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Hi there,
One of the most common questions my consulting clients ask me is: "How do I establish a better partnership with our Finance leader?"
Actually, it's usually a little bit more visceral than that. Things like:
How can I get [Director of Finance] to ever give me access to the budget?
- Head of People at Series B cybersecurity company
[VP of Finance] is impossible to work with. They want me to plan a RIF, but won't even tell me how many people we need to cut or how much money we're trying to save.
- Head of People at a Series B AI-focused startup
If you've been in a situation like that, I'm sorry. It's tough.
It's certainly easier to be a top-notch People leader when you have access to the financials, an ability to interpret them and draw your own conclusions, and a strong rapport with your Finance partner.
Every people decision is a financial decision and every financial decision impacts people.
So, to the extent that it's possible, it's important to invest in a relationship with Finance. And it is sometimes worth leaving a company over if you can never get to a good enough place.
How to Build a Good Relationship with Finance
βFirst, give before you get. Take the time to understand, be considerate of, and compliant with all Finance workflows.
Almost all Finance teams have crunch periods in the monthly close (first 4-10 business days of the month), quarterly or semi-annual forecasting, annual budgeting, and taxes.
Know when those times occur episodically and don't add HR work to those times (e.g., comp reviews).
Finance teams also spend a lot of time corralling others, especially for Accounts Payable/Accounts Receivable (AR/AP), or collecting money from customers and recognizing expenses appropriately.
Don't be the person they have to track down every week to approve a bill in Bill.com or submit a receipt for a travel expense.
That's annoying. It inconveniences them.
It can make them feel like you don't understand their work well enough to contribute to it.
Become Business Literate
βIf you're reading this, you're literate. Well done.
You've probably had opportunities and discipline that many people across the world have not.
But, are you business literate? Financially literate?
- Can you explain how your business makes money?
- How to calculate net dollar retention on a monthly and annual basis?
- What the three types of financial statements are?
- Do you know where to lookup what % of total expenses are headcount-related?
- Do you know what EBITDA stands for?
- Do you know how to calculate Rule of 40 and its impact on likelihood of raising VC funds?
For many, I would even hazard to say "most," HR professionals, the answer to these questions is "No."
Now let's flip it. Do you think your Head of Finance can explain:
- When are performance reviews and what are the 5-points on the rating scale?
- What was our annual engagement survey score?
- What does a PIP stand for?
- How do you calculate yield-on-offer?
- What is our standard severance package in weeks per year worked?
In most cases, Finance leaders can answer these common HR questions.
If they're taking the time (or being required to attend mandatory trainings) to understand our work, shouldn't we put in some effort to understand their work too? After all, that's what a partnership looks like.
I highly recommend reading The Secret CFO, a top-notch free Finance newsletter.
If you have the ability to make an L&D investment, JooBee Yeow's StepUp MBA course is fantastic. I took it myself and it's a masterclass in business acumen that also gives you access to a vibrant community of People people.
Four Crucial Moments for People and Finance Partnership
βWhile a good day-to-day working relationship is ideal, there are 4 moments that matter more than others:
- Headcount planning: Determining what roles you need when in what locations to hit business goals
- Compensation and benefits modeling: Projecting base salaries, bonuses, commissions, as well as core and supplemental benefits.
- Commission plans: Figuring out who is eligible (e.g., sales, customer success), what the ideal base:variable pay mix, quota, and commission rate is, and determining the nitty gritty terms. Sales Ops and Legal are often involved here as well.
- Reductions in force (RIFs): The whole band is involved in decisions this big. But, the tightest conversations need to be between the CEO, Head of People, Head of Finance, Legal, and investors (if VC/PE-backed).
The Four-T Playbook
Every edition, I share a proven tip, trick, tactic, or template. This time, it's a:
π Template: Here's a free resource I've prepared to help with pay for performance compensation modeling conversations with Finance.
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Here's what this could look like for your organization:
If you find it helpful, think through how you can build out similar templates to guide conversations for the other crucial moments.
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Until next time,
Melissa