HR and Finance need to collaborate more in the era of HR 3.0, and People Analytics enables it.

In the era of HR 3.0 where HR will be more analytically sophisticated and data-driven with a higher level of business acumen and problem-solving skills*, HR and finance need to collaborate more; and data and People Analytics can improve the collaboration.

As we all know, HR has been evolving especially in the past 10 years with the start of industrial 4.0 and mushrooming of technology. In the article by Keith McNulty, Head of People Analytics and Measurement in McKinsey & Company, People Analytics in particular has had a head start among the other elements of HR 3.0*.

HR and Finance functions have been working mainly in silos. There are interactions for sure because the work involved in both teams are inter-connected and have implication on each other. For example, the number of headcounts and compensation have huge impact on both HR and Finance. However, the two teams have different priorities: one is on people, the other is on numbers. HR often request to invest more on people or system, or to increase the hiring budget. Finance often would say “No”**. Therefore the collaboration between both teams has been limited.

In HR 3.0, the key element of People Analytics brings the two teams together and allows both teams to focus on the same direction and speak the same language. HR will focus more on numbers, people insight and implication on business and financial results backed by data. The medium and tool for HR to move towards that direction is People Analytics. HR will be trained to have more business acumen with a mindset of getting good data and use powerful reports and metrics. A recent survey indicates that HR is becoming the most analytical functions in business and many HR departments are making advanced analytics such as predictive models and AI***. They are even more comfortable with analytics than Finance.

There is also increasing needs for both functions to collaborate as workforce expenditures are often among the highest costs for a company. By working closely together with People Analytics, companies can identify and predict the issues and act on them more quickly. One of the most significant benefits is the ability to forecast employee turnover more accurately and the projections can be used to enact programs and boost retention so that it can lower the cost related to recruiting, on-boarding and training new employees****.

When HR understands people trends better and the financial commitment and impacts, Finance would be able to understand HR’s point of view and support and invest in HR initiatives and technologies. Both functions will become more strategic and achieve organizational goals more efficiently and effectively.

References:

* https://www.chieflearningofficer.com/2018/04/23/its-time-for-hr-3-0/

** https://blog.shrm.org/trends/bringing-hr-and-finance-together-with-analytics

*** https://hbr.org/2019/04/is-hr-the-most-analytics-driven-function

**** https://www.adp.com/spark/articles/2019/08/hr-and-finance-leaders-can-work-together-with-hr-predictive-analytics-to-boost-retention.aspx#