A finance team’s job is to contain costs and drive income and profit. So the crucial starter question is: Are your people a bottom line cost, a revenue stream, or something more than both of these? Can they be treated like any other machine in your business, run by managing the numbers.
Most CEOs and MDs like and trust their Financial Director, so it makes sense that when new problems arise without a simple solution, they are keen to step in and help. If however, your issues as a business director are around how to develop strong leaders, build a successful culture or empower employees to take the initiative, experience in managing numbers will not help.
Here are our five biggest concerns about HR reporting to finance:
- A business function designed to make your people more effective is moved one step away from the senior level of the business. HR initiatives will only be heard if they can first persuade the numbers, rather than the visionary.
- HR’s main roles are to find, recruit, develop and keep star performers. Where do you see anything like that in the finance team’s training?
- Have you ever met a Finance Director or CFO who is leading the way on happy, satisfied, productive staff?
- Sometimes the FD is the biggest dragon in the business, with a firm reputation for saying no! Developing people means spending money on training, which can be difficult to put a hard ROI against. However, if you don’t do these things, employees won’t stay, won’t grow and can’t help the business to achieve more next year than it did this year.
- Cost control and focus on income can lead to an unbalanced emphasis on avoiding risk. FDs tend to see HR mainly as the way to escape lawsuits. We call this kind of HR a hygiene factor, but it doesn’t help the business to grow or develop.
As HR Directors, we understand David McCann’s comment that “HR is not strategically minded or in some cases even particularly business-oriented.” We firmly believe HR should have the “rigour and discipline” of any finance function. But this cannot be all it is.
Staff salaries are often one of the largest, if not the largest cost for a business. Recruitment, training new employees and termination pay offs are hefty and often unexpected expenses on the bottom line. To ignore a business discipline that could help your staff become happy, satisfied, productive and effective, and run it all through the controlling hands of the finance department does not make any financial sense at all.
HR must be equal to finance, and must report to the main decision maker in the business. This is so it can deliver strategic direction and growth, rather than be controlled by the numbers. Please contact us if you would like to discuss this further.