new offices and production facilities in new markets to better support local customers. The finance team needs to set up cash reserves in local currencies to meet local payroll requirements, and with access to accurate employee data they will be able to accurately allocate cash as needed.
Employees’ development should be as linked to business needs as it is to their own ambitions. For example, if a sales organization decides to target midsize customers with its new range of products, line managers should set performance goals for their teams that reflect this wider ambition. For their part, HR teams should offer training geared at helping employees better serve the midsize segment. Again, this strategic harmony requires aligned finance and HR systems.
Compliance issues continue to be one of the biggest concerns for businesses, and a chief barrier to innovation. In the case of procurement, all purchases of a certain category must be signed off by a VP in the accounting department. When a company’s HR and finance systems are in sync, the new policy is immediately reflected in every workflow it affects with no need for human intervention (and therefore no chance of human error).
The case for a closer relationship between finance and HR has never been stronger, and the emergence of cloud-based ERP and HR technologiescould not be better timed. By unifying these systems in the cloud, companies can gain a single reporting and analytics resource as well as a common data model across the board, not to mention a consistent user experience for all. Of course, this stronger relationship between HR and finance begins in the boardroom so it is up to CFOs and CHROs to lead by example.