Study: HR, CFO Collaboration Equals Growth

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Companies perform better, have better employee engagement and experience higher degrees of productivity if their chief human resource officers (CHRO) and chief financial officers (CFO) have strong relationships.

According to the report The CFO & HR: Partnering for Performance, by Ernst & Young (EY), 80 percent of CFOs and CHROs say improving their working relationship led to the following accomplishments:

  • 41 percent had greater than 10 percent earnings before interest, taxes, depreciation, and amortization growth in the last year, compared with 14 percent of other companies.
  • 43 percent saw a significant improvement in workforce productivity in the last year, compared with 10 percent of other companies.

“Typically, CFOs have tended to view human capital primarily as a cost, while CHROs have viewed it primarily as an asset that requires investment,” said Dina Pyron, global human capital leader at EY. But, “each day, companies are grappling with increasingly complex human capital decisions that have a fundamental impact on the strategic objectives of their businesses. A company’s workforce inevitably drives growth and performance …”

Sibson Consulting revealed that globalization and competition have driven the need for stronger alliances between HR and financial leaders, as noted in HR Magazine.

 EY’s study listed four critical dynamics that have propelled closer collaboration between CFOs and CHROs within the past three years. These dynamics are:

  • Scarcity of talent and increasing labor costs.
  • HR being a critical component within corporate hierarchies.
  • Changes in products and services.
  • Changes in business models.

“To really maximize employee engagement and improve workforce productivity, while keeping pace with the ever-changing dynamics of the global labor force, the CFO and the CHRO need to find ways to increase collaboration effectively and efficiently,” said Jay Nibbe, chairman of the Global Accounts Committee at EY. “This collaboration will empower CFOs to allocate the necessary resources required to deliver the company’s strategy, and the CHRO can ensure the alignment of ‘right people, right place, at the right time.’ ”

The survey also revealed that, on average, high-performing companies spend 50 percent more time on the CFO-CHRO relationship and have better integration between finance and HR–across processes, teams, technologies and systems—which leads to improved strategic planning and decision-making.

At high-performing companies, the CFO makes a bigger contribution to strategic workforce planning, and there is greater collaboration between finance and HR on this activity.

Other findings:

  • 58 percent of high-performers rate the collaboration on business strategy and development as excellent.
  • 37 percent of high-performers say the relationship is primarily forward-looking, rather than backward-facing.

Applying Analytics Helps

The study also found that high-performing companies use analytics more to better understand their workforce and have a “rigorous approach to identifying and tracking key HR metrics,” according to EY.

 As HR People & Strategy reported in its special report Using Human Capital Analytics to Make Excellent Business Decisions, “Without a doubt, mastering the art and science of HR analytics takes effort. But it can result in an elevation of the status of the profession and its practitioners by helping them to guide their organizations in finding the sweet spot—the intersection between more profitable and more enlightened management and development of people.”

Aliah D. Wright is an editor/manager for SHRM Online.

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