Bridging the CFO — HR Divide

Every company has two types of capital: financial and human. You can't have one without the other, and neither will reach its full potential if the other is weak. It's strange, then, that in the vast majority of companies, the directors of these two functions share a common goal -- business success -- but rarely share a common language. In fact, CFOs and HR executives typically never speak to each other, and if they did, chances are they wouldn't understand each other because they speak completely different languages.

This dynamic is slowly changing -- and it's high time. More than one-third of the average company's financial capital flows to human capital, including salaries, benefits, and training. These are costs that CFOs, who are charged with parsing the lines of the spreadsheet, really should have more than a passing familiarity with from the very beginning of any HR decision or strategy. After all, CEOs will ask every time: What's the return on this investment?

Historically, CEOs and presidents have made all decisions on human capital expenditures, and while they often consult HR as part of that process, more often than not, CFOs are kept out of the loop. Giving CFOs a greater presence and voice in the process could help ensure that such important decisions are more fully vetted. It's not about adding complexity to the decision-making; it's about creating efficiency.

The troubled economy has increased awareness of the need to enhance the CFO-HR relationship. Right now, every change in the business must help it to cope more strategically with the current financial climate. Take the issue of employee retention. Current workplace surveys indicate that a high percentage of employees are interested in moving on as soon as they feel the economic environment has stabilized sufficiently. That moment may not be here yet, but many believe it's close, or at least getting closer. Either way, companies need to be aware of how to keep their best performers, within their financial means.

To do this, CFOs and HR execs must start from the beginning, by literally learning each other's languages. CFOs work in hard metrics, and their technical vocabulary reflects this. It's precise, crisp, and very specialized -- think "EBITDA." The language of HR executives tends to emphasize less quantifiable benefits, like the payoff of a "happy" workplace, or the value of "employee engagement." Here are some ways the two worlds can learn from each other to work together in a more meaningful way:

• Respect each other's vocabulary. When traveling abroad, making an effort to speak the language of the country you're in is usually appreciated. That's analogous to the sort of effort that can help bridge the CFO-HR divide. Engagement may be harder to measure than EBITDA, but there are quantifiable benefits from motivated employees. An HR executive who communicates the EBITDA impact of a potential project, or a CFO who appreciates the morale-boosting effects of an investment hire, can each gain a new and potent ally.

• Be willing to listen. CFOs will need to break old habits to help gain that right to occupy a seat at the table when human capital decisions are being made. Respect and openness to seemingly soft HR strategies like recognition programs may be the basic price of admission. HR, in turn, must take a balanced approach that's cognizant of both qualitative and quantitative ROI.

• Collaborate for cost reduction. The largest opportunity today for financial and HR executives to build bridges is perhaps in managing the fountain of expenses. It's a high-wire act, ensuring that a company's benefits offering is sufficiently competitive to retain high-value employees without drowning the quarterly books in red ink. No company can ignore this challenge in the years to come, and it will require an all-hands-on-deck mentality.

Let's face it: Historically, CFOs and HR executives have not been the best of friends, assuming they got to know each other at all. Their skill sets and responsibilities differ significantly; it's hard numbers versus the soft calculus of how to drive motivation and contentment in a workforce. Numbers on a balance sheet may represent people, but people don't like to be treated like a number. If CFOs and HR leaders can bridge the divide, the result will be a more successful company with a happier workforce and a healthier bottom line.