Financial Management

7Managing Human Capital and Building a High- Performance Finance Team

Leaders of most organizations describe people as their “greatest asset.” While executives may sincerely believe that associates are “resources” or “capital” or “assets,” most organizations are far less disciplined in acquiring, managing, developing, evaluating human assets than they do other “capital” investments such as new products or programs, businesses, and equipment. How can we assess whether our human capital is appreciating (growing and developing) or depreciating? Have we deployed our human capital effectively? While it is often difficult to establish direct mathematical relationships between human capital management (HCM) and financial results, it is certainly worth the effort to develop conceptual relationships.

Financial leadership can play a role in elevating and improving key management processes to manage and develop human capital. We can also focus on developing a high-performance finance team. Regrettably, finance organizations often are perceived as less focused on human capital than managers in other functions. In this chapter, we will discuss the importance of HCM, critical processes, including HCM evaluation, and specific finance organization topics.

THE IMPORTANCE OF HUMAN CAPITAL MANAGEMENT (HCM)

There are two ways employees impact financial performance and value creation. First, people costs, defined broadly, are typically a major, if not the largest cost in any organization. ...