HR and Finance Collaboration: A Competitive Advantage

This article accompanies Health Partners.

Saturday, June 2, 2012
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For decades, it seemed as if the human resource and finance departments were constantly on a collision course, with HR viewed as "warm and fuzzy" and finance considered "cold and calculating."

Such a schism cannot exist today if the business is to achieve optimal success in business results, labor costs and the creation of a sound total- rewards strategy embedded in a competitive employee-value proposition. The recent economic climate has shown companies the risks of making workforce decisions in a vacuum.

And, a recent Towers Watson survey of HR and finance executives reveals considerable agreement on key issues between HR and finance, and also highlights opportunities for both stakeholders to align even more effectively in the future.

Organizations in which HR and finance are aligned will be best- positioned to assess both the costs and talent implications of future decisions. In top-performing organizations, HR understands the business issues and finance understands the people issues.

This understanding doesn't occur happenstance -- it occurs when the CEO and senior leadership welcome both to the table and where finance and HR respect their similar yet different roles. Our survey data shows that finance executives view themselves as owning the budgeting process, but HR sees itself as increasingly involved in the numbers.

Conversely, HR owns the strategy process but finance sees itself becoming more heavily involved in the years ahead. (This is an interesting point: While finance sees its role increasing in strategy and planning, HR sees the finance role as minimal today and minimal in the future.)

There is broad agreement between HR and finance on the importance of a total rewards strategy, although their priorities differ: Finance sees pay as the most important element, with training and development a close second. HR, by contrast, puts training at the top of the list and pay a close second.

However, while the priorities may vary, the good news is that both believe in the importance of their rewards package and see it offering them a competitive edge in recruiting and rewarding needed talent.

The passage of the Patient Protection and Affordable Care Act has created significant internal debate regarding the employer's role in providing health benefits should health exchanges emerge as an alternative to direct-employer sponsorship.

While many might assume that finance would be quick to advocate an "exit" of health-benefit sponsorship, the survey shows only 15 percent of finance executives seeing their organizations potentially exiting.

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The survey examines similarities and differences in depth, but what rings throughout the analysis are the similarities in views and the realization that a total-rewards perspective is vital to organizational success. Through a clear and well-articulated total-rewards framework, organizations can better manage the unit cost of labor while delivering the right combination of rewards to the needed workforce.

Looking ahead, both groups of respondents see finance assuming a more active role in the future. However, while HR still expects to dominate, finance sees itself as having an equal or bigger role in the future.

For HR executives, the message is clear: Organizational success will come from a well-planned and strategic collaboration between HR and finance, with both parties respecting the role of the other. Failure to do so will create collisions that can be avoided by navigating both shores proactively today.

Randall K. Abbott is a senior consulting leader at Towers Watson with more than 35 years of experience in HR, benefits, healthcare and total- rewards strategy.  He has advised many of the nation's largest and most complex organizations on these issues. Abbott is based in the firm's Boston office.

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