Business HR is the buzz word in corporate circles. Human Resource is identified as one of the most differentiated function and linked very much to the success of a business.

HR plays the role of a strategic partner in business organisations and HR professionals need to be competent enough not only in the HR domain but more so, in other interdisciplinary functions which are relevant to business. Among them, finance is the nearest function associated with HR.

Finance speaks only with numbers, where as HR boosts up the talent, while dealing with emotional aspects, employee engagement, attracting and retention of talent etc. One always wonders that in the natural world, how can HR and finance functions be opposite?

Earlier HR professionals functioned as generalists, looking after all functions of the field on the frontline. It was more of an operational role providing all types of services to employees and line managers. Role of HR business partner was more oriented towards business results and a little further specialised focus for achieving business objectives. In the present trend, HR professionals should learn fundamental aspects of business, what the organisation is trying to accomplish, suggest solutions and more importantly, show results that can be measured.

Today’s business is all about growth and growth is measured in terms of numbers. The concept of ROI (Return on investment) is a hum word for all finance personnel. The question is always on everyone’s mind, whether ROI can be applied to the HR function?

Inevitably ROI concept is made applicable to all other functions too. When we talk about ROI, the insight on finance and accounts, knowledge and skills are very essential to the HR fraternity.

HR Professionals need to be more strategic in approach, able to understand the overall company performance in financial terms, understand the business in a financially intelligent manner, work closely with the Finance Department, take decisions based on facts and figures, assess the financial implications on HR initiatives, tie the functional knot with finance function to achieve the desired results and develop positive approach towards the finance function. HR professionals need to understand the Indian as well international financial and accounting regulations and practices. Understand as to how it impacts the HR function.

HR & Finance functions have to work together in many areas and are not to function as ‘cat and mouse’. High importance is given for collaboration and complement between each other to identify challenges to meet the expectations of employees, customers, shareholders and other stakeholders.

The question is always asked as to how HR can impact the financial outcome of business?

HR professionals should take those observations seriously and be a partner with the finance function. The finance function is very vast and it encompasses all business aspects, but HR professionals are not expected to be aware of all the aspects of finance and accounts function. However, HR Professionals need to understand key financial components, appreciate them and use them for continuous value additions.

Measurement is the key component of finance and business expressions.
Anything that needs to be done in quantity has to be measured as only then can it be accomplished. The common human capital measures are: Workforce Planning, Recruitment, Compensation & Benefit, Compliance, Safety and Employee Relations, Workforce Stability - Retention, Employee Capability, Human Capital Investment, Leadership, Productivity, Workforce Profile, Innovation & Creativity, Employee Attitudes. Extremely important areas which are impacting business results are high attrition, productivity, employee engagement in organisations, impact on customer satisfaction and most importantly, revenues and profits.

The HR function can be driven effectively when things are viewed at both, financial and human angles. HR professionals need to understand the value drivers of business and the value journey ,  Channelize people’s competencies to generate organisational  value,  Ensure that human resources are effectively engaged to deliver the needs of customer and retain them for long and ensuring that people effectively contribute to enhance efficiency.

All the above and other  things that HR can do to impact the financial outcome of business is by    talent acquisition, develop effective performance management process and performance metrics, Develop effective reward and recognition programme , Ensure employee engagement, Institutionalise HR processes and practices, encourage potential personnel to realize their aspirations, have strong  leadership and succession pipeline in place.

In a way all these methods are practiced in many of the organizations, but how do you link results with Metrics and financial measurements are the challenges to HR professionals and what abilities HR Team need to have is the focal point .

What should HR Professionals do and where to get in to Finance sphere?

HR Professionals have to partner with the Finance and Accounts department and start speaking the language of business. They need to speak in terms of numbers which brings in accuracy to the business plans. The number game is increasingly played inside and outside organisations. Professionals who can present facts with data, analysis and results are most appreciated in the corporate world and these days, it is spreading to all other areas as well.

• The most important skill essential is in the area of budget preparation and the ability to link the HR budget to the business plan.

• Ability to read the balance sheet of the company and its components such as profit and loss account. Other related to HR function such as employee related expenses and its impact etc.

• Understand the importance of cash flow to companies and shareholders.

• Ability to develop tools to measure productivity and initiative performance linked incentive to motivate employees.

• All the salutatory contributions are part of employee-related expenses. HR Professionals need to be thorough with the calculation methods of components such as Minimum wages, Bonus, ESI, PF, Gratuity, Workmen compensation, Maternity benefits, VRS compensation. Income tax and professional tax calculation are the most important for arriving at a total salary) to be paid to employee and Cost to company etc.

• Develop the competencies to prepare Ratio Analysis in respect HR. What is the per employee value addition? Earnings per employee? Salary expense per employee?

Measure recruitment and training expenses? How to form relations between different key HR expenses? What do ratios communicate and how to get vital and actionable information out of important ratios?

• Recognise the measures that are affected directly or indirectly by the HR function
• Be a strategist while evolving compensation and benefit plans and link to ROI concept.
• Develop a tone to create a training budget and measure the benefits and link to the overall growth of the organization.

• Develop the right tools to evaluate HR performance in financial terms.

Conclusion

HR professionals should create a good Human Resource Information system (HRIS) and implement it in line with the Management Information System (MIS), which speaks with numbers, variant, complaint etc. Once HRIS is in place, at least few or most of the HR Functions will fall in line for measurement and once measurement is done, value addition by HR to become visible and HR will be in par with other functions of the organisation.

HR professionals must start and end the day with statistics, specifics and stand themselves for review of HR contribution based on financial terms or with ROI concepts on a quarterly or half yearly and annual basis. Challenge before the HR professionals is to create a financially intelligent HR department and become a strong business partner.

Ultimately all levels of HR professionals should develop key competencies related to finance, understand the business they are in and know the finance arena at the very initial stage, which can change the status of HR professionals in the organisation.

(The writer is a Management Consultant and Trainer in the field of HR)