As the skills gap continues to threaten many industries, HR leaders, benefits professionals and CFOs are collaborating more than ever to sustain and grow their businesses.
Companies that report strong relationships between HR and finance departments show substantial improvements in company fundamentals, but it all depends on the data, says Steve Coco, a principal in Buck Consultants talent and HR solutions practice. The more effective HR becomes with providing data-based insights to senior leaders, the more involved they are becoming with the corporate hierarchy.
Data can offer answers for what skills and development training each department needs to function at its best, Coco explains to EBN.
Just like financial assets, people are an asset that requires investment what, when, how and how much to invest are the questions that require alignment internally, he says. For this reason, change management and collaboration between HR and finance becomes critical to managing stakeholders and getting things done particularly in HR.
Approximately 80% of CFOs and chief HR officers surveyed recently by Ernst & Young report a more collaborative relationship between finance and HR over the past three years. For 41% of those CFOs and chief HR officers that worked together, their companies experienced a greater than 10% increase in earnings before income tax, or EBITDA. Also, 44% of this top performing group report improvements in employee engagement and 43% report increases in workplace productivity.
CFOs are understanding what investments are needed to drive growth, people development, cost management, employee retention and engagement, and the CHRO [chief HR officer] are understanding the return on investments that must be demonstrated in these investments, says Bill Leisy, global human capital talent strategy and analytics leader at EY. Together, the two key function areas really complement each other from a strategic and operational basis.
The EY survey highlights that HR is becoming an important piece of the corporate management pie for many companies as they face the need to change their core business models. One reason for this need to adapt is the scarcity of talent facing many industries right now.
Last summer, the McKinsey Global Institute, the business and economics research arm of McKinsey, determined that more effective talent development can help with the current skills gap challenges. With slight tweaks to education curricula, a more competitive workforce is expected to raise the countrys GDP as much as $1.7 trillion by 2030. But until this nationwide effort bears fruit, employers need to address current problems and deal with the resources they have.
Dana Borowka, CEO of Lighthouse Consulting Services, a firm focused on increasing executive and employee productivity and well-being, says that companies need to develop strategies to retain high quality talent.
If companies have A and B players, they are not wasting money on everyone else that is sucking time, Borowka says. So now they can afford to pay more to the A and B players because they are just so much more productive than the C, D and E players.
The assumption that many organizations can keep these top employees is evident as long as companies are effectively tracking workforce performance, which Coco deems a tricky spot for CFOs.
More rigorous employee performance measurement programs and increasing focus on overall efficiency requires new ways of working centralization and shared services are two common models that drive cost out of the business and have significant impact on people, Coco says.
Leisy advises that high-performing organizations with strong relationships between HR and finance can differentiate between those programs that should be invested in and those that are not producing the right ROI. Alignment and integration of talent strategy with business strategy has shown to have significant financial and nonfinancial returns to the organization, he says.
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