Tuesday, March 17, 2009

Fact or Myth: HR professionals lack financial expertise

Do I really need to say it? Probably not but I will anyway: Talent management is about business results. Period. If you aren’t getting good business results from your talent management strategy you’re wasting money. Managing talent is the means to an end, and therefore needs to be done well in order to achieve results, but it is not the end in itself.

It’s the same old story: Human resources professionals stress the importance of talent management strategies without being able to demonstrate clear financial benefits. Citing HR’s inability to produce convincing financial data, financial executives push back on the additional expense. A clear illustration of this can be found in David McCann’s ‘Memo to CFOs: Don’t Trust HR’* and the conclusion seems to be that HR isn’t good enough at numbers to make their case.

Maybe that’s true. After all, we don’t find that many MBAs working in human resources, although I question whether it really takes an MBA to get that talent management is about business. If we take a deeper look at companies and how they track and manage their revenues and costs, we find two things that give financial professionals a clear edge over their HR colleagues when it comes to getting executive attention:

1) all financial numbers feed centrally into a general ledger system because consolidation of data is required for financial reporting (and therefore the CFO makes sure this happens); and

2) people are reported as costs in these systems because financial systems can’t measure their intrinsic value.

Human resources professionals may well lack the analytical skills needed to justify talent management investments. But more importantly, they lack the tools to do so.

Not for lack of trying. Many HR departments have persuaded their CFOs to invest in talent management solutions, reasoning that this will help them roll out strategic talent management strategies that in turn justify the investment.

Unfortunately most of these solutions tend to be separate from core business data and therefore lack the ability to perform meaningful financial analysis without significant additional investment. Therefore, many companies have implemented standalone talent management solutions only to find that getting the value out of the solution requires expensive integration to core business applications and workforce analytics platforms. It can be made to work, but it’s difficult and expensive.

And the irony is that after making the initial investment in talent management solutions, HR still lacks the tools to justify additional investment.

Talent Management is about business but by and large talent management solutions are not business applications. So instead of blaming HR for lacking analytical skills - although this may be fair criticism - maybe it’s time to give HR the right tools.

I'm just saying.

*‘Memo to CFOs: Don’t Trust HR,’ McCann, David, CFO.com.
**Also worth reading is Jim Holincheck’s commentary on this article.

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