Canadian HR Reporter

CANADIAN HR REPORTER CANADIAN HR REPORTER April 7, 2014 April 7, 2014 14 FEATURES FEATURES HR EDUCATION Finance know-how vital to HR success By Duff McCutcheon F or too many HR profes- sionals, the prospect of looking over a financial statement leaves them in a cold sweat. Traditionally, numbers have not been HR's forte. But if they want to move up the ladder into a senior management role, an understanding of fi nance and accounting is essential. "All business professionals need to understand how their business generates revenue and the anato- my behind it all — and HR is no diff erent," says Norm Sabapathy, executive vice-president of people at Cadillac Fairview in Toronto. "A good HR professional's job is to maximize the eff ectiveness of people to deliver results and to do that you need to be fully inte- grated with the business you sup- port — and that requires fi nance acumen." As an HR professional, under- standing the fi nancial side of the business is a key enabler to suc- cess, according to Sandra Smith, CHRO at North York General Hospital in Toronto. "On a daily basis, HR works in partnership with finance to understand resource utilization issues and design potential busi- ness solutions and opportunities." While Canadian CEOs agree that senior HR executives are valued contributors and trusted advisors on an equal footing with executives from other business ar- eas, they also believe some HR ex- ecutives fall short of really under- standing the business challenges, according to a 2010 report released by the Human Resources Profes- sionals Association (HRPA) and Knightsbridge Human Capital. Most CEOs expressed how important it is for senior HR executives to have a thorough understanding of the business profi t and loss (P&L), found e Role and Future of HR: e CEO's Perspective. "The senior HR executive (needs to be) a business person fi rst and an HR leader second. ey need to decipher and de- liver," said one CEO. at means understanding the numbers — such as budgets, fi - nancial statements, P&L and pro- ductivity metrics — that defi ne the health of an organization. Learning the language e fi rst thing HR professionals must learn is the basic language and terminology, according to Swaran Singh Vohra, a certifi ed public accountant who teaches one of HRPA's fi nance and ac- counting seminars. "My course starts with the basic accounting terminology — accru- als, income statements, deferred expenses, productivity measures, etcetera — and an understanding of the fi nancial statements used to provide information about the or- ganization's fi nancial position and performance: income statements, cash fi nancial statements, P&L statement, balance sheet, cash fl ow and productivity metrics." Learning and understanding the language, says Vohra, will help HR professionals speak to accounting and planning depart- ments. For example, if HR must make a decision around hiring a headhunter versus using in-house recruiters, it must take into ac- count the costs associated with both options, he says. "Since recruiting, like every other aspect of HR, is closely tied to fi nance, HR must speak to ac- counting in such a way that articu- lates the best decision because fi - nance is going to be driven largely by the numbers. But as the people specialists, it's the HR profession- als who, with the help of some accounting know-how, need to make the case for the best option — even if it's more expensive." Sabapathy agrees. "If I'm going to the board with a new long-term incentive program or training program, you absolutely need to have the ROI for it. It's impossible to design programming if you don't get the fi nance behind it." Building business acumen While learning the language is essential to any accounting primer, there are other areas HR professionals should be comfort- able with, according to Violette Henein, an instructor of one of HRPA's accounting and fi nancial management courses. "Budget is number one because it's the cornerstone for every plan. You need to know how to budget and understand its implications for the organization." HR deals with compensation, benefi ts, training — all of which have budget implications — so it's vital to understand how ev- erything fl ows. "For example, if I ask HR to do some training, you need to know how to price that training a) to help your own HR department b) if you're going to charge it back to the other department or c) if you're doing it for free. If you're doing it for free, you need to plan the re- sources within your own depart- ment — do you have the capability and resources?" says Henein. Another area HR needs to know is cost-volume-profi t anal- ysis, which shows the point at which an HR initiative is going to be profi table — What is the rev- enue needed to break even and cover costs for this? " is also ties back to employee performance evaluations — that has a cost implication because you're compensating people with dollars for what they do. HR needs to know the ROI on that person's salary," she says. Singing the same song Ultimately, it's important for HR professionals to learn some basic fi nance to help close the gap be- tween what the fi nance depart- ment sees and what HR sees. HR deals with people — individuals with emotions, work-life balance needs and ambitions. "Accounting looks at that same resource as a unit — a full-time equivalent (FTE)," says Vohra. "It's diff erent aspects of the same thing. It's totally diff erent viewed from an accounting perspective versus an HR perspective. If these two opposing person- alities — fi nance and HR — don't come to a common understand- ing that is aligned with the organi- zation's goals, they will never work together in the same direction, he says. " Before, HR was seen as tactical but they're now seen as strategic partners. How is that possible? Because the CHRO is closely aligned with the CFO and other C-suite professionals — they have the same vision. ey're able to drive the organization using the same language." Duff McCutcheon is the Toronto- based communications specialist at the Human Resources Professionals Association (HRPA). For more infor- mation, visit www.hrpa.ca. Ashton College | Vancouver, BC 604 899 0803 | 1 866 759 6006 w w w. a s h t o n c o l l e g e . c o m Equip yourself with the knowledge and qualification to obtain a licence for international talent recruitment. "I joined the immigration consulting program so that we had a licenced presence in the immigration market, which ties into our international recruitment and search business." Peter Meingast, CHRP, IPMA-CP | Private Consultant in HR & Foreign Recruitment, TPD Immigration Consultant Diploma Program, 2008 Immigration Consultant Diploma Program: Full-time | Part-time | Online "It is not clear that supplemen- tary service employees would be covered by the policy as there ap- pears to be a distinction between being 'on call' or 'on scheduled call' and being 'available for call,' said the arbitrator. "However, if they must comply, it is doubtful that they could ever consume a prod- uct that contains alcohol and must abstain from alcohol at all times. is is a higher standard than (the collective agreement), which only requires supplementary service employees to be available for call and fi t for duty within one hour of being called." CP was ordered to reinstate the mechanic without loss of seniority and compensation for lost wages and benefi ts. In addition, CP did not act in "good faith and fair dealing" in both its investigation and quick dismissal of a long-serving em- ployee with a mostly clean record who was nine months away from retiring with a full pension, found the arbitrator. e company was ordered to pay an additional $5,000 in damages for its bad-faith conduct. For more information see: • Canadian Pacifi c Railway and Unifor, Local 101R (Veldhoen), Re, 2014 CarswellNat 392 (Can. Arb.). Jeff rey R. Smith is the editor of Ca- nadian Employment Law Today. For more information, visit www.employ- mentlawtoday.com. ALCOHOL < pg. 5 Quick dismissal Quick dismissal HR needs to know cost-volume- profi t analysis.

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