Why Finance and HR Need a Close Working Relationship

Many organisations have a challenge in forging a good working relationship between the finance department and the human resource (HR) department. Conflicts regarding the roles and goals of these departments are common in many organisations. The tension between the two departments starts from their traditional goals and perspectives.

The belief that the finance department is solely concerned with money or costs and the HR department with people affects the relationship between these departments. Based on this outdated belief, the HR department focuses on human capital and regards it as the most important asset. The finance department, on the other hand, focuses on profitability and views the HR department as a cost unit.

The differing perspectives raise unnecessary tensions in an organisation. Both departments must forge a close working relationship for the following reasons:

Overlapping Responsibilities

The HR and finance departments work towards one ultimate goal of achieving a higher level of performance and profitability. In the current business context, HR managers often perform some duties that were traditionally thought to be financial duties. The same applies to chief finance officers. For instance, HR managers must consider the cost and benefits of recruiting new employees. They must also consider the impact of their HR policies on the profitability of the organisation. Such considerations require data analysis and financial projections.

Finance officers or managers must go beyond considering employees as costs to determine ways through which they can improve profitability through human capital. For instance, finance managers estimate the impact of salary increment, bonuses, and other motivational programs on the company’s profitability.

The Impact of Tension On Business Performance

A strong relationship between the two departments has a positive impact on the overall performance of an organisation. Given the overlap in responsibilities, open communication across departments is important to ensure that the overall goals and objectives are achieved. Businesses must ensure that there is a free flow of information across departments, especially performance data.

Each department can then align its strategies to improve future performance. Tension hinders this free flow of information, which in turn slows down business growth and expansion. Each department must recognise the contribution of other departments to the overall performance. The HR department must recognise the importance of sound financial decisions. The finance department must accept that all companies including those in the financial market like ETX Capital depend on employees to implement their growth and profitability strategies.

The Changing Business Context

The current business context is highly competitive and dynamic. Organisations can no longer hold on to ineffective traditions and outdated perspectives. Managerial teams must shift from internal problems to the high competition in the global business environment, which is a threat to many companies’ survival. In addition, the roles and responsibilities of human resource managers and finance officers are changing. Professionals must be willing to accept the change to remain competitive and relevant.

Strategic Workforce Planning

In today’s rapidly evolving business landscape, the importance of strategic workforce planning cannot be overstated. This process, which requires a deep collaboration between HR and finance, involves forecasting future workforce requirements to achieve business goals. By understanding the organization’s strategic direction, both departments can work together to identify the skills, positions, and numbers of employees needed to support future growth and success. This collaborative effort ensures that the company remains agile, competitive, and prepared for the challenges ahead.

Leveraging Technology for Collaboration

The adoption of technology, such as people operations platforms and equity management platforms, plays a pivotal role in enhancing the collaboration between HR and finance. These tools not only streamline data sharing and communication but also provide real-time insights into workforce metrics, financial projections, and compensation management. By leveraging technology, HR and finance can work more efficiently together, making data-driven decisions that align with the organization’s strategic objectives and improve overall operational effectiveness.

Understanding and Managing Investments in Human Capital

A paradigm shift is required in how finance views HR and vice versa. Finance departments must start seeing HR not just as a cost center but as a strategic partner involved in the investment in human capital. This investment is crucial for nurturing a skilled and motivated workforce that drives organizational success. HR, on the other hand, needs to understand and articulate the value of these investments in terms that resonate with finance, such as return on investment (ROI) and impact on the bottom line. Together, HR and finance can develop compensation strategies, benefits packages, and talent development programs that are both cost-effective and aligned with the company’s strategic goals.


The tension between HR and finance departments has existed for many years. The differences in primary goals and responsibilities cause strife between the two departments. However, both departments must work together to achieve the overall objectives of business growth and profitability. A strong relationship between the two departments is necessary because of the overlap in their responsibilities and the changing business context.

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