There was a lot of great conversation happening at TLNT Transform in its inaugural year. There was one conversation, however, which stood out to me as being of particular importance. In a breakout session moderated by John Hollon, Nick Araco–co-founder and CEO of The CFO Alliance–discussed a very interesting trend. In the post-recession C-suite, an increasing number of HR chiefs are now reporting directly to the CFO rather than the CEO.
While the rationale for this may be sound–aligning people processes with the company’s financial strategy is never a bad idea–it is meeting resistance from HR. the idea of reporting to the stereotypical “cold-hearted number cruncher” who doesn’t understand HR is objectionable, if not intimidating, to many HR leaders.
What HR Can (And Should) Be Learning from the CFO
But can HR leaders learn from the CFO? Most definitely. I caught up with Araco last week to find out what… and how. Based on our conversation, there are five things HR leaders need to learn before they can step up their game and become key players in business strategy and execution:
1. Use Your People Data. Araco says, “There should be information flow that occurs on an ongoing basis. HR data should influence decisions on business goals and performance metrics.” But, many HR professionals lack best practices and systems for collecting, tracking and reporting on people data. For the CFO, that’s blasphemous. Though HR reporting to the CFO presents a golden opportunity to grow in this key ability, success will require the CFO to take an interest in what HR is doing with data and how they’re doing it.
2. Quantification and Qualification. HR needs to learn how to quantify and qualify more strategic investments in people process. Otherwise, we’ll never be able to break away from the traditional cost center, administrative or compliance function of old school HR. The more that HR can learn from the CFO how best to apply financial principles to decision making, the greater opportunity for them to position HR as a strategic function.
3. Business Perspective. What ramifications will your decisions have on the company’s overall business performance? The CFO wants to know. For example: What return do you anticipate for the money invested in a new hire? HR’s ability to think Big Picture and have some business perspective is invaluable in a post-recession economy.
4. Reinforce the Human Element. CFO’s are frequently the naysayer. And in the recession, his or her tough decisions often kept the company alive. As we move into a period of recovery, Araco suggests that it’s up to HR to inject a human element into the CFO’s decision-making process. “I think it’s natural that these roles work together.” To that end, Araco says soft skill development is key, and that HR is in a prime position to enhance the CFO’s ability to look beyond spreadsheets when weighing options.
Out With the Old, In With the New
“There’s a new generation of CFOs whose aspirations and goals are better than simply crunching numbers,” says Araco. “They view the greatest value having someone seated next to not under.” By elevating performance in both roles, there’s an opportunity to transform HR and Finance simultaneously. But that opportunity is only available to those leaders who can work together to that end. As Araco warns, “Those who fight this are going to be left in the dust.”
About the Author: Kyle Lagunas is an HR Analyst at Software Advice—an online resource for buyer’s guides and comparisons of applicant tracking systems and other talent management software. Using his blog as a vehicle for driving conversation in his market, he reports on trends and best practices in HR and recruiting technology.