4 drivers of collaboration between CFOs and CHROs
Partnering for performance
Partnering for performance: the CFO and HR
Over the past three years, four external and internal factors drove CFOs and CHROs to collaborate more closely:
1. Talent scarcity and rising labor costs
Companies everywhere are struggling to identify, secure and develop top talent. In rapid-growth markets, where companies are focusing on driving volume growth and rapidly rising labor costs, these challenges are particularly acute.
As the global economy recovers, unemployment falls and competitors increase their recruitment efforts, these issues will become more evident in mature markets too. Wherever it occurs, talent scarcity and rising labor costs leads to costly rates of attrition. This can affect the viability of investments.
The combination of these trends requires companies to take a smarter approach to human capital cost management. Companies need a better understanding of the relationship between cost and performance.
2. Elevation of HR within the corporate hierarchy
Because HR has traditionally been a support function, it is often far removed from the strategic decision-making of the business. As HR rises in the corporate hierarchy, this is changing.
High-performing companies are achieving closer alignment between their corporate strategy and their human capital strategy.
3. Changes in strategy and the creation of new products and services
The rapidly changing global business environment requires each company to adapt its strategy continually. They must also introduce new products and services to remain competitive. The more rigorous and agile companies are in making these decisions, the greater the competitive advantage they will achieve.
By involving both the CFO and the CHRO in the strategic decision-making process, businesses can ensure that both the financial and people impacts of decisions are addressed. This can result in better outcomes and can help businesses avoid pitfalls. A close relationship between the CFO and the CHRO increases the company’s agility.
4. Changes in the business’s operating model
Companies continue to transform key business functions, including finance, HR and IT. As we explored in Delivering tomorrow’s companies today, the process of seeking out greater efficiencies, standardization and scale in order to improve service delivery and increase profitability is ongoing.
This is a complex issue: companies must weigh up the opposing forces of on shoring and off shoring, navigate increasingly complex matrix structures and adapt their operating models to capture new geographic growth opportunities.
Many companies have already achieved efficiencies and increased productivity by moving production facilities to low cost locations, or outsourcing. The logical next step for many companies is to move toward a multifunctional, global business services model.
Transformation on this scale has significant finance and HR implications, and so requires close collaboration between finance and HR.
- Partnering for performance Part 1: the CFO and supply chain
- Partnering for performance Part 2: the CFO and HR
- Partnering for performance Part 3: the CFO and CIO perspective
- Partnering for performance: the CFO and CIO – an emerging markets perspective
- Drive organizational success through human capital