The Holy Grail: Aligning HR and Finance in Your Planning Process

by Kerman Lau

The key to fixing the relationship is to clarify the priorities on both sides and understand how both teams can provide the information the other needs to perform their job function at the highest level.

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Too often, HR and finance seem to be on different pages. Although they’re committed to the same end goal—a successful company and a happy team—they approach those aspirations separately, from vastly different perspectives. Absent a commitment to collaboration and communication, these fundamentally distinct approaches can quickly lead to misunderstandings that devolve into frustration and dysfunction.

Separate platforms, separate lives—stuck trying to get headcount planning right

For many companies, workforce planning is merely headcount planning with HR and FP&A speaking two different languages.  Overtime, silos grow around each team’s perspective: HR is focused on filling open reqs with the right candidates quickly while FP&A worries about forecasting headcount accurately and ensuring that everyone adheres to financial targets.

As a veteran finance guy, I’ve seen FP&A professionals simply ignore HR, and vice-versa. The disconnect is understandable: Given how quickly organizations’ needs change, HR execs will frequently request updates to staffing models that can throw traditional FP&A plans into disarray. Just the thought of manipulating multiple spreadsheets with various hiring scenarios is enough to make an old-school finance team feel overwhelmed and resentful.

On the other hand, the talent-acquisition team and individual business units become frustrated when it seems like finance isn’t able to deliver information quickly enough to get the right people into the right roles at the right time in a competitive landscape.

This divide is worsened when each team relies on separate systems or outdated technology. If both HR and finance are still using Excel, it’s extremely difficult to create a multi-dimensional view of headcount. Professionals on both teams miss out on instant visibility into planning for new hires, promotions, and merit pay increases. Minus this transparency, driver-based planning—an approach that links financial forecasts to operational activities—becomes impossible.

Consider a fast-growing company that needs to ramp up its sales team. Traditionally, HR would meet with the chief revenue officer and create a workforce plan, which would be entered into its applicant tracking system. Separately, the FP&A team would also sit down with senior leadership and generate its own hiring plan, which would be added to its own system. Then, weeks later…you guessed it: There’s an uncomfortable meeting in which everyone wonders why finance forecasted a headcount of 500, while HR planned to hit 550.

Mission-critical problems result from this kind of miscommunication. Without the ability to access up-to-date financial data, HR risks creating a hiring plan that doesn’t square with the company’s budget—and therefore not being able to hire the right people at the right time. On the flip side, finance risks not being able to effectively plan bookings or revenue when they’re not involved in workforce planning. If they don’t have insight into hiring timelines, FP&A execs can’t properly account for the delay in productivity that results when certain hires—particularly salespeople—take a bit of time to get up to speed.

Establishing shared goals 

The key to fixing the relationship is to clarify the priorities on both sides and understand how both teams can provide the information the other needs to perform their job function at the highest level. That means establishing KPIs not merely from an HR or finance perspective, but from an entire-company perspective. At the highest level, both divisions are working towards the ultimate goal of achieving a higher level of performance and profitability.

It starts with strategic workforce planning that supports your business strategy.  For example, if a company decides to enter a new market, a key component is planning your workforce that will support that strategy.  Working closely with HR and business leaders, they need to decide should they hire or use contingent workforce.  Retrain existing workforce or hire new talent.  Hire in headquarters or open a new location to attract new talent. These are far more than headcount planning.  It’s looking at your current workforce skill sets, modeling hiring and ramp up scenarios.  

The strategic workforce plan drives the operational workforce plan.  Things like if you hire in a different location, do you have IT resources in that location to provide support?  Is there actually a workplace resource available in that location?  

It’s easy to see how hiring affects both teams’ ability to meet this objective. People, of course, are a company’s largest expense. They require space, support and technology. If the wrong people are hired, or the right people become disengaged and leave after 18 months, a company’s financial performance absolutely suffers.

Once HR and finance are united by this shared goal, workforce planning takes on a new definition. It no longer falls entirely on HR’s shoulders to forecast headcount, develop succession plans and create recruitment pipelines. Likewise, finance is no longer merely tasked with ensuring the hiring process sticks to a budget. Instead, both functions now look beyond those immediate objectives to consider whether the hiring plan aligns with larger corporate ambitions.

A modern platform that integrates a company’s workforce plan with its FP&A plan is the business equivalent of a family whiteboard or shared Google calendar. It’s the single source of truth—the holy grail—that keeps everything moving and everyone on the same page.

By utilizing the self-service capabilities, business unit leaders can map hiring strategies to their business plans, while finance and HR teams can model hiring, retention, and attrition, plus their associated costs. At the same time, execs can create what-if scenarios to compare possible workforce restructurings depending on M&A, divestiture or relocations—and quickly analyze the relative costs and benefits.

Collaboration is critical to ensure that talent management and cost management result in the right people joining the company at the right time to meet overall business objectives. When HR and finance rely on a single source of truth from a constantly updated cloud-based system, that collaboration gets a whole lot easier—and both sides start to realize they’re working toward the same goal.

Kerman Lau is Vice President of Finance at Adaptive Insights, a Workday company.