3 Ways Finance and HR Can Collaborate to Drive Company Strategy
Finance and HR are better together. When these two departments that have historically fought for strategic seats at the table collaborate effectively, businesses can maximize returns on their most valuable assets—their people. But what are the best ways for finance and HR to team up? There are 3 main areas that stand out.
For years, HR was seen as a cost center because the department handles a company’s biggest expense—hiring. But, as companies realize people are their most important asset, HR has become the strategic partner it should have always been. When done strategically, hiring isn’t a cost, it’s an asset. The people hired should, ideally, show a return on investment.
Unfortunately, HR isn’t always set up to analyze the return on investment of each employee. But, with the right data, they can partner with you and members on your finance team to do it.
Finance teams have been under pressure to make larger and more meaningful investments into employee growth and development. And as a finance leader, you can partner with HR and uncover the insights and strategy that will deliver stronger results for the company.
When finance and HR partner to align people investments with business outcomes, your company will see massive improvements in strategic workforce planning, competitive wage packages, and coordination of risk management.
Connect Headcount Planning to FP&A
Connecting a company’s org design to financial planning and analysis (FP&A) involves aligning hiring plans with the company finances. Collaborate with HR by incorporating FP&A into the headcount planning process—a strategy that ensures your company meets short- and long-term goals based on a represented budget. With headcount often being at the top of the list of company expenses, FP&A should be deeply integrated with workforce planning.
Normally, HR works with the business leaders to develop a hiring plan that sets out to meet company goals in headcount planning. They'll work with execs to review their organization’s goals for the next six months to a year and evaluate what positions are needed to fulfill those goals.
If you and your finance team collaborate with HR on headcount planning, you can more accurately adjust headcount forecasts based on business needs and constraints.
For example, finance can partner with HR on a hiring model based on the top line growth that’s been forecasted. Collaborate on scenarios such as thinking about what the company will need to look like to reach 30% revenue growth. It may require a 30% increase in sales headcount as well since sales is primarily responsible for prospecting and driving revenue growth. So with a bigger sales team in place, you could work with HR to then grow the marketing team by 20% and the R&D team by 10%.
A big part of building a growth path is bridging FP&A with headcount plans. Merging finance and HR helped Showbie, an educational app for teachers and students, establish a path for growth.
When Showbie raised its next funding round, it was able to navigate its post-Series A growth by openly discussing headcount plans, budget needs, and month-over-month growth projections with leadership and employees.
Because he was able to tie it all together, Showbie co-founder and CEO Colin Bramm created a vivid growth path that gave members of the team the context they needed to ask the right questions, and ultimately, support it.
Turn the Compensation Strategy into a Business Asset
Together, finance and HR can turn the company’s compensation strategy into a business asset by creating a more fair, more competitive compensation package.
Attracting top talent and ensuring they are receiving a fair benefits package is a big priority for businesses. And in Paycor’s recent State of American Business survey, 65% of companies said they want to reevaluate benefits in 2021. Employers want to ensure employees have a stable mental health and wellbeing while working hard.
With this growing attention on developing fair compensation, collaborating with HR to turn your compensation strategy into a business benefit is essential for ensuring equal pay, employee retention, long-term success, and strong company benefits.
In compensation planning, HR typically creates a strategy that accounts for base pay, benefits, pay bands, and merit increases that’s aligned with company goals and employee needs.
As a finance leader, you can partner with HR to benchmark compensation against other companies. That way, your company has an informed standard--allowing you to establish a more fair and competitive compensation package. A more fair and competitive compensation package is particularly helpful in attracting and retaining top-tier talent.
Finance can help visualize the broader market by analyzing the fully loaded cost per employee. Doing so will allow you to get as close to the competition as possible, calculating expenses beyond base pay. Those expenses include the cost of recruitment, signing bonuses, relocation fees, and dependent benefit expenses. Keep in mind that it will be crucial to track these wage-related costs, especially as you scale.
After working to make fair compensation a priority, make a contingency plan that focuses on the essential people in your org. The ones who make the biggest impact on the company’s growth are your highest priority when turning your compensation into a business asset.
Create a People-First Contingency Plan
Finance and HR can work together to provide a consistent employee experience and respond more effectively when unexpected events arise.
During the pandemic, for example, HR took on a lead role in crisis management and business continuity. HR teams quickly had to support employees to work remotely. People Ops helped organizations find new approaches to performance reviews and employee benefits to accommodate workers’ changing needs.
According to “Human Resource Planning for the 21st Century,” HR teams are best positioned to help guide crisis management efforts because they understand the workforce’s needs. They are the glue for organizations—bringing data about people to the conversation to ensure employees continue to help their company operate as best as possible.
Your finance team can partner up with People Ops by looking at company budgets. While HR looks at all the possibilities based on current and future employees, finance teams level out operation efforts by factoring in finance-related strategies. Both departments run budgets for different scenarios—looking at plans for budget cuts, relocations, business downturn, and other unexpected events.
Having HR in your corner when creating financial and budget plans will help you see the importance of putting people first.
Prioritize Finance and HR Alignment to Deliver a Higher Return on People Investments
By prioritizing collaboration on key People Ops goals, HR and finance will create even stronger people strategies, allocate resources more effectively, and ensure smoother planning processes.
A stronger finance-HR partnership enables both departments to clearly demonstrate value to the company, allowing you to deliver a higher return on people investments.
This article was Part 2 in a two-part series about the strategic value of HR and finance collaboration. You can go back and read Part 1 to learn more about the data gap between the two departments and the benefits of fixing it.
About Maria Barrera
Maria Barrera is Head of Growth & Partnerships at ChartHop. Throughout her career, Maria has been on both the operational and go-to-market sides of fast growing companies and deeply understands the pain points that companies experience as they scale and manage change.
Maria is passionate about empowering leaders with the data and tools they need to enact real change within their organizations. She believes that by decreasing the frictions and barriers that stand in the way of progress, we can build more equitable, diverse and effective workforces.
As a mechanical engineer at heart, Maria is excited to help leaders build better companies. Maria holds a bachelors and masters from Stanford University.