Greater collaboration among CFOs and HR leaders drives stronger business performance
Thursday, 29 May 2014 00:00
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80% of CFOs and CHROs say their relationship has become more collaborative over the past three years
Where the relationship is significantly more collaborative:
41% had greater than 10% EBITDA growth in the last year, compared to only 14% of other companies
43% saw a significant improvement in workforce productivity in the last year, compared to only 10% of other companies
The second instalment of ‘Partnering for performance,’ a global survey of 550 CFOs and CHROs, finds that 41% of these high-performing companies experienced EBITDA growth of greater than 10% versus only 14% of non-high performers. In addition to faster EBITDA growth, 44% of high-performers have also seen a significant improvement in employee engagement, versus 9% of others. Forty-three percent have seen a marked increase in workforce productivity versus 10% of others.
With the gap between finance and HR narrowing, the EY study identifies four key factors that have driven closer collaboration between these two leadership functions over the past three years:
Talent is scarce and labour costs are rising
Companies need a better understanding of the relationship between cost and performance, especially as organisations in both mature and rapid-growth markets are struggling to identify, secure and develop top talent. This challenge, combined with fast-rising labour costs, leads to costly rates of attrition that can threaten the viability of strategic investments. It’s imperative that companies take a smarter approach to human capital cost management.
HR is more important within the corporate hierarchy
Because HR has traditionally been a support function, it has often been too far removed from the strategic decision-making of the business. This is changing as HR rises in the corporate hierarchy, and companies recognise the need for closer alignment between their corporate strategy and human capital strategy.
Companies need to quickly change direction and develop new products and services
The rapidly shifting global business environment requires every company to continually adapt its strategy and introduce new products and services to remain competitive. By involving both the CFO and CHRO in the strategic decision-making process, businesses can ensure that both the financial and people impacts of decisions are addressed.
More organisations are altering their business models
Companies continue to transform key business functions, including finance, HR and IT. The process of seeking out greater efficiencies, standardisation and scale in order to improve service delivery and increase profitability is ongoing. Firms are navigating these highly complex issues while weighing the opposing forces of onshoring and offshoring and adapting current models to capture new geographic growth opportunities. To accomplish this, they will need to move toward a multifunctional global business services model. Transformation on this scale has significant finance and HR implications. Dina Pyron, Global Human Capital Leader at EY, says: “Each day, companies are grappling with increasingly complex human capital decisions that have a fundamental impact on the strategic objectives of their businesses. A company’s workforce inevitably drives growth and performance and, in most companies, people are also the single largest expense. Typically, CFOs have tended to view human capital primarily as a cost, while CHROs have viewed it primarily as an asset that requires investment.”
Jay Nibbe, Chair, Global Accounts Committee at EY, says: “To really maximise employee engagement and improve workforce productivity, while keeping pace with the ever-changing dynamics of the global labour force, the CFO and the CHRO need to find ways to increase collaboration effectively and efficiently. This collaboration will empower CFOs to allocate the necessary resources required to deliver the company’s strategy, and the CHRO can ensure the alignment of ‘right people, right place, at the right time’.”
