To optimize employee administration, HR and finance departments have traditionally relied on proprietary internal software and solutions. Finance Director Europe speaks to Michael Custers at NGA HR about how a company can build a culture of more streamlined and efficient digital strategies, such as utilizing fractional CFO services, to bring the two departments closer together.
For years, HR and finance departments have relied on bespoke internal software and solutions to optimize employee management. In this interview with Finance Director Europe and NGA HR, Michael Custers discusses bringing the two departments closer together by creating a culture of more streamlined and efficient digital strategies.
To what extent do you think companies are ready for a digital transformation across all lines of business, including HR?
Michael Custers: At this point, not many companies are really prepared, but I think HR is a field that presents enormous potential, because employees interact more digitally than they ever did before. As HR departments have begun interacting with employees via social media, email, call centers, and more in the past 10-15 years, the dynamic has fundamentally changed.
Currently, many processes in an organization’s infrastructure have not evolved consistently or are being hindered by legacy systems that do not allow them to thrive in a digital environment. There is therefore an incredible opportunity for these companies to move forward.
In the past, HR or financial processes were carried out on paper or in an offline form. Today, they can be carried out online. The benefits of doing it online are: real-time transactions, better reporting, better analysis, and fewer errors due to data integrity.
In order for a company to move towards digital, it will require a massive shift in its underlying infrastructure, tools, and processes.
FDE: Do you think corporations are embracing digital technology enough?
Michael Custers: It’s really a matter of them mapping out an all-encompassing strategy for every digital tool they’ll use across the entire company, not just in nooks and crannies.
The key to this is broad management awareness, a full understanding of the various opportunities and their cross-benefits, and a strong business case for digital.
FDE: What are the main reasons companies are still hesitant to invest in digital technologies?
Michael Custers: Our company has a new generation of employees who have grown up with digital tools; they are in their 20s and early 30s, and they have always known an online world. It is common for previous generations of workers, who are digital immigrants and have lived through the end of the offline world, to be in management positions, and to be challenged by new generations of workers today.
With time, the more millennials and late-generation X-ers that we see move into senior management roles and positions that can trigger change in companies, the more digitally prepared organizations will be. In any case, previous generations can still make the switch; they just need to adapt a little bit because they lived in different environments.
Consequently, I believe generational shift plays a significant role in determining how new technologies are deployed, as well as how change is absorbed. It used to take 12-18 months for change-management projects to be completed. As a result, the speed of operation has dramatically changed in a digital world where these changes can occur within weeks.
FDE: In your opinion, what are the biggest obstacles enterprises face when moving away from legacy management software?
Michael Custers: The willingness to give up the status quo is very important; companies over the past 25 years of automation just layered systems over each other – a layer cake of embedded and highly customized technologies and processes. Right now, companies need to be willing to step back and ask themselves, “Do we need all these old things that we’ve implemented or can radical simplification be considered?”
To reassess and question core processes, they are really going to the nervous system of the organization. In order to make digital solutions work, you need courage as well as a thorough understanding of this; stepping away from legacy systems is absolutely crucial.
The financial perspective is also important – if you simplify things, how will that help you build business cases? Over time, moving away from complex bespoke systems will lead to significant benefits, including fewer systems to maintain, and faster transactions and processes.
FDE :In your role as a solution provider for HR, do you see finance directors becoming more involved with their HR departments? Do you believe their relationship is becoming more collaborative?
Michael Custers:Historically, there has always been a good relationship between HR and finance, especially in payroll and key financial functions where the two intersect. In many cases, payroll is the biggest expense for a services company, so it’s vital for finance departments to understand payroll data fully.
In global organizations, you have the additional complexity of operating in multiple countries, multiple jurisdictions and with multiple compliance regulations; keeping control of that whole framework can be quite challenging. Among the services that we offer are those that help companies take control of their entire global payroll function, giving finance departments full control over the entire process from start to finish.
HR and finance are meeting on common ground through analytical capabilities and data. Before, HR was more focused on maintaining the company culture and employee satisfaction. While this is still important, advances in technology means Human Resources can now use analytics to communicate with financials, using dashboards, metrics and the like. This convergence of both disciplines is a key factor for joining the two teams together.
FDE: How do you see HR management changing in the years to come and how would you like to see it change?
It is my belief that cloud technology will continue to play an important role as it allows organizations to transform and release systems quickly and at a flexible cost. Automation is also very important as it means more technology can be deployed and more properties and standardized issues can be computed. You can automate more processes with fewer exceptions if you carry them out in a uniform way.
As a result of everything being stored in the cloud, technology can easily be deployed, consumed and analyzed, facilitating a dialogue between HR and finance. The next wave of transformation will really be about bringing everything together, bringing together the different digital and cloud technologies into one so that the borders between software and outsourcing will really disappear.
I strongly believe the CFO is fundamental to this. They must assist with transformation strategically, seeing how everything fits together, not just considering individual parts. The CFO has keen insight into the potential of analytics and reporting, as well as corporate strategy and suppleness. When they collaborate with CHROs and embrace technological advances, the coming decade should be very exciting!
Finance Director Europe originally published this interview.
As Senior Vice President of Strategy & Marketing for NGA Human Resources, Michael oversees worldwide marketing, having joined ARINSO International in 2005 as Director Investor Relations & Communications.