In most businesses we find the HR department does not have as close of a relationship with the finance function as it should. And that is unfortunate!
Given that the “people cost” of a business is usually about 30% of revenue, it would make sense for finance and HR professionals to talk more closely; not just about budget, but also about ROI when it comes to investing in people.
Secrets and silos sink the ship.
When our client David came to us a few years ago, he had just joined a non-profit as their Executive Director. The Board had brought him in to solve the organization’s financial chaos.
The finances were shrouded in secrets with a general attitude of spending money without worrying about the details.
David had a big problem in front of him. It wasn’t just communication from the finance department that was lacking. Secrets and silos pervaded other staff relationships, too.
Many of the employees and volunteers felt disenchanted and underappreciated, and no one was being held accountable for their work. None of the different functions were communicating with each other, and it was quite literally sinking the ship.
David’s problem is far from uncommon. Finance and HR must work together to deliver results for your business. Both areas are critical to your organization’s success.
In fact, one function working without the other could create operational (and financial) impacts that are detrimental to your business. Yet many organizations, like David’s, allow these departments to operate in silos, separate from each other.
This is beginning to change, thanks to a growing recognition of the value of people in business. Companies are beginning to see the value that knowledge, problem solving and creativity can create for their bottom line!
Does David’s situation sound familiar? If your organization struggles to move past silos, here’s what you need to do:
How to Blend Finance and HR
Here are 3 major steps to align your HR and finance efforts for increased collaboration and profitability.
1. Include people development and management as part of overall strategy.
A comprehensive business strategy can’t just include financial goals such as sales and profitability, as much as Patty would enjoy that! A strategy to set your organization up for success will include issues that typically fall under the HR umbrella, including hiring strategies, retention programs and training.
For example, employee turnover is often thought of as just an HR problem. At TurboExecs, we look at both the financial and human impacts of employee turnover. There’s a financial cost to the hiring, onboarding, training and development processes. A bad hire can cost you a lot of money!
But there’s also an important people impact. When we work with clients on their budgets, we make sure they include training money in the budget. We also make sure they’re using best practices for hiring.
We might tap the knowledge of current star employees or create a referral program with bonuses for the referee if the new hire stays in the position for a year.
These are silo busters. They are the kinds of things organizations should plan for from a budget standpoint while ensuring HR processes are in place to support them. Both functions need to be involved to create the best possible hiring, training and onboarding strategies.
2. Ensure your recruitment program aligns with your business strategy. This strategic alignment will extend out of the office and into relationships with external clients.
Appreciation and respect for people within the office – outside one’s own silo – creates the foundation for solid client relationships outside the office.
3. Develop new success measures and strategies for employee retention. People are a company’s greatest asset, so hiring the right people is critical. If you’ve ever had to let someone go or reassign them to a different role, you know how important it is to have the right people in the right jobs.
Studies have shown that replacing an employee can average a cost of as much as 200% of the base salary of the previous employee in that same position.
Getting it right when it comes to performance management can have huge financial impacts for your business. Training, administrative tasks, recruiting costs for job boards and possible client losses all contribute to the high expense of employee turnover.
Turnover’s human impacts, including reduced productivity, lower morale, loss of information and extra stress on coworkers, are arguably just as bad.
A successful recruiting strategy considers several elements besides pay, including maintaining a positive work environment, identifying the motivations for employees and prospects, and defining the values and traits needed for success within a position.
Additionally, you’ll want to be aware of the HR trends. Click here to find out what people trends you need to leverage for success.
When Busting Silos, Don’t Forget to Consider These Key Items
Culture and Employee Development
Before beginning the recruiting process, organizations should have a formal training program in place. Companies should strive to hire leaders who create a safe environment that focuses on accountability rather than blaming people when things go wrong. A culture that fosters innovation and safety is a culture that thrives.
At TurboExecs, we hire for culture fit. That means we’re thinking about things like, Will you fit in? Can we take looking at you every day? Can you take looking at us every day?
Do we have shared goals? Do we have shared ethics? Do you want what we’ve got and want what we want?
The cultural aspect of hiring is critical. You can teach skills. You can’t teach culture fit; it’s either there or it isn’t.
What Motivates Employees?
Once a company’s training program is in place and its culture is established, they can begin to recruit. With a workforce made up of several different generations, what prospective workers value can vary widely.
For example, millennials are typically motivated by a fun work environment and satisfaction. They want to be creative and desire frequent recognition from management.
Baby Boomers, on the other hand, are generally motivated by a manager they respect, relationships and desired respect from colleagues. They want recognition of their value to the organization and like management to reinforce their need to succeed.
Regardless of generation, most people want to work for a company that they feel cares about them. A company should aim to create a unique culture where employees feel supported and cared about. Most importantly, organizations need to be able to put their culture into words and clearly explain why people would want to work for them. This will also help organizations identify prospective employees and clients who fit their values.
Define Core Values and Find Candidates Who Match
It always helps to be proactive in recruiting. Considering skills and personality traits when creating job descriptions ensures that the right people are hired.
As we’ve said, it’s always better to hire for culture fit versus skills because it’s easier to train someone than to try to change their attitude and values.
All organizations’ core values will be slightly different. They could include traits such as accountability, collaboration or problem-solving skills. Behavioral interviews will help identify candidates who have the values you’re looking for.
Increased Employee Retention Rates
Increased alignment between finance and HR allows for the inclusion of both people-based and financial metrics in tracking success.
Organizations should consistently seek ways to measure the connection between employee productivity/engagement and progress toward overall company goals.
People and numbers are two very different things. But when they intersect, it can have incredible results. Just don’t forget that the people behind those numbers are just that: people.
Recognize Your Employees
In the sales department, it’s easy to identify the top performers. In other departments where contributions are harder to measure, it’s much more difficult. But employee recognition is critical to retaining top talent.
Think of a time when your hard work was recognized at the office. How did it feel? Did it encourage you to continue working hard and contribute even more?
All employees, regardless of generation, want to feel their work is valued.
However, people value different things and thus need to be rewarded in different ways. Organizations should identify whether employees value time or money more, and reward them accordingly.
For example, an employee who values time could be rewarded with flexible time on Fridays.
Just remember to tie rewards, regardless of the shape they take, to results rather than productivity.
Your Employees Should Be Your Biggest Fans
The work isn’t done once the right people are in the right jobs. You want to get employees to adopt the same pride in their work and the company as the company’s management and owners.
These employees become your brand ambassadors and biggest fans. Imagine what an incredible thing it would be to have your employees praising your business!
Employees become more engaged when they’re connected to the overall organization. All employees should know how their specific jobs are tied into the organization’s strategic goals. Each employee should also have their own personal goals that help achieve the overall company goals.
For highest effectiveness, manager bonus pay should be tied to department and company goals. Individual rewards should be tied to individual goals.
In this way, everyone is incentivized to work towards the company’s overall goals.
Remember David, the new Executive Director of a non-profit asked to come in and sort through the chaos? TurboExecs worked with David to bust open those profit-draining silos, get things back on track and put David in the driver’s seat.
Finance and HR can be excellent partners if HR is given a seat at the table and the two functions work together to utilize people to reach financial goals.
Recognizing employees as an important asset to your organization’s profitability will help your business grow and better meet the needs of your employees and clients.
If you’re ready to take the next step into integrating your business functions for greater profitability and success, contact us here.