Top 4 Megatrends for Finance and HR

I see four megatrends that directly impact finance and HR teams. Although these two functions represent different disciplines and skillsets, they’re responsible for what’s at the heart of any successful company: financial performance and talent.

If your inbox is anything like mine, it’s filled with articles about the outlook for 2014. I don’t think we should stop at 2014, though, as those things we need to pay attention to will grow in importance for years to come. So let’s call them what they really are: megatrends.

I see four megatrends that directly impact finance and human resources teams. Although these two functions represent very different disciplines and skillsets, they’re responsible for what’s at the heart of all successful companies: financial performance and talent.

Megatrend 1: Finance and HR Align. Traditionally the relationship between human resources and finance has ranged from tense to ambivalent. For most of the last 100 years of business, things (assets, inventory, goods) were the cost driver and the value store, while labor was just one more cost to be minimized.  As HR cared about people and finance cared about cost, the two functions were natural adversaries.

Today couldn’t be more different. Businesses increasingly recognize that talent drives business performance. Talent costs, supply, assignment, development, and optimization are now top-level business discussions upon which the success or failure of ventures and whole companies depend. Human output is no longer a commodity to be minimized, it is a resource to be optimized, and this puts HR and finance on the same side of the table.

Going forward, I expect to see far more collaboration between HR and finance; I have had discussions this year with people who suggest that in the future the two organizations may even merge into a single organization under a Chief Resource Officer.  I don’t really see that happening in 2014, but the conversation is a good indication on the evolution of the alignment of the two functions.

Megatrend 2: Finance and HR Support Growth Agenda. For the past 15 years, businesses have been in a defensive/reactive stance.  From “Y2K” through Sarbanes-Oxley to the Great Recession, they hunkered down, conserved cash, and worked hard to keep their heads above water. Going into 2014, the conversations we are having with customers and analysts suggest the business world has digested the “new normal” and is becoming more optimistic, realizing that corporate anorexia is not an avenue to corporate health.  Now it’s time for a growth agenda.

Business leaders are looking to both finance and HR to help them answer the tough questions and play a bigger role in managing this growth. Developing and executing the growth agenda is going to be a stretch for finance and HR organizations that have been focused on cost reduction and governance for so long. It will require a new set of skills and tools and it will require working together, as virtually all growth strategies involve both financial and HR information and expertise. For example, if their company is expanding internationally, does it hire local talent or transfer existing employees? If it’s acquired another company, how much does it pay the new talent coming on board, and best integrate teams so as not to lose the best talent? If it’s introducing a new product, where does it locate operations given access to and cost of critical resources, including talent? Operational excellence and efficiency will always be necessary for successful HR and finance operations, but in 2014 and beyond the very best HR and finance teams will be differentiated by their ability to take a leadership role in realizing the growth agenda of their organizations.

Megatrend 3: Working With, Rather than For, the Information. The talent and technology in place in many finance and HR departments has been purpose-built for administration and control–count, pay, and CYA-type functions. While fundamental skills and capabilities will always be necessary, they will not be sufficient to support business going forward. The future of HR and finance is demanding much more in the way of operational and analytic skills and the technology that supports them.

We see very few organizations investing in new technology and people just to do what they have always done a bit better or at a bit less cost. The investments in HR and financial technology and talent are virtually all targeted at substantial improvements in the development and analysis of information that is relevant to the operating business, not on more GAAP accounting or personnel compliance efforts.

There also appears to be an interesting and growing interconnection between financial/HR talent and the technologies they use, and as a result businesses won’t attract and retain bright thinkers and doers unless they give them the right tools to do their jobs. I believe in the importance of technology to attract and retain good people based on what I’ve heard from our own customers, and also my own experiences. I remember early in my career while working as an accounting manager for a bank, having to literally cut and paste numbers from one report onto another to do various monthly analyses because the bank’s system lacked the flexibility to produce those reports on its own. That gave me the impetus to get out of that job and into a career where I would spend my time working with, rather than for, the information. I’m sure the same thing continues to happen today at organizations struggling to make legacy systems usable for analysis and strategy.

Megatrend 4: Regulatory Uncertainty. In this post-Enron, post-Sarbanes-Oxley, post-Great Recession world, we live not only with more regulation and compliance, but also with more uncertainty about regulation and compliance. When organizations are not prepared for how they’ll deal with new regulations that arise or change all too quickly, they can end up paying more on fire-drill responses to get into compliance or worse, actual fines because they couldn’t respond in time.

That’s why finance and HR teams will face more pressure than ever before to advise and protect their businesses against lack of preparation in an era of regulatory uncertainty. Having the right systems in place is fundamental to being able to step up to these pressures. If finance and HCM systems lack agility, there will be lag time in adapting to new or changing regulations.

For some more views on what the future holds, watch the replay of the live studio videocast of Workday’s 6th annual Predict and Prepare that took place Dec. 10 and featured four leading experts in finance, HR, and technology: Naomi Bloom, Vinnie Mirchandani, and Brian Sommer, with moderator Bill Kutik. These folks delivered compelling insights and some lively debate on  what to expect not just in 2014, but in the years to follow. In the meantime, I want to know your opinion—what do you see as megatrends for finance and HR?

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