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By Melissa Campeau

Former Chrysler CEO Lee Iacocca once said, “You can have brilliant ideas but if you can’t get them across, your ideas won’t get you anywhere.

Former Chrysler CEO Lee Iacocca once said, “You can have brilliant ideas but if you can’t get them across, your ideas won’t get you anywhere.”

As HR pros increasingly sit shoulder to shoulder with other senior executives on leadership teams, many face a communication barrier. For better or worse, finance is still the primary language of business. HR pros, though, speak the language of human capital, with a value that’s often tough to quantify. To bridge the communication gap, it’s critical for HR pros to understand the intricacies of the financial conversation and be able to position HR initiatives in a way that makes sense to those with dollars and cents backgrounds.

“I think it’s fair to say a lot of people in HR are uncomfortable with the financial side of business,” said Tony Dimnik, a professor at Queen’s School of Business Executive Education and president of Vednost Inc., a company that teaches finance and accounting fundamentals.

It’s a missing puzzle piece that can hamper an HR professional’s ability to be influential and contribute fully to the decision-making process.

“If human resource management is the key to the success of an organization – and current business thinking accepts this as true – why aren’t there more HR people at the most senior level?” said Dimnik. “I think one of the main reasons is because they don’t have enough accounting and finance knowledge.”

Beware the (knowledge) gap

“The trouble with not speaking the finance language is that numbers can lie, or at least appear to,” said Michelle Causton, professor with the accounting department of Canadore College in North Bay, Ont. Understanding a little about how numbers find their way into reports can let a human resource professional contribute more fully to strategic discussions.

“[For starters,] you have to feel confident enough in your understanding of something to challenge it when it doesn’t make sense,” said Causton. “That’s why it’s important for people to build their financial muscles a bit.”

What’s more, a lack of conversational financial knowledge can mean missing the chance to claim funding for HR initiatives.

“Because people don’t have comfort with the numbers, they abdicate the opportunity to speak up,” said Dimnik. “If there are 10 places for a company to put its money, for example, and the HR people are abdicating from the process, they can’t promote and support their projects and claim one of those places.”

HR initiatives can seem vague and fuzzy to numbers-minded members of the organization.

“Instinctually we understand that happy employees and well-trained employees are good for business, but at some point you have to make the effort to quantify things to help clarify the case for the rest of the executive team,” said Causton. “If you devise some metrics to support your argument, then everyone at the table can see there’s something behind it.”

SUBHEAD: No accounting degree necessary

Getting a handle on basic finances doesn’t mean HR pros need to engage in seven-year accounting programs. Instead, a little targeted financial knowledge, the kind that can be picked up in an intensive weekend or by studying for an hour or two each week, can make all the difference. (See sidebar for options.)

Think of it in terms of your own engagement.

“If you don’t understand finances well, financial discussions and financial language just float by,” said Dimnik. “Imagine how much better it would be to work in an organization where financial information makes sense to you.”

For many, a dislike of numbers can make the task seem daunting, but the math component of finance is actually fairly basic.

“Quite frankly, if you can add, multiply, subtract and divide, you can understand strategic accounting and finance,” said Dimnik.

“You don’t need to become an expert,” added Causton. “You just have to become conversational in the topic.”

If you can sling the lingo with colleagues – while understanding everything you’re saying, of course – there’s potential to become much more effective and influential.

“You can then pick up the phone and talk to a person in finance and talk to a person in operations about nearly anything and you can build a level of trust and respect between you,” said Nick Shepherd, founder of Eduvision, a company offering management consulting and professional development. “At the end of the day, business is all about building relationships.”

Finance 101

“Many HR pros have some knowledge of finances,” said Causton, “but in today’s business, it’s not enough.”

For starters, understanding the components of an accounting cycle, meaning the steps involved in collecting and recording an organization’s financial transactions, is an important basic.

“You have to find out how what you do fits into the financial statements,” said Dimnik. “For that, you need an understanding of the complete financial cycle.”

Core financial statements should all make sense, as well. Being able to read income statements and understand what goes into revenue and expenditures is an important building block, says Shepherd, as is the ability to read balance sheets and understand assets and liabilities.

Everyone should understand how to calculate an after tax net present value – or discounted cash flow – too. In English, this is the long-term strategic worth of an investment, based on projected future cash flow.

“For most medium and large business, discounted cash flow is the major decision-making tool,” said Dimnik.

Cost allocation should be another fundamental area of study.

“People should understand how cost allocations are calculated because that will impact nearly any decision at the table,” said Causton. For example, numbers on a page might initially point to cutting a particular cost centre to improve profits. “If you understand how the numbers found their way onto that report, you have a better sense of whether it’s really a good idea to go ahead with the cut.”

These and other basic building blocks can help an HR pro measure impact in accounting terms and develop more influential business cases, even when the subject matter appears difficult to quantify. For example, it might seem nearly impossible, at first, to quantify how a new training program will positively impact business. But if you take a look at the documented excess costs of poorly managed projects in the past, and how the new program will help avoid those, a stronger business case will start to take shape.

Give investors more confidence

An HR pro with a good handle on finances can impact investor relations, too.

“A savvy investor is looking towards not only earnings capability in the short term but protection of capital in the long term,” said Shepherd. A lot of that protection of capital is about the organization’s ability to attract, retain and develop its talent pool to maintain or grow those earnings.

A business with effective, strategic HR initiatives in place is only compelling to investors if those plans can be articulated in the language of finance.

“[To give investors confidence,] an organization’s HR people have to be able to communicate how what they do and the systems they have contribute to value,” said Dimnik.

SUBHEAD: Continuing education for advancement

Learning a new skill set never hurt anyone’s career trajectory.

“In terms of personal promotability, being a person who knows accounting and finance means you’re a person who can learn other things and take your knowledge into other areas,” said Dimnik. “I can’t see how anybody could get promoted to the top position in the organization if they didn’t have a basic understanding of finances.”

Cross train for better performance

In sports, cross training is commonplace because it’s effective. NFL players take ballet classes and runners frequent yoga studios to round out training programs and elevate performances. Flexing our intellectual muscles beyond departmental lines can have the same sort of impact on professional performance.

After all, every aspect of business is ultimately interconnected.

“To be a fully functioning member of the senior team, you’ve got to have an understanding of not only finance but also operations, sales and marketing and all the things that go into how an organization works,” said Shepherd.

When professionals cross train and become knowledgeable – not expert, just knowledgeable – in an area outside of their own, they become extremely valuable to any organization because now they can translate.

“They can take accounting speak and explain it to the HR people and take HR speak and explain it to the accounting people,” said Causton. “This opens up dialogues that would be impossible if everyone was busy speaking their own language.”

Freer communication and collaboration lead to more reasoned business decisions, since issues can be seen from all sides. For example, an organization looking to cut hiring costs might consider eliminating multiple interviews and some levels of testing. Intuitively, an HR person might know that the step would save money in the short term, but cost the organization dearly in the long term. By collaborating with a finance person to help quantify the argument, the pair could develop a strong business case and help steer the organization to a better decision.

A more effective senior team

As part of the senior decision-making team, HR pros who can see a story from the financial side of the fence as well as their own have more to work with when it comes to contributing.

“Simply put,” said Shepherd, “the more members of a leadership team that understand each others’ perspectives, the more effective they can be.”

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