Balancing Accounting Objectives and HR Goals

An article in the January-February edition of the Harvard Business Review titled “How Financial Accounting Screws Up HR” recently caught our attention. 

A scale balancing money and businesspeople.

The author, Peter Cappelli, a professor at the University of Pennsylvania’s Warton School of Business, highlighted the ways in which he believes that pursuing financial goals causes businesses distort their hiring and training objectives and deprive employees of the benefits they deserve. His summary for the article was as follows:

Many HR practices in the United States are bad for companies, employees, and shareholders. Firms skimp on training and development, for instance, and tightly limit head count even when they’re understaffed. They increasingly move work to nonemployees, like leased workers, and replace pensions with more-expensive 401(k) plans. They do such counterproductive things because U.S. financial reporting standards treat employees and investments in them as expenses or liabilities, which make companies look less valuable to investors.

​The solution he proposes is to change SEC reporting requirements, which would only help publicly traded companies, though he seems to indicate that these struggles are being felt by a broad array of business types and sizes.

​Unfortunately, it seems this article misses one very important point – the ways in which accounting and HR can work together to benefit the overall business. As a result, we’d like to cover that aspect of the discussion to help remind companies that their accountants are not the villains in the discussion of hiring and employee retention.

​As our partners at CFO Selections explain in an article on the areas where accounting and HR converge, “Companies that understand how finance and HR overlap and foster a relationship between the two are better poised for long-term growth than their less informed counterparts.”

So, let’s take a look at how to balance accounting objectives and HR goals to create sustainable business growth:

Accounting Objectives
Accounting manages the company’s money – that’s no secret. But what are their actual objectives in doing so? They are driven by achieving accuracy, improving efficiency, and maintaining timely reporting for stakeholders. Their goals are to ensure that there is sufficient cash flow to support business needs. Accounting manages one of the company’s most valuable assets – its money. In the same way that your heart pumps to keep blood flowing through your body and sustain life, accounting keeps tabs on what is going in and coming out and how that compares to what was expected to make sure that the business has what it needs when it needs it.

HR Goals
Human resources manages staff acquisition and development and oversee training and performance reviews. They plan and execute initiatives to keep employees engaged, increase job satisfaction, and encourage employee retention. They manage the other most valuable resource a company has – its people. They are like the soul of the company – the embodiment of what the company believes and how it demonstrates those principles. HR is willing to invest what is needed to ensure that the company is a place where people want to come to work to make or do something that attracts customers and achieves aspirational goals.

The Intersection
Thriving businesses need both. Enough money and the right staff are required for a company to do business successfully. Accounting and HR intersect in the areas of payroll, budgeting, benefits, business trend analysis, and financial audits. In these areas, strong communication between both teams is essential. Financial data helps shape strategic HR decisions (like determining how much raises should be for the year) and HR metrics contribute to accounting figures (like when employee records and compensation documentation are required for an IRS audit).

Our partners at CFO Selections explain the business benefit of accounting and HR working together in saying, “A convergence of accounting and HR allows a company to attain its short-term goals and long-term strategic vision by supporting employees as they grow.”

Finding Success
Balancing accounting objectives and HR goals requires strong collaboration between both teams. This relationship hinges on a mutual respect and an understanding of the role each plays in the organization’s success. Both teams must understand the other team’s goals, perspective, approach, and challenges to gain a deeper understanding of how they can benefit each other. Ultimately, each team should understand how they can work together and what kind of deliverables they will be sharing.

Additionally, they should both have access to the business owner or CEO to feel like they have an equal “seat at the table.” Otherwise, one team may mistakenly believe that they are less important to the company’s future success. Furthermore, their perspectives must be given equal weight when leadership needs to decide on issues that affect both teams.

Next Steps
When you need accounting help, turn to us for your outsourcing accounting needs. We have a team of highly experienced bookkeepers and accountants to help you achieve your financial objectives and facilitate meeting your greater business goals. Contact us today to find out more about how we can come alongside your existing personnel to partner in success.