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CFO and CHRO Collaboration: A Power Partnership

Author

Chuck Leddy

More by Chuck
Author

Chuck Leddy

More by Chuck

CFO and CHRO collaboration has become a growth-driving trend over the last decade. A recent survey from global consultants Ernst & Young (EY) found that 80 percent of the 550 CFOs and CHROs surveyed said that their relationship had become more collaborative over the past three years. The reasons are fairly obvious. Human capital is both the most valuable asset an organization has and likely its largest operating expense. It is, therefore, quite natural that CFOs and CHROs are becoming strategic partners to leverage human capital investments into growing revenues.

CFOs and CHROs: Partnering to Align Human Capital With Organizational Strategy

Getting talent in the door, and developing that human capital to its full potential in order to seize quickly evolving business opportunities, are primary functions of both CFOs and CHROs. As the EY survey explains: "While the CFO must ensure that resources are allocated efficiently and appropriately to deliver the company's strategy, it is HR's role to nurture this particular asset to realize the potential value for the company." Strategic collaboration between them simply maximizes value generation.

Richard Kanor, an EY Human Capital expert, explains the bottom-line value of the CFO/CHRO partnership: "The high-performing organizations have a greater focus on HR metrics. Costs, performance, attrition, retention, productivity are all being measured with much greater frequency, as the CFOs and chief human resource officers are collaborating to try to ensure the organization is optimizing the return on the money that it's spending on its people."

So by working together, CFOs and CHROs can focus on the key human capital indicators that drive organizational growth, such as employee productivity, employee engagement, retention and training.

Drivers of Collaboration

Talent as competitive advantage

As the business landscape has become more driven by fast-evolving technologies, the need for talent has never been greater. Attrition, especially the loss of specialized talent, can devastate an organization's bottom line, so talent retention (and recruitment) has become strategic for CFOs and CHROs alike. Understanding the intricate relationships between labor costs and performance is a joint priority of CFOs and CHROs.

A dynamic approach to strategy and resource alignment

Agility is crucial in today's business world, and the closer CFOs and CHROs work together, the more agile their organizations can be in identifying and seizing strategic opportunities. The flexible, dynamic allocation of people and financial resources is essential to develop products and services that markets demand. The more rigorous and varied organizations are in making those decisions, the greater the competitive advantage they will achieve.

Necessary Enablers of CFO and CHRO Teamwork

Leadership buy-in to break silos

Neither finance nor HR can be viewed as siloed support functions. Both are key business drivers needing a seat at every decision-making table. As the EY report says, the "broadening of both CFOs' and CHROs' responsibilities to be more strategic and commercial, and less siloed and specialist" will take "the administrative burden away from the retained function, freeing up time for a more-strategic focus."

Big data

CFOs and CHROs need to work together to mutually define the key human capital indicators that drive business growth. They should team up to build a business case for needed investments in HCM capability such as predictive analytics, workforce analytics and other forms of HCM-related big data. Being able to integrate HCM data for relevant insights and business actions will be pivotal for future business success.

As an article in Strategic Finance magazine concludes: "CFOs and finance organizations can play a vital role in the evolution of human capital metrics and in understanding how human capital drives business and financial performance. To be truly valuable, human capital analytics and metrics need links to business results and reinforcement through compensation, communications, training, and ongoing reporting. This is an area where collaboration between the CFO and CHRO can create strategic value."

The CFO and CHRO relationship has come a long way in the last decade. This collaboration will only grow in importance as organizations look to recruit and retain the best possible talent in an ever more competitive market while simultaneously continuing to foster business growth.