As finance departments look for ways to continue to add value even with finance staff levels declining slightly, HR will become increasingly global in the years ahead at the same time that it is wrestling with talent as a increasingly volatile commodity. These are among the findings of "2012 Finance Agenda: The Lean Years Continue," published by The Hackett Group.
Overall, CFOs show some optimistic expectations for growth averaging 7.9% this year, a significant increase from the 5.4% and 5.3% growth rates in 2010 and 2011, respectively. To achieve this growth rate, companies are pursuing opportunities in emerging markets while they continue to increase margins in established markets.
However, that growth is unlikely to extend to finance staff. The Hackett Group's research found that CFOs expect to see corporate finance budgets decline by 1.5%, while staff levels decline about 1%. The Hackett study notes that this is effectively a 10% cut in relative terms when you consider that companies are expecting an 8% projected increase in company revenue.
"This means that, once again, company executives are hoping to squeeze more productivity improvements from finance," according to the report. "Thus, finance will need to be very selective about where to make investments, because that money will need to come from another part of the function." This list shows the most important strategic priorities for finance this year:
On the HR front, two things stand out. First, talent availability promises to be, by far, the most volatile area of operations for companies to deal with, far outpacing output pricing, exchange rates, customer demand and input pricing. This volatility is characterized by uncertainty in the supply of the right people to meet the company's needs. This promises to make HR planning even more difficult.
One other change is coming to HR. The level of expected globalization expected for internal operations/back office support, including HR, finance and procurement, is expected to nearly triple over the next two to three years from 13% to 34%.
To deal with these changes, Hackett recommends that companies ensure that their business models and priorities can quickly adapt to economic changes in regional global markets. This is particularly important given the expected volatility talent availability and demand in these markets.
You can download the full study (free but registration required) here.