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Sales, Finance, and Human Resources, Only Room for 2 at the Table

Posted on Mon, May 10, 2010
  
 

Without an understanding of how your project impacts either sales or finance, you have very little justification for budget.  You have to make a case for your salary or contract and it is easier to get either if you can trace directly to sales or to profit.  Because without a pet project you're either in or you're out.

There are really only 3 swim lanes in business:  sales, finance, and human resources.  All jobs fall within only these 3 swim lanes, or functional areas.  Unfortunately, only 2 of those 3 functions are considered business drivers:  finance and sales.  The 3rd, human resources, a support function, a compliance function, and a cost center.

You can't have a business without sales and you can't stay in business with financial acuity.

Just look at some job categories and the reality of where they align:

  • marketing < sales
  • accounting < finance
  • operations < finance
  • IT (internal processes) < finance
  • IT (market data) < sales
  • public relations < sales
  • supply chain < finance

Sales gets the dollar and finance maximizes the profit margin of each dollar and until human resources ups their stake in the game human resources is largely relegated to support, compliance, and supply.

All the talent management, learning and development, organization behavior, human resource business partner, recruiter, chief human capital officer, chief diversity office, chief learning office, human resource generalist, and organization development cabal; we are in a war for limited attention, limited resources, and limited involvement until we make the clear case that we (you) do drive sales results or that you (we) do drive financial performance.

It's your job to make a valid case, each and every day, on how talent drives business results; strategic recruiting is a direct link to sales; and that motivation drives financial performance.  If you can't make the case you are not business partners.  Worse, we don't deserve a seat at the business table and will never be invited to the business discussion.

I don't have a prescription, but I know the only way to be a business partner is to understand finance and understand that when human resources does not contribute to sales it's just a cost center.

Time for human resources to know that their place:  either driving sales or compliance and transaction.  If it is compliance, that is a perfect map to be outsourced and outsourcing, of course, increases margins and that gets us right back to finance... 

So, if you want to talk business then learn to talk sales and talk finance; know the industry drivers for each; and frame all your projects, programs, or efforts in maximizing sales and/or maximizing margin.

Human resource ROI is a sexy topic bring up, but without a sales and finance frame it's only putting lipstick on a pig.

Knowing finance is as easy as asking what formulas are used to evaluate projects:

  • Net Present Value?
  • Present Value?
  • Internal Rate of Return?

Whatever the formula do yourself a favor and learn how to calculate your impact, it is rarely more than addition, multiplication, or division, so there is no advanced math to be intimidated with.

Otherwise don't be surprised if the contract or project is canceled. 

About the author:  Toby Elwin is part of the MassBayODLG, you can find out more about him at his website or on @telwin

For more information on organization development's impact on business, check out last week's MassBayODLG meeting from Julia Geisman:

 

ROI Survival Guide: Making Dollar & Sense From Your OD Programs
View more presentations from MassBayODLG.
 
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Comments

ROI in OD: For Real 
 
 
 
Julia Geisman’s MassBayODLG May 17th presentation on calculating ROI as a function of creating value-add to an OD initiative, provided voice to a mostly ignored and/or avoided topic. With courage and determination 45 people engaged the ideas and learned new techniques for validating and justifying initiatives in the terms and language of organization clients who make " go/no go " decisions of these initiatives based on perceived value. While the going was sometimes murky as the calculations sometimes eluded us, Julia persevered to a satisfactory conclusion. Thanks to Julia and MBODLG for getting this critical conversation started. What’s next?
Posted @ Friday, May 28, 2010 4:21 PM by charley matera
Of all places I saw this post on the Russia Journal<a href="http://www.russiajournal.com/node/11349>HR Teams Must Measure Their Performance. If it's good enough for a recovering dictatorship, it should be good enough for a market economy.
Posted @ Sunday, May 30, 2010 6:51 PM by Toby Elwin
Of all places I saw this post on the Russia Journal HR Teams Must Measure Their Performance. If it's good enough for a recovering dictatorship, it should be good enough for a market economy.
Posted @ Sunday, May 30, 2010 6:52 PM by Toby Elwin
I was reading through a great article from Human Resources IQ on getting a Seat at the Table just the other day. I wanted to share the link to the article for you all to read: Why Is It That Training Never Gets a Seat at the Table?  
 
 
 
Enjoy!
Posted @ Tuesday, June 01, 2010 12:19 PM by Kristine Dunn
Toby, great post! As I raised at Julia's workshop, when your client is a large government agency or non-profit there is no obvious equivalent to the sales department, and finance is about managing to budget allocation. I've found clients in these contexts still care about ROI,but the metrics might be the amount of staff time and energy relative impact.
Posted @ Saturday, September 11, 2010 1:02 PM by Clarissa Sawyer
Clarissa, 
 
I've worked for national, state, and local government and focus on budget and finances by keeping in mind tax-payer dollar. Maximizing each dollar, whether revenue dollar, investor dollar, donor dollar, or tax-payer dollar the same financial principles to maximize return are in play. 
 
In many, many, many public-sector organizations there is a reverse-reward mechanism that if a manager does not spend their budget they lose their budget is reduced for next year.  
 
Spending every cent of your budget is thought to be what good managers do. And a lot of these agencies or managers derive their perceived power by the size of the budget they have and increasing their budget becomes a power play. Instead of saving tax payer money, the perceived punishment is that their budget is reduced.  
 
However, when I translate that line of thinking to private-sector no private-sector manager would last a year in his job if he built and spent his budgets that way. They would probably be fired for incompetence. 
 
There is a 3-letter, intelligence agency I worked for that spent >5% of their budget within the last 12 hours of their fiscal year. Those people should be prosecuted for tax-payer fraud, but, sadly, they aren't and walking down those halls looking at stacks of unopened computers and printers that were never going to be plugged in was not an enjoyable experience. 
 
As far as an equivalent to sales, in public sector you have budget reviews and authorizations and in non-profits you have donor dollars or grants that these organizations are chartered to manage effectively and maximize return. The line of thinking should be every dollar, whether tax payer, donor, customer, or investor, is to be maximized; anything else is financial irresponsibility. 
 
As much as a charity values a donor dollar for public-sector I make the case that an hour of effort is as valuable as a dollar. Both a dollar and an hour are finite resources. With a compelling case I can make the case for managing both with a financial mindset. I've made the case that both my client and myself are tax payers, wouldn't we want our taxes managed effectively? 
 
We in OD fight the good fight and the only way to convey organization development is to understand resources, resource constraints, and valuation. 
 
You've brought up valid measures as alternatives and both can be converted to dollars. 
 
Thanks Clarissa and I hope your clients are managing my tax dollars to the best of their capability...
Posted @ Thursday, September 16, 2010 11:37 AM by Toby Elwin
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