Business And Financial Acumen Can Be HR’s Secret Weapon

The workplace is changing, and so is the role of HR. There’s never been a more critical time for HR professionals to demonstrate business and financial acumen. But what does this mean, and how does the profession overcome its traditional disconnect from business metrics?

Let’s take a look at Kemi. She is a Senior HR Manager with over ten years of experience and oversees a team of 5 HR generalists. Kemi is highly technically proficient and with her team responsible for a broad range of HR functions including staffing, development, compensation and benefit, health and safety, performance management and employee relations. Unfortunately, she is underappreciated by the management team because she has been unable to make the connection between her actions and her organisation’s measurable outcomes. Whenever she requests resources to drive human resource initiatives, she is blatantly refused. Her failure to align her HR function to organisational goals is adversely impacting her team’s performance and the rest of the organisation.

Sadly, Kemi’s struggles are not unique to her and are quite common to many HR practitioners. Research findings indicate that as many as 75% of HR practitioners lack business and financial acumen. Our experience at Workforce Group confirms these research findings as over the years, we have trained or worked with many HR professionals who have never seen an income statement or balance sheet in their lives. These trends are spurring several negative trends to the human resource function:

• This capability gap is strongly linked to the career stagnation of HR professionals: Statistics show that less than 5% of HR directors ever become CEOs, while Finance, Marketing, Sales and Operations directors are naturally given a preference for the office. A 2015 Forbes article found that 32% of Fortune 100 CEOs, at the time of publishing, were previously CFOs. Improving proficiency of this competence will help enhance the HR function’s legitimacy in the eyes of the business world and increase HR professionals’ opportunities at the table.
• Disconnection from the business is a major reason HR professionals lose their jobs: Studies, statistics and surveys reveal that the inability to connect HR efforts to the business goals directly is the second most common reason why CHROs get fired and the number one reason they leave voluntarily — Kon Ferry, 2017.

HR professionals need to understand that HR effectiveness isn’t really about HR; it’s about the business. That’s why Dave Ulrich, one of the greatest HR minds of our generation, emphasised in his 2019 digital HR series interview with David Green for MyHRfuture podcast, that the most important thing that HR can give an employee is a company that wins in the marketplace. Ulrich added, “it’s not just about the skill you’ve got; it’s how those skills will drive outcomes that make a difference in what matters.”

The best HR professionals are deliberate and proactive about ensuring their business strategy can be delivered through people — but you can’t do that if you don’t understand your organisation’s strategy and business model. Theoretically, the organisational strategy and business model should dictate the HR delivery model. This requires that HR practitioners are aware of — perhaps even contribute to decisions about — changes to the organisation’s business model, which will require them to adapt the way HR is delivered.

HR practitioners with business and financial acumen are more capable of making decisions that will impact the top-line revenue and bottom-line profitability, while prioritising their day-to-day actions, aligned with the organisational strategy.

The question then becomes, how can the HR function increase their business acumen competency?

Here are ten great tips to help HR professionals sharpen their business and financial acumen:

1. Recognise that good HR is about making the right business decisions — based on a sound understanding of a company’s business strategy and applicable HR levers.
2. Learn enough finance to understand the factors that drive shareholder value — become fluent in the language of numbers, and learn to analyse the P&L/income statement and balance sheet.
3. Choose your continuing education options wisely — beware of HR courses that use outdated curricula that don’t reflect the issues confronting businesses today. Commit time to study and research. Read general business management books and articles.
4. Request for temporary work assignments in different functional areas, such as finance, sales or marketing
5. Keep abreast of business news pertinent to your industry, organisation and customers.
6. Regularly request feedback from other key business stakeholders regarding the quality of your business’s decision-making.
7. Talk with key line managers and join chat rooms that include non-HR business professionals.
8. Find a mentor with strong business and financial acumen.
9. Attend our quarterly “Business and Financial Acumen For HR Professionals” webinar.
10. Attend a full business and financial acumen course — The Workforce immersive “Business And Financial Acumen Simulation” is highly recommended.

Think about your organisation. Does your HR team understand how your business works and how it makes money?

Are they making decisions aligned with your organisation’s strategic, financial, operational, and sales goals?

Do you want to make business and financial acumen development a priority for your HR team?

Schedule a consultation with us @ www.workforcegroup.com/schedule-a-consultation, and Let’s help your HR team develop a better understanding of your business and align their actions to drive attainment of the financial and strategic objectives of your organisation.

The sooner HR professionals start taking personal responsibility for developing their business and financial acumen and ensuring alignment between the HR function and the business priorities, the better for their organisations, careers, and the HR profession.