The Cat And Dog Relationship Between HR And Finance
I belong to the rather small group of finance people who also have worked in HR. The four years I headed up HR in the petrochemicals company Borealis was a great experience (after heading up finance where we kicked out the budget already back in 1995, another great experience!).
My HR years was also a wake-up call about what Beyond Budgeting really is about from a people and leadership perspective. When I later returned to my current employer Equinor (formerly Statoil) for a corporate controller role, getting to know the HR organisation was high up on my to-do list.
Many of you might wonder why on earth Finance should be interested in HR, and vice versa? Historically, we have had very little, if any common ground. Finance was about accounting, treasury, taxes, etc. HR was about recruitment, training, rewards, welfare and unions. Both functions were heavy on administration and transactions.
Many years ago, some things happened.
- Both functions started to move transactional tasks over to shared service centers,
- “Business management” became more important on the Finance agenda,
- People development and leadership became more important on the HR agenda,
- Better IT systems were introduced, which not only improved efficiency, but also vastly increased analytical capabilities,
- And, both HR and Finance often introduced the label “performance management”.
Today, both Finance and HR are very different functions compared to where they once came from. In some organisations, the increasing focus on performance triggered an understanding that corporate messages and processes around “performance management” needed to be integrated, coherent and consistent.
Creating poisonous gaps
It does not help that HR is preaching positive “Theory Y” people and leadership messages if Finance is pushing much more negative and controlling “Theory X” management processes. In most organisations, this is exactly what is happening, creating poisonous gaps between what is said and what is done.
Theory X and Theory Y
Theory X and Theory Y are theories of human work motivation and management created by Douglas McGregor in the 1950s and 1960s. The two theories proposed describe contrasting models of workforce motivation applied by organizations. Theory X explains the importance of heightened supervision, external rewards, and penalties, while Theory Y highlights the motivating role of job satisfaction and encourages workers to approach tasks without direct supervision.
It has a lot to do with the two functions not talking well together. They do talk a lot about each other, however. It isn’t very nice, either way. I know, because I have worked both places!
Cat and dog relationship
We might smile about this “cat and dog” relationship, but it isn’t very funny. It is actually a serious problem. When conflicting messages from the two functions hit all the management teams out there, they undermine each other. But it also works the other way; when messages are coherent and support each other, they become equally stronger.
We should also remember that in all these front-line management teams, the artificial borderline between business and people/organisational issues is much more blurred. Out there, it all hangs together, being addressed much more integrated than what the two functions upstairs seem able to do.
At Statoil, Finance and HR have a long history of working closely together. We have developed an integrated “Performance Framework” running seamlessly through both Finance and HR territory. We are also both leaving behind the label “Performance management” in favour of “Enabling performance” and “Developing performance”.
Let me close with sharing a dream….. Could this collaboration develop even further? Into an even more integrated group of people jointly and seamlessly addressing all aspects of performance; business, people and leadership. What an exciting place to work that would be! Count me in!