HR and Finance Agree? – Has The World Come To An End?
By tobyehatch-Oracle on Jul 22, 2014
By guest bloggers Alex Anvari and Mike Bollinger
HR and finance executives agree on many people and performance-related issues according to a survey of HR and finance executives by Towers Watson and Forbes Insight.
The top areas of joint activity, according to the survey were, setting annual budgets for reward programs (cited by 46 percent of finance and 62 percent of HR), determining changes to reward programs (43 percent finance and 42 percent HR), and setting reward strategy (39 percent finance and 41 percent HR). Other important areas like overall workforce strategy (35 percent finance and 23 percent HR) or talent management (32 percent finance and 20 percent HR) saw considerably less collaboration, however. That last set seems low to us and an opportunity for further improvement.
“If there is any one secret of success, it lies in the ability to get the other person's point of view and see things from that person's angle as well as from your own.” - Henry Ford
Nobody disputes that talent has become critical as a competitive differentiator. However, financial measures of that impact are often met with skepticism, and the true challenge to executive leadership teams is to be able to see both points of view empirically as well as anecdotally. Answering the age-old conundrum: how do capital, labor and organization find common purpose and expression now that information is the surpassing unit of currency.
We are all familiar with the aphorism “what gets measured gets managed” (Drucker) but it is so much more in the brave new of world of analytics and big data. How can both HR and Finance truly align at your organization? How can we embrace the strengths of both to move the needle in our organization? Together?
How about through a common agreement on the way in which things are described and considered? One of the simplest and often overlooked ways is through an agreement on a common language, set of definitions and sets of data which can then be examined through a common lens (in this case analytics).
If HR and Finance share an analytics foundation built on common definitions of employee, role, account, cost center, business unit and period, we can then ask, are there performance indicators that combine people performance measures with financial results for each level within the organization? Does this “state of alignment” adapt to changes in regulations, updates to HR Policy, revised Financial Controls, reorganizations, mergers, acquisitions or entry/departure from markets and/or geographies?
In our conversations with owners of operating units or cost centers, leaders of divisions or business units we hear how users of financial and HR information expect a complete picture of their business from yesterday, today and tomorrow. Their expectation is that they are able to use analytics for their informational needs at all levels. To use analytical tools to drive decisions to the bottom line, health and prosperity of the organization regardless of its context as a “financial” or “people” measure.
Analytics and metrics that tie HR and Finance together have significant bottom line impacts, for example:
• Total compensation and cost analysis, e.g. total base pay, incentive pay, employer-paid healthcare cost and taxes;
• Market entry decisions in the context of a customer base, a product possibility and geographic demographic and compensation data to make an informed investment decision;
• Correlation of development and learning program design/effectiveness with employee performance, safety or other metrics that matter to the bottom line;
• Recruitment strategy based on retention effectiveness, on boarding and new hire programs by role, business unit and market;
• Optimized talent sourcing based on vendor, channel and candidate performance;
• Tracking of productive time, controlling overtime impact, job/responsibility design all comparable to Contingent Workforce alternatives; and
• The ongoing impact of safety, absenteeism, shrinkage, and workforce satisfaction on productivity.
Professional associations such as CenterForTalentReporting.org have amassed an impressive set of measurements for HR professionals to build transformational initiatives upon. Organizations such as the technology agnostic APQC.ORG establish measures to benchmark with. A recent such study, “2013 Recruiting Metrics Survey Results” - top performing companies spend $456 in Personnel Cost to “Recruit, Source and Select Employees” per New Hire and the bottom performing companies spend $2,294. That is a profound difference but how do we turn that insight into action? For starters we know that calculation was done at an enterprise level, which is not where decisions – about recruitment, sourcing, selection, compensation and retention – are made. We need to dig deeper, there are decisions to be made by role, geography, channel, department and business unit.
To move into the best performing group or organizations, and achieve competitive advantage, you need an integrated HR and Financial analytics platform to be aligned at all levels and a common agreement on what the measures would be.
Here are a few questions we’d like to explore with you at the right time and place so you can achieve maximum value from your Oracle investments:
1. Do you want to dive deeper into metrics that describe the data – measuring the effectiveness of cross functional business processes – where HR and Finance collaborate?
2. Do you see changing requirements or new regulations in your future? How adaptable has your Analytics platform been historically?
3. Would your users of HR and Financial information say they experience a consistent user experience across all corporate applications for operational and analytical reporting? Is that true for your reporting requirements whether they are descriptive, prescriptive or predictive?
In summary, alignment of HR and Finance information is mission critical for all leaders and high performers to master the facts underlying their business. No single head of a business unit or division, no cost center manager, or director of a corporate function, has the expertise and access to all the various source HR and Finance applications required. Therefore they receive lowest common denominator extracts from those HR and Financial systems and then face the challenge of standardizing definitions of key dimensions like account, company, cost center, product, time dimension, HR organization, role etc. And that repeats itself across your geographies, lines of business, divisions, entities and operating units.
To truly have impact you have to empower your leadership at all levels. The recipe can be found in Thomas Davenport’s 2006 seminal thought leadership article “Competing with Analytics.”
• Champion Analytics From The Top
• Create a Single Analytics Initiative
• Focus your Effort
• Establish an Analytics Culture
• Hire the Right People
• Use the Right Technology
To which we would add one more: “agree on the meaning of facts.”
Oracle has built not just the tool set but a library of content to help you focus on what really matters: Content to create a world where Finance and HR agree on the true definition of organizational success that embraces both points of view.
Technology is not magic, but it can serve as a unifying technique where the language is often different. It can serve as a vehicle for agreement on what the core functions of the organization (HR and Finance) should do together.
Alex Anvari, Oracle Director of Business Development, is responsible for Business Intelligence, Analytics and Enterprise Performance Management sales in North America.
Mike Bollinger is Vice President of HCM Transformation and Thought Leadership at Oracle.