As CFOs at the helm of two high-growth HR tech organisations, Xref’s James Solomons and Kristie Langley-Gliddon from Expr3ss! – Software that Simplifies Staff Selection, are perfectly placed to discuss the evolving relationship between finance and HR.
Here they share their views on everything from the financial implications of hiring decisions, the hidden costs of a bad hire and how they ensure their finance team is seen as more than just bean counters.
How have the financial implications of hiring decisions changed?
Kristie: “The more things changed, the more they stayed the same…” This was my experience prior to joining Expr3ss!. Ever since I have seen a shift in the role of Finance when it comes to hiring decisions. Increasingly, the finance team is included in the business case development for hiring, rather than being an afterthought.
We are moving into a world where all business functions are starting to understand the value of collaborating. In this environment, the Finance team can function as a strategic adviser, offering insight into how hiring decisions could impact financial performance and other key metrics.
James: I agree. I also believe that, in today’s market, it’s hard to find great staff and even harder to fire those that turn out to be a bad decision. It’s becoming increasingly important for HR teams to understand the financial implications of each decision they make.
Also, while market trends show that wage growth has been slow, people entering employment now typically expect more. As a business owner, you’ll do what’s necessary to get the best people through the door and then look after them financially, but that can mean paying over the odds for staff. There has to be a balance between hiring great people and making the right financial decisions.
What are your top three hiring pet hates?
Kristie: My top three would be:
- Hiring the wrong person based on a CV and just one or two interviews;
- An unbalanced power play between HR and the hiring manager where HR has the final say rather than the hiring manager – this can be costly if the wrong person is hired; and
- Finance not being involved in the decision making regarding hires.
James: Kirstie’s first point is absolutely spot on and aligns with the first in my top three:
- A lack of due diligence leading to rushed or unplanned hires, with decisions made hastily and based on little data or insights;
- Increasing salary expectations, which I alluded to above. Candidates now have a lot more power during hiring and often this leads to an unjustified salary request; and
- “Friendship hires” that result in a friend of the decision-maker landing a job over someone more suitable – this can ultimately result in a costly hiring mistake
How is HR data factored into reporting?
Kristie: Before joining Expr3ss! and seeing how technology can streamline the recruitment process, I worked in environments where we only used market salary estimates in our budgeting and forecasting.
When the right HR tech is used this process changes significantly. Without unpredictable and protracted HR and recruitment processes, and by harnessing the data that your HR tech solutions provider, you can now forecast staff hires and the financial impacts more accurately.
James: People are often the largest expense to any business, so it’s important to understand what you’re getting in return for that investment. Finance teams are data custodians and we often use our skill sets to assist HR in both measuring and securely controlling their data.
Finance and HR are the two biggest assets in any company – together they’re a powerhouse and can deliver robust insights and arguments at the decision-making table. When reporting to senior management, it’s important to be able to provide the correlation between business and employee performance, which will lend itself to wider business scenario planning and future proofing.
What are the hidden costs of a bad hire?
James: There are some key mistakes often made during hiring that can have a huge financial impact, such as:
- Badly worded contracts, which can be highly detrimental – both legally and financially – if a company decides they want to terminate someone’s employment;
- The potential legal implications of a bad hire that is then poorly managed – if they are led to believe they are doing a good job but then let go, they may plead unfair dismissal; and
- The negative impact a bad hire and poor performance management can have culturally when other high-performing staff see bad performance go unchallenged
Ultimately, due diligence during hiring is critical to ensuring the right people are identified and that they are given accurate expectations of their role and consequences for not meeting them.
Kristie: James’ has covered off some significant ones and there are far too many to list them all, but I’d also add:
- lost productivity;
- costly mistakes or errors resulting in a knock to the reputation and financial success of the business;
- low team morale due to other team members taking on the workload of a poor performer; and
- additional investment required to train or mentor the poor performer – rather than investing time in the high potential performers – to an appropriate level
How do you ensure your team is seen as more than the bean counters?
Kristie: Finance is too frequently seen as a support function or a policeman that is keeping the business from spending. At Expr3ss!, we understand there needs to be an open line of communication and transparency. We’re at our best when we’re working together. Accounts, Finance, HR, Marketing and Sales are constantly talking to each other – so that we don’t make strategic decisions without having the full picture and greater objectives in mind at all times. Also, if one department changes course, the others can respond proactively.
James: I think it’s also important to just be human! At Xref, we celebrate with our staff – we’re as involved in the social side of the business as every other department. We also like being able to use our knowledge and skills to support staff in their personal financial challenges.
But from a business perspective, you have to recognise the significance of money to everyone. It is the lifeblood of any company – people are not going to come to work for nothing and getting the very basics right, such as ensuring your payroll is correct and on time every month is an absolute must to build staff respect of the finance function.
* As part of a content collaboration, this article was also published here.