Senior financial executives are becoming more involved in the oversight of human resource functions, at least up in Canada, that is.
A new study released Thursday by the Canadian Financial Executives Research Foundation, the research arm of Financial Executives International Canada, along with the human capital management company Ceridian, found that despite the senior finance exec’ increasing sphere of responsibility, a large proportion of these executives rate their knowledge of HR functions as only moderate or average. That suggests a widening skills gap among finance executives who are starting to oversee HR managers and payroll functions.
Three out of four ranked their own skills in this field as only a 2 or 3 on a scale of 1 to 5, while only 11 percent described themselves as extremely knowledgeable.
The online survey found that 61 percent of the Canadian financial executives reporting that they had taken on more accountability for such functions, including payroll, recruitment, talent management, training, benefits and bonus management, in the past five years. In addition, more than a third of the respondents expect to see their involvement in HR and payroll expand in the next five years.
Traditionally, finance and human resources executives have operated in separate spheres within most corporations. But rapid globalization has caused a growing number of companies to focus much more intensively on labor costs and human capital, as well as their role in delivering value to shareholders.
“Financial executives manage many moving pieces on the modern business landscape. They need to think strategically about all levels of their business, while managing risk, staying ahead of technology, fostering innovation and working with fellow executive team members to build enterprise value,” said FEI Canada president and CEO Michael Conway in a statement. “Human resources is another area where CFOs are being held accountable and we continue to seek insights into helping our executives improve their skills in this area.”
Many senior financial executives are taking an increasingly active role in the oversight of payroll and HR divisions. As the organizational overlap between these two corporate functions expands, finance executives are looking for better ways to measure and benchmark HR/payroll outlays, which means relying on, and learning to interpret, a wide range of HR metrics.
Survey respondents said they paid most attention to the average cost of employer-paid sick days, personal leaves, with 73 percent ranking these HR expenses as moderately to most important in their analysis. Nearly four out of five reported that they rely heavily on a per capita-based formula for evaluating performance management, tracking revenue, cost, profit, EBITDA or return on investment per full-time equivalent employee. The survey also found that many finance executives assign relatively less importance to more granular HR/payroll related metrics that focus on areas such as absenteeism, turnover, recruitment and talent management costs and human capital.
While some of the survey participants indicated that the return on investment in human capital metric needs more development, many were seeking a comprehensive measure such as this, with 53 percent indicating it was moderately to very important. Eighteen percent of the respondents said they did not pay any attention to data on voluntary separation of high performers, while only 10 percent thought such information was crucial.
Several roundtable participants expressed the view that finance executives should track HR metrics, but felt that the measurement function itself was secondary to the importance of setting legible and clear targets for improvement.