HR and Finance are – and have always been – two distinctly separate entities both striving for business efficiency and success. Consequently, collaboration between these two departments is unusual. In fact, at many organizations the relationship between the two has traditionally been quite strained.
Generally, people think that the CEO should enlist input on critical business matters either from HR or finance. Some argue that HR should have more input on critical business matters because HR has grown in prominence and thus, the HR chief should serve as a prime advisor to the CEO. HR’s significance has grown because some view human capital as a key driver of shareholder value. Additionally, HR departments now assume a number of finance-oriented responsibilities, including benefits and employment taxes. As a result, many HR departments are hiring finance-savvy individuals.
Conversely, there are those that argue that finance should have more input on critical business matters. Believers that finance should run the show argue that finance knows most about money, including how it is spent and made and thus, the department that supervises a business’s financial operations should be consulted more frequently than HR. Additionally, many consider finance a business’s profit center whereas HR can be considered a cost center.
Currently, the relationship and collaboration between HR and Finance is on an upswing, however. Granted, it took a global economic crisis, rising health care costs and a looming mass retirement. But the walls between finance and HR are now finally tumbling down as the two departments work together to decrease spending. Finance and HR are now finally working together to optimize employee health benefits. HR often leads the discussion regarding which benefit programs to invest in but finance generally decides where the dollars will be spent. This partnership makes great economic sense. HR may not always understand cost implications of investing in a certain program, however finance may not understand how an investment may affect workplace demographics and morale.
Finding common ground between the two departments is facilitated much easier when HR can talk finance and vice versa. It is important for Directors of HR to work closely with Chief Financial Officers to define benefits programs in terms of cost and return on investment. Often a CFO’s support can be gained by aligning on return investment with reduced overall medical costs.
In addition to stellar wellness programs, collaborations between HR and finance can lead to programs that effectively reduce turnover, manage risk and help companies recruit and retain the best employees.
In sum, cost saving ideas occur naturally when these two departments, with different and unique views of business goals and practices, collaborate with one another. Since human capital is often the largest spend, HR and finance can help each other by balancing cost management with attractive programming.
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