HR Management & Compliance

The Evolving Role of HR and Finance in Supporting Digital Transformation

With 2020 marking the beginning of a new decade, the relentless drive of digital transformation has now coalesced with the new realities of the coronavirus pandemic, creating an unprecedented time for businesses and consumers alike. While company leaders are focused on employee communications and trying to execute business continuity plans, many of which may not have envisaged this particular scenario, there is an ongoing need for sustained adaptability.

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Recent research by EY has shown that almost half of company bosses in 45 countries are speeding up plans to automate their businesses as workers are forced to stay at home during the coronavirus outbreak.

Some 41% said they were investing in accelerating automation as businesses prepared for a post-crisis world. They conclude that companies have to be both predictive and proactive in their decision-making to preserve business continuity and build enterprise resilience.

Inevitably, much of this systemic change is being led by two teams that have become increasingly intertwined: finance and HR/people. Both functions are going through significant change as they seek to lead and manage this transformation to a more forward-looking view of the business. This may require different mind-sets and a more agile approach in how business is run.

According to the recent Sage CFO 3.0 report, which surveyed more than 500 finance executives in the United States, 76% of CFOs believe they are the ones who drive digital transformation in their business, and nearly half (46%) are facing increased demand to provide overall business counsel. They are no longer just the “number crunchers”; they are the leaders other departments look to for strategic guidance.

Similarly, in the Sage People Changing Face of HR Report, a staggering 69% of HR leaders anticipate employees’ expectations of HR to completely change in the next 3 years alone. And, according to that same report, many HR professionals don’t feel ready to meet or exceed those new expectations.

In fact, fewer than one in three respondents would rate their HR skills and competency levels as expert today, with 86% of respondents believing HR skill sets need to change. This means incorporating data analytics, behavioral science, and knowledge of technology into the skill set, as well as working with the finance function, to address digital transformation, creating more flexible and adaptive businesses as they navigate uncharted times.

Shifting Company Priorities to an HR-Focused Mind-Set

In order to truly embrace digital transformation and their changing role, HR leaders will have to work with the CFO/head of finance to train and educate their workforces around the role in both digitalization and the use of agile methodologies in business frameworks. They will have to not only be aware of transcendent technologies on the horizon but also take the initiative to build in flexibility in business decisions through all levels of the company.

As a result, the HR/people function will likely have a bigger and more impactful role in the business. Just as the CFO has shifted from a number-cruncher to a strategic counselor, the chief people officer (or respective title) can also add more value to the business by acting as a change agent, focusing on the relationships between employee and customer experiences while considering the impact of HR processes on financial business performance.

Paving the Way to Address Evolving Employee Expectations in the Workplace

While new ways of working are being adopted constantly and working from home has now become a new reality for millions of people, changing employee expectations are also driving operational changes across organizations—particularly as HR teams continue their evolution to people teams.

More than a third of HR leaders have adopted new ways of working—such as flexible hours/locations, data-driven decision-making, and continuous performance management—to meet the demands of a more diverse workforce and an increasingly elastic hiring market with the growth in the number of contingent and gig workers, which is a trend that is likely to increase during less predictable times.

Creating these changes through employees, who serve as the very foundation of a company, sets the precedent for the future starting from within. While companies have a wealth of information about their consumers at their fingertips, it’s critical for companies to continuously collect feedback data and expand on developing enhanced workforce experiences for all employees. One example is performance management.

Though traditional approaches such as the annual appraisal aren’t quite dead, it’s very possible they may be soon—40% of HR/people leaders polled said they continuously collect performance feedback data right now, with a further 47% planning to within the next 12 months. Continuous performance management is now becoming more common, and this, in turn, may evolve to managing sustainable performance as people are forced to work from home for potentially longer periods of time.

As the way people work continues to evolve, so, too, does the way they learn—and the way in which companies offer learning and development as a result. As HR teams transition to new ways of working, progressive, forward-thinking organizations need to be ready to adjust; those that end up successful will blend formal company training with informal autonomous and social learning, continuous development, and flexible career paths.

This is particularly important during mandated work-from-home scenarios and as employees look to further skills that keep them at the top of the talent pool or enable them to be retrained quickly to become more employable to meet the demand for new skills.

With 94% of respondents expecting further changes in the sector over the next 3 years, it’s encouraging that more than a third of HR and people leaders are adopting new ways of working and learning.

The Importance of Encouraging HR Leaders to Take the Reins

While HR leaders and professionals are bracing for continued change, there is also an enormous opportunity for the sector to further seize the opportunity to lead these changes.

Thanks to technology like analytics and automation, they can transition from being process-focused to people-focused as they move from the backroom to the center of the business and help make a demonstrable impact on business and financial performance.

Similarly, CFOs need to manage beyond finance and have a more holistic set of analytics and dashboards across the entire business. This is being played out now as organizations make strategic decisions about their future, their workforce, and scenario-based budgeting and planning.

In this new world, the interrelationship between finance and HR has become more critical and more strategic, with both functions evolving as digital transformation accelerates to enable new agile ways of solving emerging business problems.

Paul Burrin, is the Vice President at Sage People.