Why the People Team Needs to Be Deeply Involved in Finance Results

Introduction

The relationship between People teams and Finance has traditionally been transactional—HR provides headcount data, Finance approves budgets. But in today’s business environment, this level of collaboration is no longer enough.

The People team is responsible for hiring, retention, compensation, workforce planning, and productivity—all of which have a direct financial impact on the business. Without deep involvement in Finance results, HR risks making decisions that are misaligned with business goals, leading to inefficiencies, budget overruns, or missed opportunities.

To drive real impact, People teams must not only understand Finance results but also influence them proactively.

Why People Teams Need to Engage with Financial Results

Many HR leaders are not deeply involved in financial discussions, yet every major People decision has financial implications:

• Headcount planning affects payroll, benefits costs, and hiring budgets.
• Compensation strategies impact company profitability and retention.
• Employee productivity is a key driver of revenue per employee.
• Turnover costs can erode financial performance if not managed effectively.

When HR and Finance operate in silos, business outcomes suffer. People teams must shift from being seen as a cost center to a strategic partner that drives business efficiency and profitability.

Key Areas Where People Teams Must Be Aligned with Finance

1. Headcount Planning and Workforce Costs

People teams must work closely with Finance to ensure that hiring plans align with company performance and revenue growth.

• Too aggressive in hiring? Payroll expenses might outpace revenue, causing financial strain.
• Too conservative in hiring? The company risks productivity gaps, overworked teams, and missed business opportunities.

Best Practices:

• Regularly review financial forecasts and hiring needs together.
• Use data-driven workforce planning to anticipate hiring demands based on revenue projections.
• Implement real-time tracking of headcount costs to avoid budget surprises.

2. Compensation, Benefits, and Total Rewards Strategy

Compensation decisions are one of the biggest financial commitments a company makes. Yet, in many organizations, Finance sets salary budgets while HR determines pay structures—often without deep alignment.

To optimize compensation strategies, People teams should:

• Align salary increases with business performance and revenue targets.
• Use financial benchmarks to ensure competitiveness without overpaying.
• Work with Finance to model different bonus and equity scenarios for cost control.

By collaborating with Finance, HR ensures that compensation is both financially sustainable and competitive in attracting top talent.

3. Workforce Productivity and Business Efficiency

Productivity is one of the most underutilized metrics in HR. Every employee represents an investment, and companies must ensure they generate a return on that investment.

People teams can help Finance optimize workforce efficiency by:

• Measuring revenue per employee and aligning it with workforce planning.
• Identifying areas where training and development can improve efficiency.
• Partnering with Finance to analyze the impact of remote work, automation, and workforce restructuring on financial outcomes.

This approach helps HR move beyond engagement metrics to demonstrating real business impact.

4. Turnover and Retention Costs

Turnover is one of the most expensive workforce challenges. When employees leave, the company incurs:

• Recruiting and training costs for replacements.
• Productivity losses as new hires ramp up.
• Potential revenue losses due to client relationship disruptions.

By working closely with Finance, People teams can:

• Quantify the real financial impact of turnover and make a business case for retention initiatives.
• Develop data-driven retention strategies that reduce financial leakage.
• Shift from reacting to turnover to predicting and preventing it through predictive analytics.

How to Strengthen People and Finance Collaboration

1. Embed HR Leaders in Financial Discussions
   • HR leaders should attend Finance meetings, not just HR-specific discussions.
   • Finance teams should be invited to People strategy discussions.
2. Use Shared Metrics and Dashboards
   • Create a People-Finance dashboard that tracks headcount costs, revenue per employee, and turnover costs in one place.
   • Ensure both teams speak the same financial language when discussing workforce investments.
3. Align Workforce Planning with Business Performance
   • Workforce decisions should be tied directly to business revenue and market conditions.
   • Instead of using static annual budgets, HR and Finance should adopt real-time scenario planning.
4. Ensure Compensation is Sustainable and Competitive
   • HR should partner with Finance to model different pay structures, including base salary, bonuses, and equity compensation.
   • Compensation strategies should be reviewed regularly to ensure they align with profitability and business goals.

Final Thoughts: HR and Finance Must Work as One Team

The success of any company depends on its people and its financial health—yet many organizations still keep HR and Finance separate. To maximize business performance, People teams must be actively involved in financial results and use data to make better workforce decisions.

HR should not just report headcount numbers. It should demonstrate how workforce investments drive business outcomes, profitability, and long-term growth.

How closely does your People team collaborate with Finance? Let’s continue the conversation.