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PARTNERING FOR PERFORMANCE

CFO and CHRO


How CFOs can partner with the leaders of other internal functions
to drive organizational performance.









EY






As part of EY's Master CFO Collection studies, Partnering for performance is a series that looks at how CFOs can partner with the leaders of other internal functions to drive organizational performance. In this part, EY examines the relationship between the CFO and the chief human resources officer (CHRO), and explore how finance and HR can collaborate to achieve superior financial performance.


An excerpt:




It has so often been said that people are a company’s greatest asset that it has become a platitude. A company’s workforce is a key driver of growth and performance, and success is intrinsically linked to the workforce’s skills, talent, knowledge and ability. This value, held in people’s heads, is worth more than any physical asset.

In most companies, people are also the single largest expense. One study has estimated that total human capital costs average nearly 70% of operating expenses.2 But unlike the physical assets that CFOs have long measured and managed, people are difficult to control and predict. While the CFO allocates the resources required to deliver the company’s strategy, the CHRO ensures the right people are in the right job at the right time, with the right support and incentives.

An organization’s people exist at the junction between the CFO’s and CHRO’s worlds. But the relationship between these two figures has not always been a comfortable one. CFOs have tended to view human capital primarily as a cost, while CHROs have viewed it primarily as an asset that requires investment. In addition, the differences between the traditional finance focus on certainty and hard measurements, and HR’s focus on softer, less-tangible metrics, have contributed to a rift that many companies have found difficult to bridge.

It has so often been said that people are a company’s greatest asset that it has become a platitude. A company’s workforce is a key driver of growth and performance, and success is intrinsically linked to the workforce’s skills, talent, knowledge and ability. This value, held in people’s heads, is worth more than any physical asset. In most companies, people are also the single largest expense. One study has estimated that total human capital costs average nearly 70% of operating expenses.2 But unlike the physical assets that CFOs have long measured and managed, people are difficult to control and predict. While the CFO allocates the resources required to deliver the company’s strategy, the CHRO ensures the right people are in the right job at the right time, with the right support and incentives. An organization’s people exist at the junction between the CFO’s and CHRO’s worlds. But the relationship between these two figures has not always been a comfortable one. CFOs have tended to view human capital primarily as a cost, while CHROs have viewed it primarily as an asset that requires investment. In addition, the differences between the traditional finance focus on certainty and hard measurements, and HR’s focus on softer, less-tangible metrics, have contributed to a rift that many companies have found difficult to bridge.

Two worlds converge
Things are changing, however. In recent years, the gap between finance and HR has narrowed, as both CFOs and CHROs have broken the traditional molds that defined their roles. Among the CFOs and CHROs we surveyed for this study, 80% say that their relationship has become more collaborative over the past three years. The high cost and scarcity of talent top the list of factors driving the need for a closer relationship. Changes to strategy, operating model, and products and services are also prompting CFOs and CHROs to work more closely.

A strong relationship between the
CFO and the CHRO is linked with superior performance

Our survey has found that there is a powerful link between a business’ performance and the extent to which its finance and HR leaders collaborate. Companies where the relationship has become much more collaborative over the past three years report average higher EBITDA growth and stronger improvement across a range of human capital metrics, including employee engagement and productivity.




CLICK HERE to access EYs entire study.
 
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