In most companies, the partnership between HR and the finance team is one-directional, meaning it primarily consists of the finance department setting up budgets, and then HR filling headcounts according to the provided budgets. Collaboration between HR and finance is typically limited to the HR team providing some candidate feedback or the implementation of a new recruiting or HR tool, and the process of negotiating offers with potential employees can erode relationships between the two departments.
But Finance and HR sit at a unique intersection, with a great opportunity to make an impact. Decisions made regarding hiring, compensation and rewards, and company policies have an outsized impact on organizations. By coming together and being both data-driven and people-focused, we can create an efficient, productive, and fulfilling, environment. To that end, clarity, transparency, and real-time decisions from finance teams can dramatically transform a company’s culture, including trust and people's sense of recognition and being valued.
The hidden cost of conflict
Gallup's State of the Global Workplace: 2022 Report found that employees who are not engaged or who are actively disengaged cost the world $7.8 trillion in lost productivity. Individuals who don’t feel valued, empowered to do their jobs, and capable of taking care of their own wellbeing can’t perform at their full potential.
Everyone in an organization is building a company together. Everyone has a vested interest in its success. We’re all human and want to have positive interactions, and we all look for fulfillment in our roles. When there is unnecessary friction — whether you sit in the finance department, marketing, HR, or somewhere else — individuals end their days feeling unfulfilled. Ultimately, we all want to do our best work, and we want to grow as individuals, apply our talents, and feel well-received. Conflict does not serve anyone. Learning how to work together efficiently, successfully, and respectfully both in our departments and cross-functionally will bring everyone more joy and better results for the business.
The power of clarity and transparency
The world is moving toward transparency; we’re seeing it everywhere. Organizations are sharing compensation information, operational philosophies, and more with prospective employees, and internal leaders are trying to provide more context and insights as we operate our teams.
In organizations that negotiate offers, there can be significant friction between finance and HR. Recruiters are often held accountable to hire new employees at the lowest possible salary, saving the remaining dollars for negotiations when necessary. There can be significant back and forth between candidates, recruiters, and the finance team as recruiters attempt to justify a higher compensation or a sign-on bonus.
During the process of these negotiations, there’s an erosion of trust between finance and recruiting. Recruiters are busy writing detailed justifications for requests, unable to make the decisions they think are best, and are sometimes left feeling like the bottom line matters more than the person behind the compensation number. Transparency in the hiring process removes these hurdles instantly. By making data-driven decisions around compensation, and being forthright about how those decisions are made, the back-and-forth messiness of negotiations is removed.
If your organization isn’t ready to make the jump to transparent compensation bands (although it soon may become a necessity as states continue to pass laws regarding this issue), it’s important to approach the negotiation process as a partnership between the finance and their counterpart in HR. Recruiters often have had several conversations with candidates and have developed a strong sense of who would be a good cultural fit in addition to having the expertise for the role — listen to them. Over the long term, hiring the right people, at a price that would make them feel valued will pay dividends for the business, and drastically improve company culture.
Enabling real-time decision making
There’s a very real push to remove friction and increase collaboration, meaning every team is going to require access to the essential data necessary to make decisions. Decision loops will get shorter, and asynchronous work will continue to trend upward. Across organizations, people are constrained by the data that's available or unavailable to them. We come to work every day believing that everyone has the best intentions. People want to make decisions quickly. Inefficient tools and working in spreadsheets make it much harder to make quick decisions.
Finance teams working within many different spreadsheets are inherently making financial recommendations based on outdated data. For example, finance teams are often operating in the past while recruiting needs to operate in the future. It can take 2-3 months minimum to make a new hire. It’s a pipeline generation business, similar to sales. The work recruiters do today pays out in 3-5 weeks. If the finance team doesn’t have the data it needs to approve future budgets, then the HR team won’t have the data it needs to recruit and plan.
Compound this internal frustration with the fact that smaller organizations are facing the challenge of attracting talent. It can break trust with candidates if the hiring process goes too slowly, or it lacks transparency. If there are increasing delays and recruiters can’t speak confidently about timelines and plans, then candidates perceive an increased risk. They often won’t take that risk, and you’ll lose great candidates.
Finance teams need to understand the timing of the recruitment process. Recruiters are tasked with fulfilling a hiring plan, but that plan often takes weeks or months to finalize. During this time, recruiters have to keep prospective candidates engaged and up-to-date on the planning process, which is difficult at best. Maintaining candidate pipelines is hard, and there’s a disconnect between departments with vacancies that desperately need help and the recruiting team who was maintaining pipelines, sometimes with excellent candidates, but couldn't move forward until the finance team approved positions. Additionally, recruiting teams may be operating on a quota, and they can’t meet their goals because they don’t know them. This, combined with losing out and reeling a diminished reputation from candidates, impacts morale. Having the ability to know what’s coming next quarter and having access to real-time data for quick decision-making helps everyone win.
The bottom line
The finance function can play a significant role in shaping the culture of a company by leading with open and transparent communication, encouraging collaboration and teamwork, promoting diversity and inclusiveness, and making strategic financial decisions that align with the company's values and goals. By prioritizing a positive company culture, finance leaders can not only create a more enjoyable work environment but also increase employee morale, productivity, and retention, ultimately contributing to the long-term success of the organization.