Human capital performance levers for the overall business


Zoe Hruby

Global Head of HR Solutions

Every finance team wants to have as many plays as possible in their business and financial performance playbook. They should look to HR.

Although HR and finance each understand performance as a somewhat different set of activities, the topic represents a unique opportunity for deeper alignment. That common ground is where finance gains access to the levers HR has available to steer the business’ course. Acting as partners, they can determine which HR strategies and interventions can best help finance optimize costs and maximize performance.

In an earlier blog post, we made the case for HR and finance to form a closer partnership and discussed how their leaders could collaborate more effectively. Finance can use HR’s expertise and guidance to comprehend a bigger picture of the workforce, which facilitates the full range of economic and budgetary dimensions of the workforce. HR can communicate proficiently in the language of finance when proposing investments in the workforce. Working together, HR and finance can develop business plans for the workforce using the same rigor as with planning around financial and other valuable assets.

Investing in people isn’t just a theoretical concept. It’s a disciplined approach to designing the workforce for sustainability and high performance.

HR’s domain includes individual and team performance, while finance’s domain is organizational, financial, and business performance. Yet, to achieve desired performance levels in their respective domains, each need to build a portfolio. That is, they need to assemble a combination of strategies and investments that generates the greatest return at the lowest risk the company is willing to tolerate, all within their budget limits. Although theories abound on how best to manage such a portfolio, they all tend to share three elements:

  • Selecting and acquiring investments. Finance knows this drill well: Acquire a set of promising hard assets and investments that best meet financial objectives. For HR, this covers identifying strategic talent, critical skills, and organizational competencies, then develop a plan to accumulate each in a timely manner.
  • Managing the turnover of investments and the associated costs. Finance often calls such periodic adjusting and replacing of investments “rebalancing the portfolio.” HR similarly needs to manage the attrition, turnover, churn, and associated costs of the organization’s workforce investments. People will always be joining and leaving the organization. To meet performance goals, HR needs to ensure optimal talent pipelines and capacity at all times.
  • Growing, enhancing, and positioning quality investments. Sometimes informally referred to as “riding the winners,” the principle is to maximize performance by making timely, astute modifications to already well-performing investments in the portfolio. For HR, talent and skills development are fundamental to growing and enhancing workforce investments. But no less important is “getting the right people in the right seats.” That is, matching up the right talent with the right roles, teams, locations, and work arrangements.

Thus, the common goal for HR and finance is to optimize workforce costs and maximize workforce performance simultaneously. Let’s look at some of the levers that HR has in its shop that finance can use to reach that common goal.

Eyes on the prize, hands on the levers

By working in a Connected Planning environment, HR and finance can apply their combined expertise to the art of balancing talent acquisition, retention, attrition, and skills development in achieving business goals. Finance gains visibility into the costs and timing in each of these areas and their impacts on business growth. That provides finance with more levers to manage costs and maximize performance. Here are three of the most prominent:

  • Training and upskilling. Over the years, training has been regarded as a punishment for low performers, a reward for high performers, a perk for those in key roles, and an easy cost to cut when the company tightens its belt. Connected Planning provides a line of sight to business strategy and enables HR and finance to treat training and upskilling more like an investment where they can determine the anticipated timing of returns, expected levels of performance, and competencies needed to fulfill both. Training and upskilling programs enable promotions and transfers from within and provide a potentially favorable alternative to hiring from the outside.
  • Smarter cost management decisions. Workforce cost reductions often have a negative effect on short-term organizational performance. Connected Planning allows finance to understand the full cost of such initiatives and avoid short-term workforce performance impacts turning into long-term financial performance deficits. It can reveal strategies such as retaining talent that would be hard to rehire when the business bounces back to growth mode or identifying segments nearing retirement. Finance can perform a more accurate cost analysis for attrition, retention, and succession by accounting for the multiplier on talent loss according to each tier of talent. HR and finance can develop a common set of measures illustrating people-related costs, such as the average total cost of lost productivity or the financial impact of time to proficiency for new hires replacing departed talent.
  • Precise positioning of the right talent, in the right places, at the right times. Connected Planning provides a foundation that enables HR and finance to achieve this elusive condition. For example, they can design location strategies that both optimize costs and improve access to diverse talent. Or, as they uncover talent gaps, they can simultaneously determine the most cost-beneficial ways to address them, including outsourcing, adding headcount, reapportioning roles or teams, work arrangement modifications, offering education or training to existing employees, or a combination of these options.

Anaplan helps HR and finance learn how much they really have in common

HR is a key partner to finance. Without keen workforce planning insights informed by both functions, the entire business risks draining both short- and long-term revenue and profits due to shortcomings in its workforce investments. By tapping into HR’s forecasting and planning expertise, finance can significantly improve the company’s ability to meet organizational and financial performance goals. And, through greater visibility into headcount, compensation planning, and budgeting variations, both HR and finance can better understand workforce implications on business risks, costs, and performance, all while using more levers and resources to drive digital transformation.

CHROs, get the strategies to use to deliver what the CEO wants.