Building bridges: how HR can become more strategic

HR professionals face a difficult challenge: how can they make a more direct and consistent contribution to business strategy and objectives? Operational tasks are vital but don’t help with forward planning and decision making about the organization’s future.

HR alone can’t provide the universal view of the organizational ‘system’ that’s needed and historical data can only provide so much insight. A different approach is needed, one that ringfences responsibility for longer-term workforce planning and helps prepares the business for the future. Fortunately, there’s a comparison with Finance that proves helpful.

What HR can learn from Finance

Finance serves the business in two ways. There is the transactional, day-to-day function, called financial operations, which covers accounting and credit control. This makes up 75% of Finance activity. The other 25% is dedicated to a forward-looking function that plans for the future, and regularly consults to board executives during company planning cycles. This is called financial planning and analysis, or FP&A.

HR’s operational responsibilities cover talent acquisition, onboarding, payroll, benefits, dispute resolution, the list goes on. The trouble is that this makes up almost all the work that HR does for the business. There is next-to-no long-term planning or forecasting that the business can use to inform strategic decisions concerning the workforce.

FP&A is a good starting point to explain what HR could be doing differently. We believe HR needs a similar forward-looking function that we call organizational planning and analysis, or OP&A.

So, what does OP&A do?

On a day to day basis, OP&A should review and evaluate whether the right people are doing the right work at the right time to achieve the business strategy and objectives. It can do this by collecting and aggregating people and business data from multiple sources, then analyzing it to allocate the work that’s needed based on skills and competencies in the workforce.

OP&A is the key to understanding an organization’s future skills demand and comparing it to the current skills supply and distribution of work to identify the gaps. More importantly, it can help build a bridge between HR and Finance by using a common language that both functions understand.

OP&A requires HR to focus on forward planning in the way FP&A does. Between them, OP&A and FP&A can form a single version of the truth that begins with shared data. But then they need to find common ground that paves the way for systemic collaboration between the two functions. This is where position management comes in.

Why position management is important

Position management is a simple, effective way to begin the dialogue with Finance that’s necessary for HR to make a strategic contribution to the business through OP&A. An EY[1] study highlighted the fact that HR and Finance speak different languages. Position management is the common language that both functions need.

To explain, Finance is primarily concerned with budget, while HR focuses on headcount. This leads to both having completely accurate but irreconcilable versions of the truth. Consider how HR creates a new position when someone leaves the organization or changes position, without filling or closing the position that’s been vacated. Because these changes won’t be included in budget forecasts, the views of HR and Finance begin to diverge.

Position management can reconcile these differing views by clearly defining common terms and setting parameters for roles and positions. If all employees are associated with positions, which are tied to cost centres, your budget will be accurate and will show variance from forecast.

Partnering for a sustainable business future

By creating a forward-looking function in HR that works alongside Finance, organizations can reach a single version of the truth on headcount and cost that results in more accurate workforce planning and effective organizational design. This means businesses can be more agile and responsive in the face of disruptive change. OP&A can help redefine and shift perceptions of HR from being a predominantly operational function to a valued contributor to strategic business decisions. HR has a crucial role to play in helping businesses prepare for disruptive change whenever it happens and having a forward-looking function that’s separate from the daily concerns of HR is the only way to achieve that.

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[1] EY (2014) Partnering for Performance: the CFO and HR

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Organizational design is a project that’s never finished. Disruptive change continues to gather pace, driven by market forces and new technologies.

This article explains how organizational planning & analysis can help and how you can begin to build a strategic, forward looking HR function.