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Accountancy’s difficulty, HR’s opportunity? – CIPD feature


The crisis in accounting and why HR shouldn’t miss the chance.

Tony Hope, visiting Professor of Accounting, INSEAD and Manchester Business School, is speaking at the CIPD’s annual conference in Harrogate. Here he introduces his subject: how HR could respond to the current crisis of confidence in accountancy.

Read more about the conference and exhibition.

Recent events have hit accountancy hard, and the repercussions have shaken the status of finance departments within companies across the globe. But what hits finance could well be good for HR: now that the authority of the money men has been dented, HR no longer need be a second class citizen. What I will try to show is that HR needs to, and can, engage with finance, while taking advantage of finance’s loss of status.

How can HR step up? Speaking as an accountant, my interest is in what HR can do to make their figures real, particularly since so many accounting figures have turned out not to be. We need to find the evidence that good HR makes for profits in the long run, in order to get past the general scepticism. We need to get accountants to talk to marketing and HR, to develop a firmer grasp on what each actually contributes.

There is good evidence for the value of HR, primarily form the US. Sears in particular made a great effort to understand the real relations, and built predictive models of improvements in employee commitment and customer satisfaction. The first reaction to this is that it’s obvious that accountants pay no attention. But Watson Wyatt has produced some significant leading indicators of human capital management, so we will look at these areas. Another area to investigate is research on budgeting and financial control. Some companies are abandoning traditionally financial control, devolving more power to employees.

HR and Marketing haven’t traditionally had the information or the guile to challenge the financial people. And there will be negative reactions and some scepticism towards their trying to play the accountant’s game. But research like Watson Wyatt’s demonstrates that improving practices is the important thing and that its benefits can be shown.

The functional heads in companies need to get together more. The production of profit needs to be understood much better. The people traditionally in charge – finance – need to know what the rest of the business has to offer. HR and Marketing need the confidence to say “these are the drivers of profit”. Do they have it? The confidence to say “look at the evidence of what happens if you treat us well”, and that involves more longterm thinking. We have to persuade people that they need time for these conversations.

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