Why EX Leaders and CFOs Need to Build Stronger Partnerships
Figure 1.
Recent research published by TI People on The State of EX revealed a concerning finding regarding the relationship between EX teams and finance leaders, which is that they don't really have one. Indeed, figure 1 indicates that of all cross-functional partners, EX/HR teams partner least with Finance, indicating their frequency of partnership over the last 12 months as ‘rare’.
What is the Impact of a Weak Partnership with Finance?
Lack of collaboration leads to a missed opportunity for EX leaders to get support on one of their most important challenges: measuring the financial and business impact of an EX improvement. This is the #3 overall EX management challenge for respondents, the #1 measurement related challenge, and one that had already been identified in last year's state of EX
The challenge of quantifying the positive effects of improving Employee Experience (EX) on a company's bottom line makes it hard to highlight successful, data-supported EX stories. This, in turn, weakens the ability to gain wider support within the organisation for EX initiatives, which were the #2 priority for survey respondents in this year’s research. It might also prompt leaders, including those in finance, to question the value of ongoing investments in EX endeavors.
Strengthening this relationship would therefore not only help with proving the impact of EX work; in many cases it may also be necessary to ensure the continued funding and survival of EX teams.
EX leaders would be wise to take a lesson from the world of people analytics. Findings from Insight 222’s People Analytics Trends research report shows:
Of the 65 people analytics teams surveyed that built relationships with Finance, 99% have delivered measurable outcomes from people analytics work over the last 12 months, 54% have delivered outcomes with people analytics work that has improved business performance.
The importance of this partnership was well summarised in our State of EX report:
"Finance should be a top partner of EX teams, not just on individual improvement projects but constantly, in the background, teaching us how to connect every vague, ambiguous, deeply human thing to money. Finance should be our best friend—so why aren’t they? Are we unwilling to reach out or are they unwilling to help?"
Why is this the State of the Relationship?
Figure 13.
There are a few reasons I believe this relationship is a weak one in most organisations:
Finance shows up last on the list of EX influencers
If those that are pushing forward on the EX agenda believe that people’s total experience at their organization is least attributable to finance, then it is no surprise that respondents are finding few obvious reasons to partner with them.
EX and Finance leaders have different investment mindsets
If you ask any EX-leader if they support the following adage, they are likely to say ‘yes’:
“Invest in your employees, and profits will follow.”
Meanwhile, an adage finance leaders might be more willing to embrace is:
“Manage your investments and costs wisely, and profits will follow.”
Given their roles, finance leaders must be highly discerning when it comes to the business value associated with any expenditure or investment and might quickly challenge anything that may resemble overinvestment in people’s experience. In other words, not all spending to improve people’s experience is always necessary to improve business outcomes. Given these differences in perspectives, I suspect that EX leaders and finance leaders may not be fully understood by the other, and therefore do not seek one another out.
There is little cross-pollination in talent between these functional areas
When is the last time you heard of an EX or HR leader evolving to become a finance leader, or vice versa? While these role evolutions are not unheard of, they are however infrequent. This leads to very few informal ties between individuals in these functions and few advocates representing one another’s perspectives and skills sets, reducing opportunities for organic practice sharing.
Connecting Business and Financial Outcomes Through an EX-finance Partnership
If EX leaders intentionally cultivate a partnership with leaders in finance, the challenge of measuring the business and financial impact of EX improvements should become less difficult thanks to the following enablers:
An increase in perceived importance of connecting to business and financial outcomes
In the ‘State of EX’ research, 76% of respondents say they care more about people outcomes than financial outcomes. While this high score may not be surprising coming from respondents, it nonetheless reminds us that those pushing EX forward in their organisations may not consider it essential to prove financial outcomes. More exposure to finance leaders and their decision making around fund allocation would however serve as a constant reminder of the importance of linkages to business and financial outcomes.
Reminder of a critical pre-requisite
In order to connect EX improvements to business and financial outcomes, it goes without saying that you first need data that confirms the EX improvement. And yet this isn’t a given: the #2 measurement challenge of respondents is measuring an EX improvement’s impact on employees. Here too, time with finance experts might stand to remind HR Leaders of the importance of starting to collect this critical pre-requisite data.
Collection and access to financial data
Our research shows that only 17% of responding organisations gather data on financial outcomes when tracking EX improvements and that the #4 measurement challenge is "obtaining EX-related data (people, behavioral, or business/financial) owned by someone else." Often finance organisations might be the gatekeepers to the essential data, making a partnership with them even more essential
Collaboration on the approach
A major part of this challenge is tied to know-how – many don’t know how to go about connecting EX improvements to business and financial outcomes. And this isn’t a criticism but an acknowledgment of the “inherent analytical challenge of tying human things to money” as stated in our research. Spending time on this with finance experts would certainly allow for collaboration and upskilling on how best to approach this linkage exercise.
How to Start Becoming Partners?
For those attempting to improve their people’s experience in their organisation and who are wanting to benefit from all that a partnership with finance may unlock, consider the following steps to get started:
Find a friend in finance
Their seniority matters less than your access to them and their expertise, and their willingness to collaborate.
Involve them in your next project
At the beginning of your next project, get their input as you build a measurement plan that allows you collect current state data of people, operational, customer and financial metrics that your work has the potential to influence. At the end of the project, ensure you re-collect the data your action(s) is likely to have influenced to measure the value realised and elevate the success. Rely on your finance partner’s analytical expertise to attempt to draw causal links (e.g. regression) but if this is not possible, consider correlation and trend data that allows you to claim even a percentage of the change.
Repeat through your next efforts
Do it again and again to continue to learn and refine your approach across different EX improvements efforts.
In 2024, it is our hope that many EX-leaders lean into this critical imperative of measuring the impact of EX efforts to bolster the understanding of EX as a value driver in the organisation.
As always, if you are interested in learning more about how we approach the measurement of business and financial impact with our clients, we’d love to hear from you.
ABOUT THE AUTHOR
Stephanie Denino
Stephanie Denino is Managing Director at TI People – an employee experience consultancy (EX).
Stephanie works with leaders who are eager to shape and apply the practices that will allow them to systemically improve experiences for and with their people. Through her work, she helps organizations chart their path toward excellence on EX, improve critical work experiences and build capabilities needed to improve experiences, at scale.
Before joining TI People, she spent 6 years building up the Global Employee Experience team at Accenture – this practitioner lens is one she carries with her as she now serves a broad range of organizations in this space.
