Finance and HR chiefs join forces to face digital challenges
What’s keeping CFOs awake at night? Chances are that it’s digital technology. Once owned by IT alone, digitalisation is now seen as key to improving overall business efficiency, staff productivity and profitability. And a big part of that change is driven by what’s happening in HR – a function going through its own digital transformation.
Digital technologies are changing the way we work. We are not only permanently glued to our phones. We are also “monitored closely by digital devices and we are influenced by suggestions, nudges and recommendations driven by analytics,” says HR commentator Josh Bersin1.
At the same time, the workforce is becoming more demanding and diverse. Think of any workplace you know and it’s now likely to include both millennials and baby boomers, not to mention a whole mix of cultures and nationalities. So companies need new ways of managing their people and delivering HR services. Enter Digital HR, described by Bersin “as a growing ecosystem of new tools for recruitment, performance management learning, wellness, feedback and employee engagement.”
CFOs find paths out of the data jungle
These tools give companies more data than they have ever had before about their employees. And that’s turning the world of CFOs upside down, according to a study by BearingPoint, a leading management and technology consultancy.
BearingPoint’s latest survey of CFOs2 found that digitalisation has a big impact on both financial processes and the structure of the finance function. But CFO believe that it also helps them in one of their main tasks: “extracting meaningful information from the ever-increasing ‘data jungle’, at constant or even decreasing costs, as a basis for decision making”.
To delve into the world of big data and find values from it, finance chiefs need to “have both a good business sense – which they’re good at, and also profound understanding of technology to integrate the data and analyze it as they want” according to Lucy Li, CTO at ADP China and Hong Kong, “that’s why data scientists are so eagerly wanted at almost all companies, they understand both business and technology.”
Focus on employee experience driving further change
A lot of the data in this jungle is generated as companies look to attract, engage and retain the right talent. This talent is often in short supply, with a study by Mercer3 finding that growing competition from emerging markets is adding to the challenge.
In response, forward-looking HR leaders are increasingly looking to create a compelling, personalised “employee experience that mirrors their best customer experience”, says Jeanne Meister, writing in Forbes4 recently. This means using the latest consumer technologies to engage talented individuals. Some companies are asking job candidates to showcase their strengths on Instagram posts, for example, while others are using hackathons to create new HR solutions.
But what, you might ask, have these digital HR initiatives got to do with finance chiefs? Quite a lot, as it happens. A report by Accenture5 cites research showing that organisations making the most use of human capital management solutions and other HR technology, saw a 15.2% fall in staff turnover and a rise of as much as 5.4% in productivity. Those are figures that should interest any CFO.
HR outsourcing and the changing role of the CFO
To access and leverage fast-changing HR technologies, most companies need external partners. So the changing face of the workforce, coupled with a growing focus on the employee experience are fuelling a new wave of HR outsourcing. That obviously has costs – which brings us back to those sleep deprived finance chiefs and their changing role.
CFOs are no longer sitting in their silos, focused solely on the numbers. As companies have grown more complex, the CFO function has become broader and more strategic. It has also moved closer to HR – to the benefit of the business as a whole. A study by global management consultancy EY6 concluded that “an effective CFO-CHRO partnership is one of the defining characteristics of a well-run, market-leading organization”.
It is not uncommon now to find that a company’s CFO and CHRO sit together to work in areas like strategic workforce planning, talent decisions, employee productivity and process integration across finance and HR. They decide on the plan together and also review the progress regularly to make necessary adjustments. Their effective cooperation is critical to right talent decisions.
Rising to the challenge
Working with HR leaders, CFOs are now expected to use big data and HR analytics to identify workforce trends. They also need to develop new ways of measuring return on investment on digital HR initiatives – and to keep up to date with innovations in digital technology.
But CFOs can rise to these challenges, according to Regine Slagmulder, Professor of Accounting and Control at Vlerick Business School7. “Having evolved from financial stewards to strategic advisors,” she says “CFOs are well positioned to act as a catalyst for the digital revolution in their companies.” And that includes the digital revolution in HR.
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