Why HR Should Be More Like Finance

December 6, 2022
Season 3, Episode 42

A discussion of how HR leaders can use a more metrics-driven approach to improve human capital decision-making and management, and deliver greater value to their companies, with The Hackett Group’s North American HR Executive Advisory Practice Leader Franco Girimonte and Senior Research Director Tony DiRomualdo.

Show Notes:

Welcome to The Hackett Group’s Business Excelleration Podcast, where – week after week – we hear from experts on how to avoid obstacles, manage detours, and celebrate milestones on the journey to world-class performance. This episode is hosted by Franco Girimonte, HR Executive practice Leader at The Hackett Group. Joined by Tony DiRomualdo, Senior Research Director at Hackett, we discuss “Why HR Should be more like Finance.”

To begin, Tony shares why this topic is important. The financial wisdom is that finance and human resources (HR) exist on completely opposite ends of the spectrum. However, looking at the nature of the workforce, employer/employee relationships have become a board-level issue for many organizations. The pandemic put front in center the idea that every individual employee has a significant role to play within the company. Traditionally, finance has taken the lead in many reporting requirements and regulations to the SEC. Now, however, there is pressure for HR to take similar action. Similarly, we are seeing an increase in investment professionals linking ESG efforts to good practice. There is more awareness around the fact that paying attention to these forces is actually good for business. For years, HR has struggled to get a handle on the data. The tools we have now are now making it increasingly possible for them to gather and leverage the data they have, thus influencing leadership within organizations. To really take advantage of this opportunity HR has, they should start by emulating finance.

With more insights available for HR revealing what is going on in the minds of employees, it is time to figure out how to feed those insights to leaders to make better decisions and get the best performance and retention out of employees. The finance side is never afraid to use the data available and dig deep if people are not hitting KPIs. HR should emulate this for the people component of an organization.

Then, Tony explains that there are a handful of areas currently holding HR back. First, they often look at data as a means to get someone paid, ensuring they are staying within the compliance of rules and regulation, etc. Finance, on the other hand, knows how to leverage data as a true asset to drive insights and decision-making. Going beyond measurement tracking and reporting, just being able to analyze data and draw insights from it is where HR organizations have struggled. New technologies are tools with the opportunity to generate interesting insights, pushing HR towards making fundamental changes in its competency base to be able to leverage them. You can have tools and data, but without the skills needed to leverage this capability, organizations will fall short. Franco sites the data referred to by many companies regarding company-wide vaccine mandates as an example. It is all about getting people comfortable with the outcomes of a tool and changing about how they solved the problem.

The conversation shifts to discussing how clients and listeners can begin to address this issue within their own organization. First, it is important to assess your current state including the size of your team, infrastructure they could leverage, digitization, data quality, skillsets and more. We must keep in mind that finance systems have been conducting similar assessments for hundreds of years. From there, you can get a better idea of the capabilities you have and need. This is not a quick effort, but rather should be considered up to a 2–5-year journey for best results. Lastly is the overall culture change, which must start from the HR leadership team. The infrastructure, data, tools and skills must be in place, but then there is the need for all of these things to be encouraged by the top. In doing this total transformation of HR, we could be true stewards of our human capital.

Timestamps:

  • 0:56 – Welcome to this episode, hosted by Franco Girimonte.
  • 1:40 – The key forces currently driving this topic.
  • 10:30 – Additional steps HR can take.
  • 13:03 – What is holding HR back in this area?
  • 24:42 – How clients and listers can address this issue.
  • 30:12 – Thanks to Tony DiRomualdo for joining us today!