Human Resource (HR) and Finance are different component of an organization. They are usually separated by functional silo. For instance, Finance views HR as an unnecessary cost and HR feels Finance is trying to cut down costs as much as possible. And the scenario in Nepalese organizations is no different.
The HR department deals with the people in an organization. Some of the duties of HR department includes recruitment, strengthening employer-employee relationship, arranging trainings for staffs, evaluation of employees’ performance, improving incentive packages for deserving employees. On the other hand, Finance department is the part of an organization that deals with money of an organization. Day to day transactional accounting, financial reporting, budgeting, forecasting are some of its duties.
Today’s HR department is becoming more advanced and requires more inputs and coordinated effort from Finance department. Then again, Finance is essential wellspring of execution estimation information which incorporates data, which gives an idea regarding the staffing, yield and advancement needs of an organization. But, there could be cases of conflict in between the two departments which might result in an unhealthy environment for company’s progress. The two departments are overlapped with each other. So, in some organizations both functions are carried out by a single department itself, for example the Accounts department.
It is usually the manager who has to deal directly with all the conflicts and performance related issues at the workplace. So, managerial mobility is now about applying HR strategy along with business strategy, which ensures that careers are developed for both profitability and employability. In this context, we reached out to a few people with managerial knowledge and asked them how smooth relations between HR and Finance can be established.
Roshendra Dhoj Khadka – Executive Chairman, Project A
“I believe, there are many specific pillars to evaluate the organizational performance, whether they are SMEs or LSEs. Nevertheless, the first and the foremost pillar will always be the financial performance of the organization around which several functional departments revolve. The only difference is the action in different ways for different departments.
While financial management is more like a functional silos wanting to come out with spreadsheets that projects on minimizing expenses and maximizing income, the KPI for HR could be different that has to deal with many other non-financial behaviors that are subjectively aimed to contribute to the organizational wellbeing.
Somehow, this school of thought at times could be a chasm that makes the transaction cost unhealthy to the organization. This is where line managers from both the departments and especially the strategic heads that eventually reports to the CEO need to make vital interceptions to realign the common goal set for organizational growth. Thus, a frequent communication is even more essential to stay tuned and make common decisions that ultimately take the human assets into confidence, who in-turn contribute to the spreadsheet cosmetics.”
Swati Lohia – Managing Partner, Business Brainz
“The best way to bridge the gap is through communication, and by communication I mean a two-way communication. We have to come out of the traditional hierarchy method while respecting every individual’s role and job equally.”
Abhijit Ghosh Dastidar – DGM, LIC (Nepal)
“In my personal multi-decade long experience of working, I have observed conflict between HR and Finance. This unhealthy fissure juxtaposes corporate goal vis-a-vis departmental parochial targets. The genesis of the problem is recruitment policy followed by the organization. It is generally observed that some organizations follow a narrow-specialization window for recruitment. For example, MBA (HR) is put in HR while MBA (Finance) is directed towards Finance.
The modern concept of IQ/EQ relevance, over several data analysis has clearly proved that, a person with higher general intelligence is quite equipped psychologically to adapt into any specialized job. If the recruitment policy prefers general MBA (or any other similar education), then these super-specialization syndrome can be nipped at the bud. I remember Professor Simon Stockley of Imperial College Business School in London famously said, “the MBA is, by definition, a general management qualification, and therefore we aren’t entirely convinced there can be such a thing as a specialized MBA, an ‘MBA in’ something.”
The second desirable aspect is “job rotation” which in effect means, at the formative time of new recruits (initial years), employees of one department mandatorily be posted in other departments for certain duration. This will expose them to the nitty-gritty of all departments and thus, make them more appreciative to the departmental needs. Moreover, such job-rotated employees will have a 360 degree view of the organization.”
Shailendra Raj Giri – MD, meroJob.com
“HR should have a proper Annual HR Planning along with the approved HR Budget which will be the guideline for the Finance to allocate the expenses on the predefined schedule. HR Dept. should have a detailed Analytics of every aspect of HR Function such as Recruitment Cost Trend Analysis, the financial impact of Employee Turnover, Salary Survey and the Benchmark Report, Advance Money Trend, Resources Utilization Ratio and so on. So the Finance can forecast the likely wanted and unwanted financial preparedness likewise. If Finance Manager is not equally competent as HR Manager, the organization has many things to lose.”
Dr. Prabin Manandhar – Country Director, The Lutheran World Federation Nepal
“Traditionally, HR and Finance or Program and Finance were viewed differently. Guided by performance management in the program, both finance and HR are seen as management tools for decision making processes. While HR is very critical to shape the structure and staffing, finance is critical to achieve value for money. Both of these functions are therefore part of the strategic planning of the organization.
In order to strengthen the relationship between the two, coherent planning is important. Both HR and finance are the means, not the ends, to achieve the results. Both these means have complementary roles that can be strengthened through joint planning, joint reviews and mutual accountability.
The individuals working on these two areas should be provided orientations, and both should form a team together with program for critical decision making and external negotiations. This will ensure people with right attitude to do things right.”
Deenam Lamichhane – DGM, Sita World Travels (Nepal)
“In today’s business world, one cannot deny that a strong relationship between human resources and finance is the key to success of any business. Most of the times, the core value of both components are drastically different. While human resource is at the heart of company, for finance, it is only bottom line that matters and this makes it difficult for both to find a common ground.
This is where a manager comes in, relationship between human resources and finance may look conflicting in their respective core but, in the end both work for the same goal, which is success of the company.
If managers are able to communicate the BIG picture to both, then it results in healthy and successful company.”
Surendra Bhusan Shrestha – DGM, Nepal Bangladesh Bank
“It is an evolving case in the Global Market where Finance Manager is taking greater interest in Human Capital Management and Human Resource Manager is giving quite a good consideration towards building appropriate finance related information on Human Resource that enables Human Resource Manager to take better decision. We are seeing a greater uptake of conversation about Human Resource and finance together in NB Bank and have anticipated similar uptake in other institutions also. It is important for the manager to see whether the Bank’s cost of operation related to Human Resource is commensurate with the output or targets achieved by the entire operations. Alternatively, manager needs to know entire financial impact of each HR decision. Thus, a proficient manager needs to bridge Human Resource and Finance activities for bringing efficiency, economy and effectiveness in the utilization of resources.”
The expectations and dreams of a manager is to see all the employees collaborating and working as a team. Yet, expectations do not always meet the reality. Although everyone works towards the targeted organizational goals, when employees from different backgrounds work together, conflicts are inevitable due to miscommunication and misunderstanding.
Yet it also depends on the manager’s readiness to relate with the team and communicate with them clearly. A simple communication and collaboration can bring a lot of change in an environment and go a long way in building a good team.